Applying for a Mortgage Loan

2007-03-08 10:33:40

( Financial )



So you want to borrow money to purchase that beautiful countryside home. Or perhaps you already have one and just wanted a loan refinance to get better mortgage loan interest rates. What are the steps you need to follow to assure yourself of getting the right mortgage loan in a timely manner?

Steps in Applying for a Mortgage Loan

You will have to gather documents and fill out the necessary paperwork with the lender. You need to provide at least two years' W-2 form and paystubs or income tax returns and your business income statement (also known as profit and loss statement). You also need to show bank account statements, IRA or 401K plan, insurance plans, and stock and mutual funds accounts. If you're divorced, you also need to show a divorce decree. Show any notes of existing mortages. Finally, you also need to show proof of US citizenship or residency status.

Fill out a mortgage loan application. Submit the required documents, as well as a signed letter stating why you need the loan and how you will use the funds. Be open and honest about the information even if there are adverse details. Intentionally withholding the adverse data will only prolong the application process.

Your lender is now ready to verify all the information you submitted and to do its own checking of your credit history. To speed up this part of the process, you might want to obtain a credit report through any reliable credit agency. This can be done quickly through online sites. The credit report will also show your credit score and can help the lender determine the right loan package for you.

If the loan is for purchasing property or refinancing, you need to have the property appraised so that you will know how much you can borrow. Or if you haven't found the home yet, the lender can come up with a preapproved loan package so that you know know how much home price you should look for.

Credit checking will take a few days to a few weeks, after which the lender is ready to talk to you about the offer. It may be either be a flexible or fixed rate loan, and the rate depends on your credit information. Generally, the better the credit history, the lower the interest rates. Your choice of loan package and mortgage loan interest rate depends on how long you plan to keep the property and also your monthly budget. For instance, lower monthly payments with a balloon payment after several years is ideal if you do plan on selling the property before the balloon payment is due.

Once the loan is approved, you need to pay the closing costs (notarial fees, escrow fees, appraisal cost, etc.) and sign the loan documents. Always review all the loan documents to make sure that the terms are what you have agreed on with your lender.


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