The Mortgage Application Process

The mortgage application process requires a great amount of paperwork. First, you will need to fill out an application form that will ask you for a lot of specific information about you, about your employment records and information about the house that you are looking to buy. The lender will also need documents that deal with your personal finances such as paperwork that confirms your earnings, your expenses, and any debts that you may have. This is done to asses your ability to repay the mortgage and find out if you will be approved for a mortgage or not.

Your lender will also look at your file at the credit bureau to check and see if you pay your bills on time or if they are overdue all the time. The lender can decline your application if the report displays that you have poor credit. Therefore, you should check to see if your credit file is accurate before you file an application for a loan/mortgage. It is a right for you to be able to look at the credit information that is enclosed in the credit report and to have someone from the bureau look at the report with you to find out what it says and to help you understand your credit standing better. You can find the different names of the credit bureaus in the phone book.

You need to prepare yourself for questions about your financial situation through using the charts that are provided for you on this website. The first chart will assist you in figuring out how much money you will have for making monthly payments. All you need to do is make a list of items of income and the payments that are necessary on your debts that will not be paid off within the next ten months. We also provide you with room to fill in the monthly mortgage payment that was quoted to you by the lender.

To find out what your mortgage payment will be, the lender will need to ask you questions about how much money you want to borrow. The maximum amount of the loan will be decided upon based on the value of the property you are looking to purchase and your personal financial situation. In order to get an accurate estimation of the property, your lender will likely ask a real estate appraiser to give him or her an opinion on how much he believes the property to be worth. The appraisers opinion is important because it is a major factor in deciding whether or not you are qualified for the amount of the mortgage that you are looking to get. What lenders do most of the time is they will give the borrower a certain percentage of the home's appraised value such as 80% or 90% and the lenders will expect you to make up the difference with your down payment. If the home is appraised to be below its asking price then the lender might not give you the amount of mortgage that you were hoping for so if your down payment is not big enough you will not have enough money to purchase this home. If this were to happen, the lender will probably suggest that you get a larger down payment to cover the difference between the purchase price and the appraised value of the home.

If you are looking at your projected mortgage and the amount of debt you currently have, certain lenders will use ratios such as "28 and 36" to figure out whether or not you qualify for this loan. These ratios are very commonly used. When looking the "28 and 36" ratio, the 28 refers to the percentage of your gross income, prior to taxes, that may be spent on housing expenses, consisting of principal and interest on the mortgage, any real estate taxes as well as insurance. The 36 refers to the amount of your income that you can spend on paying off your debts such as your mortgage, monthly car payments and others. When this total is added up it cannot be greater than 36 percent of your gross income. When you are talking to your lender, make sure to find out what ratios will be used when your application is being evaluated. You should also calculate if you are within the lender's guidelines.

You must be prepared to give the lender documentation that supports your income; this documentation can be in a form of pay stubs or any other documents from the government or your place of employment. You will also need to provide a purchase contract for the home that you are looking to buy. Make sure to ask the lender how long the application approval process takes when you are filing your application. The amount of time will vary for all mortgages, as some are not as complex as others. It will also depend on current market conditions and if you do or don't have to provide the lender with further information. It is mostly common for a decision on whether to approve the mortgage or not to be made within 30 days of you filing your application or after the lender receives all the essential information.

In the event that your application gets turned down, the law obligates the lender to list the reasons why you were denied your mortgage in writing. It is essential for you to understand the reasons that were given for your denial, as you might be able to explain them and offer answers to your lender and thus get approved for your loan. Even if this doesn't take place, it is always beneficial for you to understand exactly why your application for turned down so that the next time around you improve your chances of getting approved. Certain things that affect the loan decision comprise:

Down Payment

Is your proposed down payment adequate? If not, possibly the lender can recommend different types of mortgages that require a lower down payment.

Appraisal

Is the amount of the mortgage you need too high compared to the property's appraised value? You should consider the possibility that if similar houses in the neighborhood were sold at prices comparable the amount that you are buying your house for the maybe the appraiser underestimated the value of the property. If this is the case, you may want to propose that the lender re-examine the assessment. You also have a right to obtain a copy of the appraisal if you did paid for it.

Credit history

Is the lender doubting your ability to pay off your mortgage/make your monthly payments because of your credit history or the amount of debt you may have? Inquire about how your debt ratios balance to the lender's standards. If there are special situations surrounding old credit problems, you should ask your lender if you can explain those problems to them.