After The Mortgage Application

Your mortgage company will begin the work of verifying all the information youve provided. This process can take anywhere from one day to one week, depending on the type of mortgage you choose, whether youre buying a home outside your local community, or a host of other factors.

Within three business days after your application, the mortgage company must give you a good faith estimate of your closing costs. Youll also get a statement that shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage. Stay in touch with your mortgage company to speed up the application process. Some home buyers find the closing process to be one of the most intimidating aspects of buying a home because its so unfamiliar. If so, ask your mortgage company what to expect at your closing.

Once complete, your application will be given to a processor in the mortgage company who will organize your paperwork and may verify your employment, bank balances, and other information.

Be sure to respond promptly to requests for information while processing is taking place.

Commonly requested items during processing that may not have been collected during the application include:

The final purchase contract for the house (if applicable).

If youre self-employed, the mortgage company may require your personal and business tax returns for the previous two years and your companys year-to-date Profit and Loss statement.

Divorce settlement papers, if applicable

Updated account statements for listed assets in the application that may have changed in value.

Information about debts or credit report items that may have been delinquent or not accurate.

Evidence of your mortgage or rental payments, such as canceled checks.

An irrevocable gift letter if you are receiving a monetary gift from a relative.

The processor is collecting this information before presenting it to an underwriter. An underwriter reviews all the information in your loan file to determine if the application meets the lender guidelines. With approval, a lender should give you a letter of commitment, which is a promise from the lender to make a loan based on specific terms and conditions.

Once you receive your approval, and youre waiting to close on the sale of the home, dont go on a shopping spree. The mortgage lender may do a final check of your credit report or bank accounts to make sure youre not assuming more debt or spending your cash reserves.

Key Factors in Qualifying for a Loan

When a lender makes a decision about a mortgage application, they consider two basic factors: your ability and willingness to repay the loan.

Ability to repay the mortgage is determined by verifying your current employment and analyzing your total income. Lenders prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. Your proposed monthly payment will be compared to your monthly

Willingness to repay is influenced by how you have paid previous loans and by examining how the property will be used. Willingness can be gauged by your credit report. There is also a greater tendency to stick with your payments if you live in a house as opposed to a rental property or vacation home.

It is important to remember that there are no set rules and each applicant is handled on a case-by-case basis. Many applicants come up a little short in one area, but make up for it with other strong points. These compensating factors may include a large down payment, solid employment, extensive educational background or overall financial health.

For applicants who need to make a lower down payment, mortgage insurance is protection for the lender in case you stop making payments. This allows low and moderate income families become homeowners with low down payment programs.

Your Total Mortgage Payment

Your monthly mortgage payment typically is made up of four components: principal, interest, taxes and insurance, together known as PITI. The principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. The interest is the fee charged for borrowing money. You can determine the amount of principal and interest by using our Mortgage Payment Calculator.

The taxes are property taxes your community levies which are generally based on a percentage of the value of your home. The lender usually collects 1/12th of the yearly property tax bill each month. The lender collects taxes in advance and places the money in an escrow fund.

Lenders wont let you close on your home loan if you dont have home insurance to cover your home and your personal property against losses from fire, theft, bad weather and other causes. The insurance amount is collected and paid much like the taxes. Each month 1/12th of the insurance bill is collected and stored in an escrow account until the bill is due. Even if you pay cash for your home, it is a good idea to buy home insurance in the event your home is damaged or destroyed.

Principal and interest comprise the bulk of your monthly payments in a process called amortization, which reduces your debt over a fixed period of time. With amortization, your initial monthly payments are largely interest, and as the loan matures, a greater portion of your payment is allocated toward the principal.

Due to the recent trend of lenders cutting appraised values, this is something that should addressed and included in the process...You will think it's worth one thing, the appraiser will come up with another value, which we will use to structure our loan, then the lender may come up with their own value...If it's a tight loan and you need 100% financing, or are very close to the cutoff line for program you desire thru desired lender, be prepared for a 2nd option if this happens during a review...Many loans have been lost due to this happening, many of those I believe could have been better managed by discussing the possibility and discussing some options in case...It would be better to hear, "well, what we discussed possibly happening, happened, we'll move on to our 1st option and I will keep you abreast, sorry for any inconvenience this has caused" than "houston, we have a problem" and no options previously discussed...I can beleive any borrower would rather hear the first than deal with the 2nd at a time when they thought nothing else could go wrong...

 

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