After you have found a home that suits your needs, budget, and preferences (and the seller accepts it), it’s time to learn how to apply for a mortgage loan. It’s now time to apply for your loan.
Select a lender to complete the application. You may be able apply online, over the phone, or in person depending on which lender you choose. You will need to give information about yourself as well as any other co-borrowers, such as your spouse or partner.
What you will need when applying for a mortgage
If you have one, you and your coborrower will need to give documentation to your lender to confirm your employment history, creditworthiness, and financial situation. These 6 items are essential for you to have before you submit an application.
- W-2s (for the past 2 years)
- Recent pay stubs (covering 30 days ago)
- Complete bank statements of all financial accounts and investments for the last two months
- Signed personal or business tax returns (all pages, relevant schedules).
- Self-employed: A copy of the most recent profit/loss statement for the quarter or year.
- A copy of the signed Purchase and Sales Agreement
Your circumstances and the type you are applying for a mortgage may mean that your lender might require additional documents. Your lender will likely ask about your financial and employment history. Your lender may also check your credit report with your consent. Learn how your credit score could affect your interest rates.
Take your time, and fill out the application accurately and completely. Refusing to disclose credit problems upfront or withholding requested documents could delay the process and possibly prevent mortgage approval.
Locking in your interest rates before you apply for a mortgage.
Interest rates change frequently so things could change between the time you apply and the time you close your loan. You might want to lock in your rate with your lender to guard yourself from rising interest rates.
Rate lock, also known by rate commitment, is the guarantee that your lender will keep the interest rate and any discount points unchanged until the lock expires. The terms of the rate lock will be provided by the lender to you in writing. This includes the agreed-upon interest rates, length of lock, and any discount points that you pay. Find out more about discount points
If you think interest rates will fall in the near future, it may be a good idea to wait to lock your rate. It’s up to you to decide when you want your rate locked. Before the lender prepares your closing documents, you must lock your rate. Discuss your options with your lender to determine the best option for you and your preferences.
Some Common Problems When Applying For a Mortgage
It is not easy to successfully take out and pay off your mortgage. A home mortgage is the most significant amount of money anyone will ever borrow. Your credit score is too low. This tells the lender if you are financially responsible. Before the lender runs a credit check, let them know if you have poor credit. This will not help you gain their trust.
After that, you can: Explain your low credit score. It’s possible that you had a life-altering event that affected your credit score. A lower appraisal than the price of the house could indicate a problem. Lenders won’t invest in borrowers who are paying too much for assets. This could lead to your application being denied. There are several options. If your income is not sufficient, the lender might reject your application. A co-signer can help you lower the risk of your lender rejecting your application.
There are many reasons you may miss your monthly mortgage payment due date. You won’t lose the house or have your credit score affected immediately. Late payments are not reported to credit-reporting agencies by lenders until 30 days after the due date. Late fees are not charged by some lenders until 10 to 15 days after the due date. You have a grace period for late payments. You have plenty of time to rectify this. New servicers won’t treat late payments or charge late fees for payments made after the effective transfer date. The old servicer may transfer money to your new servicer, at least for the first time. Your lender has ignored your request to cancel your PMI.
If you have sufficient equity in your home, your PMI (private mortgage insurer) can be cancelled. You can contact your lender again if they don’t respond within 30 calendar days or file a complaint to the CFPB (Consumer Financial Protection Bureau). Your lender might require that you purchase a new appraisal in order to prove your equity. However, if your loan to value ratio exceeds 78 percent, the law requires them to cancel your PMI. Fortunately, there are many ways to prevent these problems and to fix them if they do. These common problems can be avoided by simply being aware of them.