The Loan Application Process

You need a mortgage loan to purchase your dream home. Lenders need to make loans in order in order to profit and stay in business. Each party needs to feel comfortable doing business with the other. Lenders will go to great lengths to find out all that they can about you, and rightly so. But it is not, nor should it be, a one-way street. You’ll want to find out as much about them as you can, as well.

First, find out what the average interest rates are in your area. Determine if they’re rising, falling, or stable. Don’t just shop mortgages, shop lenders as well. Competition is fierce among mortgage lenders, and although rates may not seem to vary too terribly much, the costs that lenders charge for their services in the way of points and other fees can vary a great deal. Some lenders offer a myriad of different loan programs, while others only have a few. Shop around to see who may have the best deal for your unique circumstances. But be careful; don’t over-shop by letting too many lenders do a credit check on you. Several credit inquiries over a short time can themselves bring your credit score down - which is something that you definitely do not want done at this time. Narrow your choice of lenders to one or two of good reputation, which have a number of loan programs available.

When you are ready to actually apply for the mortgage loan, you will normally meet with a salesman or loan origination officer who will help you to complete the application. The officer will require a good amount of information from you. But do not forget that this is your opportunity to interview the lender, as well. Write down pertinent questions that you would like to ask. Are you a first-time home buyer? Inquire if the lender has any special programs or offers for first-timers. What will the interest rate and annual percentage rate (APR) be? How many points does the lender charge? Do they include a prepayment penalty in the mortgage? What is their track record for closing loans, and how long does the process normally take? Question the lender on anything you need to know until you’re satisfied that he or she and their organization are suitable for your needs.

What information do you need to provide to the lender? Generally, the lender will need information on all borrowers and co-borrowers. Names, addresses for the past two years, Social Security numbers, and employers’ names and addresses for the previous two years will be needed. To verify your assets: W-2 forms and personal tax returns for the past two years, two most recent pay stubs, checking and savings account numbers and locations, and several months of bank statements. Also, documentation for any other sources of income or assets (child support, Social Security, IRA’s, 401[k]’s, etc.) will be needed. Property information: a copy of the purchase agreement, legal description of the property, title information, the year the property was built, etc. The lender will also want to verify all debts (car payments, credit cards, revolving accounts, hospital bills, etc.) by seeing monthly statements.

Note that these are the general items the lender will need. Depending on your unique situation, they could require many more specific documents. Contact your lender and ask what you’ll need to have with you. The more information that you can provide, the quicker the lender can process your application. They will only ask for something if they truly need it. Give them your cooperation, and ask questions, and your application process can sail through surprisingly smoothly.

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