When purchasing a home, you must complete a mortgage application to be pre-approved for a loan. You can do this online or over the phone and apply for either conventional, FHA, VA or USDA financing.
Your lender will need your name, address and contact info. They also need to verify your employment and income by reviewing pay stubs, W-2s and other documents. Moreover, they want to know all of your monthly housing costs – including the mortgage payment and property taxes – in order to estimate a fair price on housing.
You must disclose any gifts or grants received for the purchase of your home, as well as listing any existing loans and liens on the property. Doing this helps the lender assess your debt-to-income ratio and other requirements for obtaining a mortgage.
Once your mortgage application is complete, you should receive a loan estimate. This estimate can be helpful when negotiating your interest rate and closing costs in the future.
Most lenders must provide you with a Loan Estimate within three business days of receiving your mortgage application; however, this time frame may extend up to one week or longer for an underwriting decision to be made. The underwriting process includes both credit check and appraisal steps.
It’s essential to stay in contact with your lender throughout the underwriting process in order to make sure you haven’t overlooked anything or need additional documentation. If necessary, respond promptly in order to not miss out on getting the home of your dreams.
The mortgage application format varies based on your loan type, but usually follows Fannie Mae’s Uniform Residential Loan Application (Form 1003). Lenders use this form when offering conventional, FHA, VA or USDA loans to purchase a home or refinance an existing mortgage.
To complete the personal financial details form, you’ll need to fill out several pages with your employment history, assets and liabilities as well as the property you are purchasing or refinancing. Furthermore, income and expenses for the past two years must also be provided.
Your lender will require to view your credit report and FICO score. They’re also interested in your debt-to-income ratio as well as other key figures like credit utilization, inquiries and disputed accounts.
In certain instances, lenders may request you to compose a letter of explanation regarding certain aspects of your financial situation, such as unusually high bank fees or overdrafts, discrepancies in employment history or transferring large sums between accounts.
The letter should answer all the questions the lender posed, without including irrelevant information or answers to unasked questions. A concise, professional letter that is courteous and concise is ideal.
Letter of explanation requests can be an intimidating and stressful part of the mortgage application process, but they’re usually not necessary. To avoid needing this document, it’s wise to share any potentially problematic financial situations with your lender in advance so they have a better understanding of your predicament.
