The loan approval process generally begins with an initial interview where the prospective home buyer and the mortgage professional meet to discuss the potential loan. You will need to bring information to verify your income and long-term debts.
Often people prefer to meet with the mortgage company before house hunting to determine in advance what price range they can realistically afford and the mortgage amount for which they can qualify. This step is called pre-qualification and can save you much time and trouble by making certain you are looking in the correct price range.
For your first meeting with the mortgage company, you should bring:
- 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
- Divorce settlement papers, if applicable
- 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. This is only done after you have successfully negotiated on a home and have had your offer accepted by the seller. Generally, there is no fee for pre-qualification.
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. The mortgage company should let you know if you qualify for the loan within days. If you are denied a home loan, the mortgage company must explain the reasons.
Your mortgage company will begin the work of verifying all the information you’ve provided. This process can take anywhere from one to six 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 an estimate of your closing costs. (The closing is the actual settlement of your loan.) You’ll also get a statement that shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage.
For many home buyers, this waiting period can be nerve-wracking. So stay in touch with your mortgage company, be prepared to answer any questions that might come up — and remember that mortgage companies are in the business of making loans, not denying them.
Some home buyers find the closing process to be one of the most intimidating aspects of buying a home because it’s so unfamiliar. Ask your mortgage company what to expect at your closing. Be sure to respond promptly to requests for information while processing is taking place.
“Get Your Loan Done On Time”
Be prepared to provide the following typical items:
- The final purchase contract for the house (if applicable).
- Pay stubs for each applicant, showing earnings for the last 30 days and year-to-date earnings. (These must be computer-generated or typed originals that identify the employer and the employee’s name.)
- Last year’s W2 and 1099 for each applicant. If you’re self-employed, the mortgage company may require your personal and business tax returns for the previous two years and your company’s year-to-date Profit and Loss statement.
- Account numbers for all bank accounts, along with account statements for the past two months.
- Information about debts, including loan and credit card account numbers and the names of your creditors.
- Evidence of your mortgage or rental payments, such as canceled checks.