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How Large A Loan Can I Obtain?
Conventional rate loans are based on certain parameters for qualification. While these ???? are more stringent than other sources of money, by qualifying with something about obtain the best rates.
Your Initial Meeting With a Mortgage Professional
The loan approval process generally begins with an initial interview where you and the mortgage professional meet to discuss the potential loan. You will need to bring information to verify your income and long-term debts.
You may prefer to meet with the mortgage company before house hunting to determine in advance and the mortgage amount for which you can qualify. This step is called pre-qualification and can save you time and trouble by making certain you are looking in the correct price range.
To complete the 1003 Mortgage Application you will need to gather:
- A purchase contract for the house (if you have one)
- Your bank account numbers and the address of your bank branch, along with checking and savings account statements for the previous 2-3 months
- Pay stubs, W2 withholding forms, tax returns for two years, or other proof of employment and income verification
- Credit card bills for the past few billing periods, or canceled checks for rent or utility bill payments, to show payment history and amount of revolving debt
- Information on other consumer debt such as car loans, furniture loans, student loans and retail credit cards
- Balance sheets and tax returns, if you are self-employed
- Any gift letters, if you are using a gift from a parent or relative or other organization to help pay the down payment and/or closing costs. This letter simply states that the money is in fact a gift and will not have to be repaid.
Having these items on hand when you visit the mortgage company will help speed up the application process. Usually an application fee and the appraisal fee will have to be paid when you submit the mortgage application. After the initial meeting with the mortgage company, you should have a general idea if you qualify for the size and type of loan you want. After the mortgage application, the mortgage company should let you know if you qualify for the loan within days.
How Does A Lender Consider An Application?
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 gross income and your monthly credit payments to see how much you can afford.
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 and previous commitment to rent or utility bills. 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
After The Mortgage Application
Your mortgage company will begin the work of verifying all the information you've provided. This process can take anywhere from one to four weeks, depending on the type of mortgage you choose, whether you're 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. You'll 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 it's so unfamiliar. If so, ask your mortgage company what to expect at your closing.
Once you receive your approval, and you're waiting to close on the sale of the home, don't go on a shopping spree. The mortgage lender may do a final check of your credit report or bank accounts to make sure you're not assuming more debt or spending your cash reserves. There are steps you can take to move quickly if your loan is denied.
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