For many buyers, applying for a mortgage loan is one of the more stressful aspects of buying a home. The loan application process is relatively straight forward. The difficulty lies in the applicant’s ability to collect the necessary information and documentation to support his or her mortgage application.
The application process starts with filling out a mortgage application. This can be done one of several ways:
1) The borrower may fill out a traditional paper mortgage loan application that they receive from a lender or download from the lender’s web site.
2) The borrower may verbally provide the application information to a mortgage lender who inputs the information into a computer and prints a copy for the borrower’s review and signature.
3) The borrower may apply on line.
The borrower will need certain standard information to complete the mortgage loan application. A person’s individual situation may dictate additional documentation.
1) Property Information: Purchase amount, down payment source and amount, address, property tax information, and estimated homeowner’s insurance.
2) Borrower Information: Full name, social security number, address, phone number, marital status, number and ages of dependents.
3) Employment Information: Name and address of employer; if less than two years, information on previous employment and employer.
4) Financial Information: Monthly income, tax returns and W2’s for the last two years, two recent paystubs, current financial statement, last three months worth of statements for checking and savings accounts, proof of rental income (copies of leases), proof of retirement income (if applicable), proof of child support (if applicable).
5) List of Assets: Account numbers and balances for deposits and retirement accounts, information on insurance policies (face amount and cash value), information on automobiles, personal property, furniture, and jewelry etc.
6) List of Liabilities: Account numbers, outstanding balances, monthly payment amounts, names and addresses of creditors, for credit cards, personal loans, student loans, or any other type of loan.
7) Information on other Real Estate Owned: Type of property, market value, amount of any mortgage or liens on the property, rental income on property, property tax, insurance, other payments associated with the property such as common area.
8) Copy of Purchase Agreement
Along with the real estate application, borrowers will be required to sign additional documentation including the following:
1) Request for verification of employment
2) Request for verification of deposits
3) Request for verification of rent or mortgage
4) Good Faith Estimate
5) Federal Truth in Lending Disclosure Statement
6) Mortgage Loan Origination Agreement
7) A Servicing Disclosure Statement
8) Borrower’s Certification and Authorization
9) Disclosure Notices
There are many reasons that a loan application may be denied. If a borrower’s application is denied, federal law requires the lender to tell him, in writing, the specific reasons for the denial. Some of the reasons for denial include:
1) Poor Credit
2) Insufficient Income
3) Over Extended (too much debt)
4) Insufficient Property Value (the appraisal is less than the purchase price, requiring the borrower to come up with additional funds, renegotiate the purchase price, or cancel the transaction)
5) Inability to verify information provided on the application
If your application is denied, you have some options:
1) Look for another lender who may be willing to overlook the reasons that caused the first lender to turn you down. You may have to accept a higher interest rate and pay higher loan fees since the Bank considers your loan more risky.
2) Increase your down payment to improve your loan to value ratio and reduce the amount borrowed.
3) Pay off debt to improve your debt ratios.
4) Consider other types of loans (adjustable rate, graduated, or interest only)