Understanding the Mortgage Application Process

By Karen Lawson
LoanPage.com Columnist

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You're buying a home, and are working with a mortgage lender. You've heard about the paperwork that's required for a mortgage loan, and wonder why it's all necessary.

Mortgage lenders typically use standardized application and documentation. This means that borrowers complete and submit application documents according to policies established by companies such as Fannie Mae and Freddie Mac. These large corporations buy mortgages from mortgage lenders, and have streamlined underwriting requirements to accommodate busy mortgage lenders and to ensure consistency in underwriting mortgage loans.

Qualifying for a New Home Loan

The process of approving your new home loan is known as underwriting. Mortgage lenders review borrowers' income, financial obligations, and credit history. They also consider the amount of your down payment. Credit history is an important aspect of qualifying for a mortgage loan, but what if you haven't established credit? Your lender may accept alternative documentation such as rent receipts, utility payments or other proof of timely payment. If you have had credit problems, you may be asked to supply a statement explaining the circumstances that caused you to fall behind on payments. It's important to be honest and provide a specific reason. Lenders understand that people become unemployed, and may suffer illness or injury. It's possible to qualify for a mortgage if you have had a bankruptcy or foreclosure, but generally two years or more must pass between the incident and when you apply for a mortgage loan.

Your Mortgage Application: What Documents Will You Need?

Generally, mortgage lenders use recent tax returns, pay stubs, and bank statements to verify your income. They will also pull a credit report. You can get an idea of how much you can borrow by using free online mortgage calculator tools. Your lender wants your business, and will work with you to find a mortgage loan that works for you.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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