Applying formally for mortgage financing opens the floodgates to increased advertising communications from an army of appraisers, stockbrokers, real estate agents and lenders. That’s one of the practical reasons why many home buyers get pre-approval for their loans. Tundra Mortgage Finance offers pre-approvals and confidential services so that your decision to apply for a loan doesn’t feel like opening the floodgates to all types of unwanted marketing.
Unfortunately, the communications you receive after applying for a mortgage consist of both critical mortgage and marketing information. You will need to screen your email and snail mail carefully so that you don’t miss any critical steps of the mortgage-approval process. Uppermost of your new-found obligations include paying the mortgage application fee, which ranges from $100 to $400. This fee is non-refundable, but it will be applied against your extensive list of closing costs. Know about what is refinancing a home.
Other critical issues that you must deal with include the following:
- Checking out Good Faith Estimates of interest rates of mortgage offers and critical estimated closing costs
- Locking in estimates with guarantees in writing
- Coming up with a name of a trusted attorney, friend of family member who can verify your sense of responsibility and financial profile
- Verifying income from investments with two years if back federal income tax returns
- Also verifying any self-employment income used to prove sufficient resources for making mortgage payments, usually with 2-3 years of profit/loss statements and tax returns
- Checking whether the suggested interest rate is guaranteed
- Attaching any explanations of problems with your credit ratings, such as those problems related to an instance of identity theft or posting of inaccurate information
- Arranging an appraisal session using on the recommended appraisers in the lenders’ network
- Gathering the documents, you need as verification is a task that you can do in advance so that you’re ready instantly if you find an appealing mortgage offer
The paperwork you need for a mortgage loan includes proof of employment like check stubs and W-2 forms, business tax returns for self-employed people, bank statements and other records of assets like stocks, copies of your credit history, letters confirming any gifts to be applied to down payments or mortgage payments, records of the terms of any trust funds and even your rental history.
The Range of Closing Costs
Closing costs can vary tremendously, based on local laws and regulations for sellers and buyers of real estate. Closing costs can range from 2% to 3% of the cost of your new home, but they can rise as high as 5% to 6% in high tax jurisdictions. The charges included in closing costs include any discount points you’ve accepted for a lower interest rate, appraiser’s fees, origination fee of 1% to 1.5%, title search fees, insurance, etc.
Prepare for Intrusive Questions from the Mortgage Loan Officer
You might wonder how they come up with some of the intrusive questions that loan officers typically ask mortgage applicants. The tough personal questions often seem irrelevant and unnecessary, but they’re carefully designed to reveal aspects of your personality related to reliability. Earning enough income to make the mortgage payments doesn’t guarantee that you will do so. Try to answer any questions as completely as possible and try to remain professional and unconcerned about any questions you think are too personal.
Be prepared to explain any discrepancies like extended periods of unemployment, late bill payments or accounts turned over to collection departments. It’s best to compose a timeline of dates, amounts and causes of late payments. Be prepared to describe your work duties, how long you’ve worked for the company and any job promotions you’ve received. Come up with a description of why the job appeals to you.
You should also be prepared to explain negative actions like not purchasing any major new appliances in years. Perfectly useful appliances are an excellent answer to the question, especially if you’ve been saving up for a mortgage down payment, matching employers; contributions to an IRA or financing a college education for your children or other commonly approved reasons for saving money.
Be Aware of Your Debt-to-Income Ratio
Your debt-to-income ratio is one of the top indicators used by loan officers when deciding whether to approve a mortgage application. The ratio, expressed as a percentage of your debts compared to your income, is a major tool used in loan approvals. If all your credit cards are maxed out and your monthly debts total more than 36% of your monthly income, your account will be viewed unfavorably. You might seek to pay off some of your existing debts to lower your debt-to-income ratio before applying for a mortgage.
Try to maintain a reserve of available credit by not maxing out your credit cards. Lenders use these figures to determine financial stability, and the more unused credit you have, the better it looks on your mortgage application.
You might feel inundated with offers, proposals and details when formally applying for a mortgage, but you have options like getting pre-approved for a loan range. Just determine whether the loan interest rate is binding and lighten the load of worries that applying for a mortgage can generate.