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A Quick and Easy Guide to Home Mortgages
What Are the Steps in the Mortgage Application Process?
- Complete the "Uniform Residential Loan
Application."
It requests information about your income, assets, liabilities and a description of the property. - Submit all documentation requested by your mortgage
lender
The lender will need documentation pertaining to your personal finances - your earnings, your monthly expenses, and your debts - to help gauge your willingness and ability to repay the mortgage. You may be requested to provide any or all of the following information:- Social Security Number
- Birth date
- Most recent pay stub showing year-to date earnings
- W-2 tax forms and tax returns for the last two years
- Names, addresses and telephone numbers of your employers for the past two years
- For all loans and charge accounts, the name of the borrower, name and address of the institution, account number, monthly payment and current balance
- For all deposit accounts, such as checking accounts, savings accounts, stocks, bonds, etc., the name on the account, name and address of the institution, account number and current balance
- Three months of your most recent statements for deposit accounts, stocks, bonds, etc.
- Pay an application fee to cover processing costs (if
the lender charges one)
First Republic Bank does not charge an application fee. -
Your lender is required by law to provide you with the
following once you submit your application:
- Truth-in-Lending Disclosure: This statement includes a summary of all costs associated with the loan.
- "A Home Buyer's Guide to Settlement Costs": A government publication that describes the closing or "settlement" process and its costs as well as information on your rights.
- ARM Disclosure (if applicable): Information on the important terms and costs of an adjustable-rate mortgage, the past performance of the index to which the interest rate will be tied and a copy of the booklet, "Consumer Handbook on Adjustable-Rate Mortgages."
- Your Annual Percentage Rate or "APR": This is the cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fee and certain other charges that you (the borrower) are required to pay.
- A good faith estimate of the costs associated with the loan.
- A notice concerning your right to a copy of the property appraisal, if you are being charged for that appraisal.
-
Once you submit your application, several things take
place behind the scenes:
- Appraisal: The lender will get an appraisal on the property because it is the collateral for your mortgage.
- Credit Report: Lenders will also examine your file at the
credit bureau to learn if you pay your bills on time. You have a
right to know what information is contained in your credit report
and to have someone from the credit bureau help you understand what
the report says. The major credit bureaus are:
Equifax (800) 685-1111
www.equifax.com
Trans Union (800) 888-4213
www.transunion.com
Experian (888) 397-3742
www.experian.com
You can order a free annual credit report online, by calling 877-322-8228, or by completing the Annual Credit Report Request Form (PDF), and mailing it to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281.
- Flood Hazard Determination: The lender will determine if the property is in a flood hazard zone and if so, you'll be required by federal law to purchase flood hazard insurance. If you do not purchase the required insurance, the lender is required to "force place" the flood hazard insurance. This means that, by law, the lender must order the insurance on your property but you must pay for it.
- Pest Inspection: You will probably want to pay for a pest inspection to be fully aware of the condition of the home you are about to purchase.
- Credit Decision - Underwriting: Your lender will review all of
the information obtained as part of your loan application. This
information can include your application, your credit history, your
tax returns, the appraisal for the property, the title search for
the property, your financial condition (assets, debts, income, and
expenses), the amount of down payment you have, as well as the type
and terms of the loan you are requesting. When all of the
information is considered, the lender will take one of the
following actions:
- The lender may approve your application.
- The lender may ask for additional information.
- The lender may decide not to lend you the money you've requested.
- The lender may make you a counteroffer.
For example, you may apply for a 30-year fixed-rate loan with a 15% down payment. The lender may offer to make you a 30-year fixed-rate loan with a 20% down payment.
- If your application is turned down, federal law requires the lender to tell you so in writing, and to tell you that you have the right to know the specific reasons for the denial. Some lenders will automatically tell you the reasons your application was denied, but with other lenders you may need to ask them to give you the reasons in writing. Make sure you understand the reasons given - you may be able to find answers or alternatives that will satisfy the institution's lending standards. For instance, you may discover that you inadvertently reported your monthly income rather than your annual income, or that your credit history includes information that is inaccurate.
