For the majority of first-time homebuyers, getting a mortgage is a must. A mortgage, however, can be a complex process for those who don’t do their research. It’s important to know exactly what will be required of you during the mortgage application process, because preparation is one major key to success.

Start the Process

The first task is to select a mortgage lender. I suggest shopping around before you settle on one. Effective lender shopping consists of educating yourself online about the different mortgage program options, asking what mortgage rates the lender can provide and getting prequalified for a home loan online or in person with the lender. Getting prequalified for a mortgage is not a commitment to the lender, but it does give you a high level understanding of what kind of mortgage you can afford, since your bank account, financial history and credit score are all considered. Several mortgage companies allow borrowers to get prequalified for a mortgage online. Read about prequalification on our blog to learn more.

Apply for a Home Loan

Once you are prequalified and have selected a lender, half of the work is already finished since the lender has received the financial information needed to complete the application. If you did not get prequalified, you will complete a loan application, which should take 20 minutes to complete. The lender will review the application and let you know if the mortgage company has approved your loan request.

What Paperwork Do I Need?

In order to get your home loan approved, you will need to provide the following documents to your mortgage lender:

• Paycheck stubs covering at least a one month period
• Most recent 2 years W-2s
• Bank account statements for 2 months
• Investment account statements
• Tax returns for the most recent 2 years
• Rental property income, if you rent out property and make money off of it
• If someone is helping you fund the down payment through a cash gift, you will need a “gift letter” confirming the gift amount is not a loan
• Picture ID and social security card

What Else is Involved?

The next step includes getting the home you are trying to buy appraised. The lender will contact a licensed appraiser to visit the house and determine its market value. This helps the lender know how much money the mortgage company can lend, since it will not lend more than the house is worth. Once the appraisal is conducted and the documents are in order, you want to make sure you lock in your rate.

Locking in your rate means agreeing with your lender that the rate you were given after completing the loan application is the rate you will keep at closing. Rates are constantly fluctuating and based on the amount of time it takes for the application process to finish, your rate could have changed. It is better to lock in the rate you are comfortable with paying.  

The Review Process

After you submit your home loan application to your lender, the lender will review the information. During the review process, our lenders prefer to keep an open line of communication with the applicant. The applicant is free to contact the lender with questions or additional information. Meanwhile, the lender may have questions about the application and your financial information. For example, if a lender finds you missed some payments on your credit card in recent years, he or she will contact you to inquire why, rather than make assumptions about your payment history.

It is important to have a lender who communicates often.  It is important for you to provide the necessary documents when requested and asks a lot of questions. The lender usually takes up to 14 days to review the application completely and get back to you with an answer from the mortgage company, so our lenders use that time to fix any anomalies in your financial report.  During this time, it is important to respond to inquires by your lender so as not delay the process.  The lender is your advocate to the mortgage company, so a good lender will work hard to get you the loan that is best for you.

For more information on the home-buying process, download our free ebook, Easy Keys to Guide the First-Time Home Buyer.