How to Apply for a Mortgage Tips

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Should I Apply With More Than One Mortgage Lender?

Apply With More Than One Mortgage Lender?

Unlike applying for a credit card or auto loan, there is little benefit in applying to more than one lender for a mortgage loan. You might believe you are increasing your chances of getting the best available deal or giving yourself “insurance” that you will receive an approval. But, there are reasons that it is usually not in your best interest to do this.

  • In addition to filling out lots of paperwork, it will cost you money to apply (credit report, property appraisal, and, possibly, an application fee).
  • A full credit report, usually a "tri-merge" (reports from all three major credit reporting agencies) is required. This will cost you money (around $15) and also bring down your credit score, as each inquiry takes some points off.
  • You will end up paying for more than one property appraisal (from $200 to $450).
  • You may be required to pay one or more application fees (around $200 each).
  • If you want to lock (guarantee) a rate at application and a fee is involved, more than one application will involve multiple fees, only one of which will benefit you.
If you locate an experienced, honest mortgage professional and provide him/her with the correct information, he/she will advise you of the best available terms for which you qualify. Therefore it is usually unnecessary and always costly to make more than one application with multiple mortgage lenders.

What Information Do I Need to Apply for a Mortgage?

Information You Need to Apply for a Mortgage

Since the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) purchase the majority of home loans in the U.S., their standards are followed by most mortgage loan buyers. This means most lenders will require the same information from you. The differences relate to either the type of property being financed or the specific type of loan being used. The most common information all lenders require:

  • Credit report : The mortgage source will get your report, but you should get one of your own BEFORE you apply so you know your current status in advance.
  • Income verification : Keep your pay stubs for at least two months prior to making application. Also have copies of your last two years' personal income tax returns in the event you need them, including W-2's. If you earn overtime or other additional compensation, be prepared to prove that it is regular and consistent over time. To verify this, you will need more pay stubs, as many as you can collect. The same rules apply if you earn a significant portion of your income from commissions and fees. You must justify the level of income you wish to get credit for.
  • Liquidity (Cash) : Regardless of the type of mortgage you receive or the property you're financing, there will be costs to close your new loan. In all cases, you will need third party verification of the cash you claim to have. Have your bank or credit union statements for the past twelve months handy. Also gather up all information on investments, mutual funds, and other “cash equivalents”. If some of your cash is coming in the form of a gift, have the giver sign a “gift letter”. You can find appropriate wording from the Internet or you can probably get a demo letter from your mortgage source. Be aware that most lenders will allow a gift letter ONLY from an immediate family member (mother, father, sister, brother, son, or daughter).
  • If you're buying a property, you will need a Purchase & Sale Agreement : Once you make an offer that is accepted, your real estate broker will prepare a formal agreement to purchase the property. Most lenders will require this agreement before they will accept a formal application, since there is no deal without it.
  • If you're refinancing a property, have your current tax bill, hazard insurance information or policy, a copy of your deed and/or legal description of your home: This will greatly facilitate the processing of your application and result in a faster approval.
  • If you're purchasing or refinancing a condominium : Have your condominium documents (e.g., bylaws, budget, master insurance policy declaration page, homeowner's dues information, etc.) ready.
There may be some other information you need to provide for different lenders but your mortgage source will make you aware of anything further they want.

How Long Should It Take to Get an Approval and Close a Mortgage Loan?

Average Time Period to Get an Approval and Close a Mortgage Loan

Depending on the type of financing and property involved, you will encounter some different time frames in getting approved and then closing your mortgage loan. Here are some estimates for your consideration. Remember these are estimates only.

Approval time period from formal submission date of an application:

  • Full documentation loan and single family home purchase: two to four weeks.
  • Limited doc or stated income and single family home purchase: two to three weeks.
  • Refinance single family or multi-family home: two to three weeks.
  • Full doc or stated income multi-family purchase: two to four weeks.
  • Investment property purchase: two to five weeks.
  • Refinance of investment property: two to three weeks.
Closing time period from formal Approval date of an application:

  • Full documentation loan and single family home purchase: two to three weeks.
  • Limited doc or stated income and single family home purchase: two to three weeks.
  • Refinance single family or multi-family home: two to three weeks.
  • Full doc or stated income multi-family purchase: two to three weeks.
  • Investment property purchase: two to three weeks.
  • Refinance of investment property: two to three weeks.
You should plan on a minimum of four weeks for the entire process and a normal maximum will be six to eight weeks. The time frames depend on how fast you get your personal information to your lender, how quickly your source gets the property appraisal and other third party documents, and how efficient your closing agent (attorney or escrow company) can assemble your documents and schedule a time to meet.

Can I explain my bad credit history to my lender?

Let Lenders Know the Reason for Bad Credit

Worried that bad credit will ruin your chances for a mortgage or raise your mortgage rate?

You don't want a bad credit mortgage loan, with higher costs and higher mortgage rates. If you had bad credit in the past, write a letter to your lender ande explain your situation. Were you behind on bills because of medical problems? Did you lose your job? In the letter, state what you have done to remedy your credit problems. Lenders must take these reasons into consideration when considering your mortgage application.

Where can I learn how to apply for a mortgage in Florida?

How to Apply For a Mortgage in Florida

Different states have different lending procedures. Florida is a state that has great protections for home buyers and home owners which makes applying for a mortgage a very detailed process. If you want to know how to apply for a mortgage in Florida, here are a few steps to guide you through. Personally, I always suggest speaking with a certified Florida mortgage broker. They can always give you the best step by step instructions regarding how to apply for a mortgage. You can find these brokers all over the place in Florida because of the boom in real estate sales, development, and refinances.

There are almost as many mortgage brokers as restaurants, and each can truly be of help. Once you have spoken with a mortgage broker, if you still have questions about how to apply for a mortgage in Florida, you will want to hit the Web. Online you can find mortgage and lending resource websites that can give you state by state procedures and laws regarding mortgages. Take a good look at these websites if you want a full view of the procedures that go into a mortgage application. Soon you will find that you are comfortable moving forward with your application. When you reach that point, you will want to fill out a few different applications and get a variety of quotes. Perhaps the most important thing to remember in the state of Florida is to ‘homestead' your property immediately. In Florida, there is a ‘homestead tax exemption' based on the value of your property. This is up to a $25,000 deduction on your tax returns, so when you are asking about how to apply for a mortgage, also ask about how to go about homesteading.

Why do I need to give so much information on my mortgage application?

Don't Get Frustrated with your Mortgage Application

For those that have never been homeowners or taken out a mortgage, the first time they fill out a mortgage application can be a daunting experience. Depending on the lender, some mortgage applications require several pages worth of responses to answers about the applicant. If you are in this process and are feeling the strain, don't let yourself get frustrated. All of the information on the mortgage application is necessary to secure your loan and here are a few ways to better understand that.

First, it is important to provide the lender with you employment information on your mortgage application. Loans are given out based on calculated risk factors by the banks. Your employment is an important factor to these lenders because it will give them an idea of what you can afford. The same goes for needing to report all of your expenses on a mortgage application. Only after the bank can see all of your other responsibilities can they properly evaluate what would be a good investment for them. Another important piece of the mortgage application is your credit history.

Unfortunately, this is the part where most people get frustrated. Too many people find that their credit is not where it should be when they actually get it pulled. Again, do not get frustrated. If you are working with a good mortgage broker, they can help you repair any bad credit along with taking your mortgage application. There are many parts of the mortgage application process that can cause people to become frustrated. Just remember that each piece is a necessary one toward getting you into the new home that you want so bad. Keep your eye on your new front door and the process will fly by.

What is different about a refinance mortgage application compared to a purchase?

Differences in a Refinance Mortgage Application

There are only a few differences between a mortgage application for a home purchase and a refinance mortgage application. Knowing these few differences could save you a few headaches when you are going through the process. Here are a few of the differences that will influence your whole application process.

First, with a refinance mortgage application, there is only a single property in question. As opposed to a home purchase where you are usually paying off one home and moving to another, with a refinance, you are always working with your home. Therefore, you will want to gather up all of the information from when you closed your original mortgage on the house and you will get all of the info you will need for this part of the refinance mortgage application.

Also, with a refinance mortgage application, you have to choose what type of refinance you will be doing. Typically this is a choice between a ‘rate and term' refinance and a ‘cash-out' refinance. If you choose the rate and term there isn't not much work left for you to do. However, if you are doing a cash out refinance for home improvements or other reasons, some lenders will want information as to where the money will be going.

For example, if you are putting on a new roof, it would help your cash out refinance mortgage application if you can provide a quote for the roofing job. A refinance mortgage application is a fairly easy procedure if you are aware of the information you need. Take the information we have provided here and speak with a refinance specialist who can take you through the rest of the process. Good Luck!

How can I protect myself from a bad credit mortgage loan?

Don't Be the Victim of a Bad Credit Mortgage

Don't fall victim to a bad credit mortgage with higher interest rates because of your credit history. Sometimes a mortgage broker will impose higher costs on the same loans for different borrowers. The higher costs may be in the form of higher mortgage interest rates, fees, or points.

But you can even the playing field, and save yourself thousands of dollars. Just ask the lender if your mortgage rate is the lowest offered that day. Ask to see the list of mortgage interest rates that the lender or mortgage brokers were issued for the day. If your lender or mortgage broker does not share the list, or you see you are not being offered the lowest rates, try to negotiate or go somewhere else for your loan. If you choose to accept higher costs, ask the lender or mortgage broker why you did not receive better terms for your mortgage loan.

Can I find out why my mortgage loan application was turned down?

Learn Why Your Mortgage Application Was Turned Down

If your mortgage is denied, or you get a higher mortgage rate than you applied for, find out why. It is your right to know whether your mortgage application was accepted within 30 days of turning in the completed form.

When an application is rejected, the lender must tell you why in a written statement. A lender or mortgage broker can say that your income is too low, your credit history is bad, or you have not held a job long enough. All those reasons are valid. When loans are accepted but for higher-than-expected mortgage interest rates, the lender needs to tell you why.

How can I make sure my mortgage application gets full consideration?

Make Sure Your Mortgage Application Gets Considered

There's no guarantee that when you apply for a mortgage, you will get one. Your lender or mortgage broker will look at your income, debts and credit history before making a decision. So, make sure your mortgage application gets serious consideration, and that you do not get a bad credit mortgage loan because of problems in the past paying your bills.

Of course, you have to provide to the lender all the financial information he or she requires to process your mortgage application. Lenders will first look at your employment. Have you held the same job for a while? If not, make sure you let the lender know your previous employment or why there was an interruption in your employment.

It's also a good idea to take a look at your credit report before applying for a mortgage. The information found on your credit report can affect your mortgage rate. Sometimes the report shows bad credit that has been fixed, or it contains erroneous information that you will need to correct. Avoid a bad credit mortgage loan. Contact the credit bureau to fix problems, and let your lender know about it.

Can a poor property appraisal hurt my mortgage application?

Review Your Property Appraisal for Accuracy

A poor property appraisal can affect your mortgage loan application. In fact, this could be the reason your mortgage loan is denied. If this happens, get a copy of the property appraisal from the lender or mortgage broker. Make sure that the information in the appraisal is accurate.

An appraiser, by law, cannot consider racial composition of a neighborhood as a factor in his or her report. Likewise, a lender cannot raise mortgage interest rates because of the racial composition of a neighborhood when you are buying a home.

Should I get a local mortgage broker or stick to a mortgage application online?

See It All – Get a Mortgage Application Online and from a Broker

Mortgage rates vary greatly from lender to lender and broker to broker. If you really want to see the full gamut of what is available to you on the mortgage market, be sure to fill out a mortgage application online as well as with some local brokers. Filling out a single mortgage application online will usually get you at least 3 unique mortgage quotes. And this is a good start. However, you will only get the full picture when you see some quotes from lenders in your area.

Often, a mortgage application online cannot give you the benefits of what local lenders can offer. If you live in a city with much new growth, chances are that there are local lenders offering great incentives on their loans in specific areas. Get a local application filled out and compare it to what your mortgage application online yielded. Now you have a fuller picture from which to choose the right loan for you.

Can I find mortgage application forms online?

Downloading a Mortgage Application Form Online

Many people prefer to research things such as mortgage applications before officially filling them out. If you are one of these people and want to see for yourself what goes into a mortgage application before submitting one, you can find full mortgage application forms online that can give you a head start.

To find a mortgage application form online, check with different banks and lending websites. There are almost always example mortgage application forms that you can download, print, and examine for yourself. This is a smart way to go since you can see what information you will need to gather before you fill out and submit an application. This type of research is how any savvy home buyer or investor will begin their mortgage process. See for yourself by downloading a mortgage application form from our sponsor. You can take advantage of these types of resources to make sure that you get the best mortgage loan possible when the time comes.

Where can I get more info on how to apply for a mortgage online?

How to Apply for a Mortgage Online

Today, people who are looking to purchase a home are finding that the mortgage application process has some new avenues that can be utilized. With the advance of computers and the Internet, more lenders everyday are letting borrowers know how to apply for a mortgage online. By learning how to apply for a mortgage online, homebuyers can shop around for great rates and programs without ever having to leave the comfort of their computer.

When learning how to apply for a mortgage online, the most important thing is preparation. There are still many questions that must be answered in a mortgage application. You will want to have the following information handy when you begin your application; Recent paystubs from your employer, your previous year's tax returns, statements from any bank accounts that you may have, and of course, all of your personal information such as social security and previous home information.

If you can arm yourself with all of this information before you begin, learning how to apply for a mortgage online is simple. Our sponsors are a great place to start the application process. There are any number of these websites that will provide you with a single application form which will translate into several different mortgage quotes. After you receive these quotes, just compare each and know that you are making the best choice.

What is a credit grade?

Mortgage Companies Assign Credit Grades

So you feel you got a bad credit mortgage loan with a high mortgage rate. It's common for mortgage companies to assign a grade to your loan, no matter your credit history. The higher the grade the better the mortgage interest rates are likely to be.

Keep in mind that lenders have their own guidelines. If you think you got a bad credit grade and a higher mortgage rate, you may want to shop around. The grade is based on solid evidence in your own credit history. The lender looks at payment history, amount of debt payments, bankruptcies, and your credit score from a major credit reporting agency.

Whom do I contact with a discrimination complaint?

Agencies Helps Homebuyers with Complaints

If you think you have been discriminated against through higher mortgage interest rates or the denial of your home loan, you can take action.

* Complain. Talk to the lender or mortgage broker. See if he or she will reconsider your application.
* Call your state Attorney General's office. Many states have their own anti-discrimination and consumer-protection laws. Find out if state laws were broken.
* Contact fair housing advocates. These agencies can help you file reports with state and federal agencies.
* You have the right to sue the lender. If you win, you can collect damages.
* Know which federal agencies enforce anti-discrimination laws. The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) protect homebuyers against discrimination applying for mortgages.

Can I submit a mortgage application online for a second mortgage?

Submitting a 2nd Mortgage Application Online

If you are like most current homeowners, you are loving the increases in home values over the past few years. Many of us have already chosen to take advantage of these increases by taking out second mortgages or home equity lines of credit against this increased value. If you are in this situation and want to fill out a mortgage application for a second mortgage, here are a few ways to get started.

First, we recommend the Internet for second mortgage applications. The benefit to online lenders of home equity lines of credit and second mortgages is the fact that most can offer a fast, no closing cost option and you can sometimes receive your funds in under a week's time. The key, of course, is in submitting a full and complete mortgage application.

Once they receive your mortgage application, you can get a few quotes, choose between them, and sign on the electronic dotted line to take on the loan. Typically, you will get a package in the mail that you will need to send to the lender, filled out, along with a hard copy of the second mortgage application. Once this is received, you can sit and wait until the send you the next package which should contain a big check.

Can I resubmit a rejected mortgage application?

Resubmitting a Mortgage Application

So, your first attempt on a mortgage application was not accepted by the lender. Maybe you were able to get a loan, just not the one you were looking for. Don't worry, you are free to resubmit your mortgage application at any time. Usually, there are specific reasons for rejection and these things can be fixed on your next try. Ask for a full report as to why your mortgage application was rejected. Only then can you know what needs to be fixed.

If you have credit issues that need resolving, work with a credit repair agency before you resubmit a mortgage application. If you have income that you are having trouble proving, take the time to gather your necessary documentation before you resubmit. Resubmitting a mortgage application is simple once you have fixed the problems. Typically, because you are already in the system, these repairs can be evaluated quickly and you can get a quicker approval.

Will my alimony and child support count as income when I apply for a mortgage?

Lenders Accept Various Income Sources

When you apply for a home mortgage, the lender or mortgage broker will review your income and expenses. But your income can be more than just the money you earn from a job. It can be public assistance money or alimony. To get the best mortgage interest rates, you want your lender to accept and consider all your income sources. It is in your best interest as a borrower to know the rules and to make sure the lender and mortgage broker follow them:

* Lenders must consider as income public assistance.
* Part-time work, Social Security, pensions and annuities also are considered income.
* The lender also must accept alimony and child support as income, if you choose to provide the information.

What are some common omissions from a mortgage application?

Three Things Not To Forget in Your Mortgage Application

When you are filling out a mortgage application, there are so many boxes and questions that sometimes you just want the process to end, period. This type of frustration is typical, but don't let it bog you down. To help you out, here are 3 things that you should always remember to include in your mortgage application.

  1. History of Residence – Lenders want to know your past, specifically regarding any previous properties that you have rented or owned. Many people forget to gather this info and it can cause problems. Without a complete history, many lenders will reject your application in underwriting.
  2. Employment History – Again, going along with knowing your past, your employment history is a necessity to your mortgage application. Go back as many years as you can, although most lenders only require 2-5 years worth of history.
  3. Gather Assets – A big part of your worthiness as a borrower is determined by how many assets you have. This is a form of collateral in the eyes of the lender and you should be sure to gather as many as possible. Cars, bank accounts, retirement accounts, and the like are all considered viable assets to include on a mortgage application. The more you can show, the more the lenders will want to throw money at you.

How should I go about filling out a mortgage application online?

3 Quick Steps to Completing a Mortgage Application Online

If you are looking to secure a mortgage for a new home and want to fill out a mortgage application online, here are three quick steps that can help you make sure the process goes swiftly and without any problems.

  • Prepare. Make sure that when you are going to fill out your mortgage application online that you have all of the answers you will need. Mostly, you will want to have information about your income, assets, taxes, and previous home ownership. Nothing holds up a mortgage application online like being unprepared, so gather as much of this information as you can at the beginning.
  • Find the Site(s). There are so many websites that will accept a mortgage application online that it is sometimes tough to know where to go. The real trick is to go to several. There is nothing wrong with getting as many applications in as possible. This will just mean that you get more quotes from more brokers. Just remember that your credit will be pulled each time you apply and that too many credit pulls can be bad for your score. Pick and choose where you fill out a mortgage application online wisely.
  • Be Thorough. Once you have found the sites that will take your mortgage application online, be extra thorough in completing the application. Leaving just one space empty could result in delaying or not even receiving quotes. Double check and then triple check each of your answers on the mortgage application for accuracy and you will be fine.

I Want to Apply for an Investment Property Mortgage. What Information Do I Need?

Information Needed to Apply for an Investment Property Mortgage

Investment property mortgage loans require a bit more complicated documentation, particularly if you are purchasing the real estate. This occurs because you have the same debt-to-income considerations and documentation requirements as with the purchase of an owner-occupied property PLUS the addition of a more complex appraisal, the need for lease agreements or tenant-at-will letters from your prospective tenants, and the often additional time it takes to complete these and other tasks (home inspection, pest inspection, etc.) because people need to gain access to the rental units, which often results in multiple visits because of the schedules of both the inspectors and the tenants.

The debt-to-income calculations are also a bit different than you might think. The logical approach is to add the net income you should receive each month to your income thereby improving your debt-to-income ratio immediately. However, this approach is seldom used as the secondary market, to which most mortgage loans are sold, does not like this calculation. Normally, the projection of your net monthly income (gross rents less vacancy [often 5%], mortgage loan payment, real estate taxes, insurance, and any other operating expenses (utilities, trash removal, snow plowing, etc.) for which you will be responsible) is included with your current debt profile (it should obviously reduce your monthly outflow for debts) to calculate your debt-to-income ratio. Confused? Here is a simple example:

Gross Monthly Income before purchase: $5,000

Monthly Debt BEFORE purchase: $1,700

Debt-to-income Ratio: 34%

Investment Property: Gross Rents $1,200

PITI & Expenses $ 900

Net Income $ 300

Method 1: Gross Monthly Income ($5000) plus Net Income ($300) $5,300

Monthly Debt AFTER purchase: $1,700

Debt-to-income Ratio: 32%

Method 2: Gross Monthly Income ($5000) plus Gross Income ($1,200) $6,500

Monthly Debt BEFORE purchase $1,700

(include new mortgage pmt. & expenses) $ 900

Monthly Debt AFTER purchase $2,600

Debt-to-income Ratio: 40%

You can see the difference as your debt-to-income ratio INCREASES to 40% instead of decreasing to 32%. This is a very conservative approach to the calculation but it is what the market wants. Take this into consideration if you are considering an investment property purchase and want to calculate your own debt-to-income ratio.

My Credit is Not Very Good. Should I Apply for a Mortgage Loan?

Apply for a Mortgage Loan With Less Than Perfect Credit

There are a number of mortgage products available for you if you have less than perfect credit. You just want to be sure you are making application for the “right” loan so you don't waste time and money to receive an answer you will not like. Do your homework and learn as much as possible about the mortgage loans available to a borrower with less than perfect credit. To do this, you must first learn exactly how much less than perfect your credit report and score really are. Occasionally making a late payment on a credit card account and/or an auto loan, then catching up rather quickly, is very different from consistently missing a mortgage payment or repeatedly being late with your rent. Once you learn the facts about your credit status, you can smartly search for a mortgage that fits your profile.

What you want to avoid is wasting your time and money applying for a mortgage loan with terms you could not achieve because of your derogatory credit. Knowing your true credit situation allows you to intelligently discuss your loan options with all legitimate mortgage sources, getting the right information to locate the best mortgage terms you can qualify for without paying more interest or closing costs than necessary. The good news: You can still buy the property you want or refinance your current mortgage to generate the cash you need.

What Does It Cost to Apply for a Mortgage Loan?

Cost to Apply for a Mortgage Loan

There are a few basic costs that you will incur with almost every lender in the U.S, Canada, and Europe. The most common:

  • Credit report fee – unlike a credit card or auto loan credit report, which usually costs less than $5.00, a mortgage loan credit normally costs between $12.00 and $20.00.
  • Appraisal fee – whether you are buying or refinancing property, you will need a full appraisal, often called a “Fannie Mae appraisal”, since the basic format is prescribed by the Federal National Mortgage Association (Fannie Mae). This involves an interior as well as exterior examination of the house. Depending on where you live, the cost should range between $200 and $450 for a single family home or a condominium. If the property is a multi-family (two to four units), an appraisal should cost between $400 and $650.
  • Application fee – in the past ten years, many lenders have eliminated this fee but some mortgage sources still charge an amount for making an application. When charged, this fee is to defray the initial cost of processing your application paperwork to determine if it will work. The fee should be around $200.
While there are many additional costs to close a mortgage loan, these are the only costs you should face to make a formal application.

What Are the Differences Between a “Full Documentation” and a “Stated Income and Assets” Mortgage Loan?

“Full Documentation” and a “Stated Income and Assets” Mortgage Loan

While most mortgage loans are of the full documentation variety, there are a number of products that are called a variety of different names, all of which fall into a category known as “limited doc” or “alternate doc” loans. Full documentation loans require that you submit verification for all income, cash, etc., as normally called for in most mortgage loans.

Stated income and assets is the most “liberal” of all the limited doc mortgage types. You merely “state” your regular monthly gross income and your available cash to complete the purchase or refinance of the property. You are not required to supply third party verification of the income level and available cash you state on your application. The lender agrees to accept your statement of your gross monthly income and liquid assets. However, this is not a giveaway program. If you are NOT self-employed or a commissioned employee, but are a salaried or hourly worker, you may not be allowed to use this product. Should you have poor credit and no excellent explanation for your status, you may also be ineligible for this type of mortgage.

In between these two ends of the documentation spectrum, are limited documentation programs, which may allow you to state your income but verify your assets by supplying one or two years' bank statements. Or, you might be required to prove your income but be allowed to just state your liquid assets, which allows you to borrow down payment or closing cost money without proving where you received the funds.

Stated income and asset programs are excellent choices to eliminate excess paperwork and can speed the process of approval and closing, however you will pay between one-quarter and three-quarters of a per cent more of interest for this privilege. If your credit score is below around 620, you will have fewer of these loan options open to you and you will probably have to pay one per cent or more above the full doc interest rate. But always examine all of your available options to locate the best choice for you.

Should I Use a Mortgage Company, Broker, Bank, or Credit Union?

Mortgage Company, Broker, Bank, or Credit Union

While there are literally thousands of sources of home mortgages, the rule of thumb has not changed since the first home loan was granted. But there are some potential differences and things you should know:

  • Be comfortable with whomever you select to handle your home mortgage. Interest rates and many other basic requirements of a mortgage application are determined by the “secondary market”, the entity that buys mortgage loans, so the differences are minor.
  • There might be more (or occasionally less) expense if you deal with a mortgage company or broker. This is not an absolute truth as you can sometimes save money. But the reality is that a bank or credit union, with many other sources of income, has the ability to be less expensive to deal with. Mortgage companies and brokers do not offer installment loans, credit cards, education loans, etc., nor can they accept deposits (a wonderful source of low cost funds), so their total income is directly tied to the number and amount of mortgage loans they make. The best idea is to shop around many sources and examine pricing and service.
  • If your first choice is a bank or credit union, make sure you have access to a “full menu” of loan options. Some banks and credit unions offer a more “vanilla” selection, while most mortgage companies and brokers usually have a very extensive menu, sometimes giving you more flexibility depending on your credit status, income situation, cash position, and plans for the future.
  • Find out if your mortgage will be sold by your lender. Most mortgages are sold but many are still serviced by your original lender, which simplifies the long-term process. Many banks and credit unions will keep servicing your loan, even if they have sold it (if they just sell to Fannie Mae and Freddie Mac, they must continue to service your loan). Instead of making payments to one mortgage company for six months, then another for the next year, etc., you can continue to make your payments to your lender for the long-term. This should not be a decision maker it should be considered part of your selection process.
The bottom line should always center on your becoming knowledgeable about the mortgage loan process, rates, terms, costs, and long-term relationships. Along with being the largest financial commitment most people ever make, a mortgage loan is also a personal and emotional investment. Treat it as such and you will have few problems.

Can I Make a Mortgage Application over the Internet?

Internet Mortgage Application Tips

The Internet has opened many new options for making a mortgage loan application. You should understand, however, that, like the rules of real estate transfers which are still based on 18th century English common law, the requirements for applying for and closing a mortgage loan are the same as always. With that in mind, here are some tips to using the Internet to apply for a mortgage loan.

  • Get your credit report and FICO score so you will be aware your current credit status. If you discover some problems, start working on them right away.
  • Have some idea what your current debt-to-income ratio is, but do not figure in your current rent or mortgage payment. If you do not know how to do this, use one of a variety of mortgage calculators that are available on the ‘Net.
  • While we all shop for the “best” rate for our mortgage, have a check list of other issues that will be important in both the short- and long-term (closing costs, other fees, reputation of mortgage company or lender, etc.)
  • Get specific information regarding the exact documentation you will need for any source you consider applying to. Documentation levels are pretty consistent but different loan programs and even different lenders might have slightly different requirements.
  • Check out the public information and reputation of all mortgage companies, brokers, and/or lenders in which you have interest. While it is frustrating and sometimes expensive to have a problem with an Internet auction site or e-commerce seller, this is “child's play” compared to a mortgage loan problem. There are a number of mortgage companies and national lenders who have had published problems in the past and you should avoid these sources if possible.
  • DO NOT give your social security number or any other sensitive information to an Internet lender (or any other lender, for that matter) during your mortgage shopping. DO know your current credit profile and FICO score so you can give that information to learn what interest rate and terms you can expect. But DO NOT allow any mortgage source to pull a credit report on you until you are ready to make application. EVERY lending inquiry made to the credit bureaus lowers your credit score. That is the last thing you need at this time.
  • Get firm information on how the application and approval process works with any sources you are seriously considering. Ask for a realistic approval and closing date. If either seems unreasonable, ask for clarification. For instance, if a source tells you an approval will come in 48 hours and you can reach closing in two weeks, please question such comments. If it sounds too good to be, it is!
The key, as always with a home mortgage loan, is dealing with someone or a company you trust. You cannot “return” a home loan as you could with an appliance, a TV, or a sweater. You will own it and have to live with it for a while. If you're comfortable with your lender and you've done your homework to make sure they are legitimate and reliable, you should be able to use the Internet to make your mortgage loan application.

Can a lender reject my mortgage application because I receive public assistance?

Mortgage Applicants Protected from Discrimination

A lender or mortgage broker must treat all mortgage loan applications equally, regardless of the applicant's race, age, gender or martial status. Federal law protects homebuyers from discrimination when they are applying for a mortgage loan. If you suspect discrimination, contact your state Attorney General's Office. Know the law and be informed as a consumer.
* Lenders cannot reject mortgage applications because of age, race, gender, marital status, national origin, or because the applicant is on public assistance.
* Be aware that you can be asked to list your race, national origin or sex on an application. The voluntary practice enables monitoring agenices to uphold anti-discrimination laws. Creditors also can ask about immigration status to determine whether homebuyers will be in the country long enough to pay off a mortgage loan.
* Lenders are prohibited from increasing mortgage interest rates or requiring larger down payments because of race, sex, or other factors.
* Lenders cannot inquire about a homebuyer's plans to have children.
* If the home buyer meets the standards for a mortgage loan, the lender cannot require a co-signer.

What can I do to improve my finances and look more attractive to lenders?

Improve Your Standing with Lenders

OK, so you know you have bad credit. But you don't want it to affect your mortgage rate and you don't want a bad credit mortgage loan. There are steps you can take to lower costs and improve the terms of your mortgage.
* Make sure all other financial information is filed with your loan application, including income sources and employment history.
* Have a stable income. Lenders look at how long you have held your job. Having assets helps.
* Pay bills on time. Late payments are a red flag, especially if you made late mortgage payments on a previous home.
* Settle old debts. Your lender will look at your history and pattern of paying bills. A lot of unpaid, old loans is a problem.
* Don't ignore debt. Paying late is better than paying nothing. Lenders look at your willingness to pay off your bills.

What Information Do I Need to Apply for a “Government” Mortgage Loan?

Information Needed to Apply for a “Government” Mortgage Loan

Government mortgages can be wonderful alternative choices to help you get the property and terms that work for you. There are two government-related programs that guarantee large portions of loans made by others. The Federal Housing Administration (FHA) and the Veterans' Administration (VA) provide financing guarantees to approved lenders to help many people, who may not qualify for conforming loans, to purchase property at reasonable terms.

Established in 1934 as part of President Roosevelt's New Deal program, the FHA was created to help people purchase homes. The original “non-conforming” or sub-prime mortgage product, the FHA program does NOT directly make loans; they guarantee them. To apply, you need the same information required for conforming mortgage programs (income pay stubs and W-2's, bank account information, last two years' tax returns, and all open loan information). If you are a military veteran, you should also have your Certificate of Eligibility and DD-214. If you don't need an FHA loan, you'll be better off applying for a conventional mortgage since you will pay a “guarantee” fee every month to cover the insurance FHA is providing. The cost of the FHA guarantee is 1.5% of your loan amount, charged at closing, and 0.5% annually on your outstanding loan balance. But if your credit is less than perfect and/or if you have limited cash for down payment and closing costs, an FHA mortgage loan is an excellent choice.

If you are a military veteran, the VA loan program might be the best choice for you. To apply, you will need all of the usual information (see above), including your Certificate of Eligibility. You can obtain this certificate through the VA or directly online through a number of sources. You will qualify whether you were a member of the regular military, the National Guard, or reserves. The good news: You can purchase real estate with no money down, no ongoing insurance fee (as with FHA), and your loan may be assumable, making it easier to sell your home in a period of rising interest rates. The only downside is that you will pay a “funding fee” at closing. The amount will vary depending on whether you are a veteran of the full time military or National Guard/reserves, the amount of your down payment, and whether you are using this benefit for the first time or have used it previously. If your credit is less than perfect and/or you are short of down payment and/or closing cost funds, this program will help you buy the home you want.

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