Understanding the Mortgage Loan Application Process

Once you are satisfied with the mortgage lender you have chosen to handle your home loan, the next step is to begin the application process.  During the mortgage loan application process be prepared to hear various unfamiliar terms that are often only used in to the mortgage loan process.  Terms you may encounter include; 1003, credit score, Fannie Mae, preapproval, prequalification, subprime, FICO score, Tri-merge, compensating factors and a host of others. 

Don’t be intimidated, do your research and remember this is your home loan request; you can control many aspects of the process.  Use this site to review the mortgage loan terms and loan types before you apply.

Mortgage loan applications are completed primarily in four different ways; over the phone, by mail, via the Internet or in person.  Either method ends in the same result, with the submission of a completed mortgage loan application regarding the type of home loan which is a summary of the borrower’s qualifications for that home loan.

The choice of how to complete your home loan application for a mortgage is based on your preference.  Almost all mortgage applications, with the exception of home equity loans, use the uniform residential loan application  referred to the industry by its code number, 1003 ( pronounced: 10, 0h, 3 ). 

Before you complete the mortgage loan application make sure you have studied the various home loan programs available and go one step to further and review the general underwriting conditions needed to qualify for that type of loan.  Shopping and comparing home loan programs and mortgage rates should be completed well before the loan application is submitted.

The application that will need to be completed details, among other things, a borrowers income, assets, liabilities and a description of the property for the home loan.  The home loan application is summary of the borrower’s asset, credit and income position at a particular point in time.  It does not measure your character nor does it measure potential future changes, such as potential employment changes or debts that maybe incurred or satisfied at a later date. 

After the mortgage loan application is completed, the underwriter and processor will check the borrower’s credit.  Credit checks will serve the purposes of investigating the credit worthiness of the borrower as well as verifying the debts outstanding.  The processors and underwriting department will also proceed to verify the borrower’s assets and employment to establish adequate funds to close on the house as well as sufficient debt ratios to qualify.

Be prepared to discuss any unusual circumstances that may put a hick up in the process, such as frequent job changes, erratic income, big deposit and withdrawals in your bank accounts or delinquent credit.  Generally speaking, the more information you provide the faster and easier the home loan process will be.  And once you know what the mortgage lender is looking for with the mortgage loan application, it is a good decision to get a leg up on the process.

In order to be a step ahead on the home loan application process, a prospective borrower should view their credit report in advance so they know what accounts are in the report, see any delinquent accounts that will need to be explained, the account balances reflected in the credit report as well as any accounts that do not show in the credit report.  In addition, take the time to review your income and assets and utilize online mortgage calculators to help determine your debt ratios and loan to value.  Try to be precise with regards to calculating gross monthly income and use current mortgage rates to avoid conflicts in the future.  A good source for mortgage calculators is www.selectcalculators.com.

Along with filling out the home loan application, a number of supporting documents will be needed so the mortgage lender can process the loan request.  The following is a list of commonly required documents and information needed at the time of the home loan application.

 Borrowers names, addresses and social security number ( a drivers license and social security is the standard supporting document).
 Description of the property to be purchased or refinanced.
 Names and addresses of employers for the past two years.
 One month worth of paycheck stubs.
 Last two years w-2’s.
 Last two months financial statements ( bank, investment account, 401k, etc..)
 List of all financial accounts.
 List of debts, names and account numbers.