Mortgage & Equity
9 Loan Application Process
This section will discuss:
What the loan application process entails.
What you should bring with you to the loan interview.
The best approach to applying for a mortgage can be summed up in two words: Come prepared.
When you make an appointment for a loan interview, your credit union lender will most likely send an application form and other information. You can complete the application form yourself, and your lender will be glad to help you through the process.
The Interview
Your credit union lender will need documentation to back up the information you fill in on your application form. The checklist below will help you in assembling the necessary documents. Bring everything with you to the interview; it will help speed up your application process.
If you have not already prequalified for a loan, your lender will need to calculate whether your income and debt load are in line with the mortgage amount you're requesting. (See What can You Afford?)
Bring Your Checkbook
When you apply for your loan, you'll need to pay for the following:
Credit record - The lender will need to get a copy of your credit record to find out if you're a good risk. You pay for this (usually about $40). By the way, it's a good idea to get a copy of your credit record before applying for the loan. That way if there are any mistakes or old problems, you can clear them up beforehand. You can get a copy of your record from a local credit bureau (expect a fee of at least $10). Look under "credit bureaus" or "Credit Reporting agencies" in the yellow pages.
Appraisal fee - The lender hires an appraiser to determine if the market value of the house is sufficient to cover the mortgage amount. You pay for this, too (typically $150 to $300). (Note, this is a cursory evaluation, not a thorough inspection, which you'll also want to get.)
Loan application fee - The lender may charge a nonrefundable fee (you don't get it back whether or not your loan is approved) to cover the costs of processing your loan.
The Waiting Game
The length of time you wait for final loan approval will vary, depending on your credit union's procedures. In processing your application, your credit union lender focuses on two things: the property you plan to buy and your ability to repay the loan. All the information you provided on the loan application must be verified.
Should your lender have questions about information on your application, respond as quickly as you can. That will help keep your application on track and speed the approval process. It's also appropriate to call your credit union occasionally to find out how your application is progressing, and whether any additional information is needed.
While your application is in process, interest rates could climb. Your credit union lender may offer to lock in a rate for you. Find out when the lock-in takes effect and how long it stays in place. Also, find out if you can lock in at a lower rate if rates fall before your closing date. Your credit union lender can tell you more about lock-ins.
When your loan is approved, your credit union lender will send you a commitment letter - the formal loan offer. Should your application be rejected, your lender must give you reasons, in writing. Talk to the loan officer to find out what you need to do to boost your chances for approval the next time you apply.
Loan Interview Checklist
Ask your credit union lender what to bring with you. It may include such items as:
- The complete signed purchase contract including all exhibits/amendments and/or counter-offers.
- A receipt for earnest money on deposit with the seller or escrow company (if not included in your purchase contract)
- Proof of income - Bring stubs from last month's paychecks and W-2 forms for the last two years. If you're a two-income household, bring documents for both of you. If self-employed, bring copies of at least the last two years' tax returns and a year-to-date profit/loss statement.
- Statements for all checking, savings and deposit accounts
- Stock/bond statements
- If applicable, award letters (Social Security, disability, retirement)
- If you're divorced, copy of divorce decree and proof of receipt of payment for alimony and/or child support (i.e., bank statements showing deposits, history of payment from clerk of court)
- Your checkbook, to pay fees
