Mortgage application: A borrower’s guide

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With many mortgage lenders, you can apply for a mortgage online, and the process can be completed relatively quickly if you have all of your information ready ahead of time.

“It can take less than 45 minutes if you are prepared with all of the necessary documents at hand,” according to Deborah Baisden, a real estate agent with Berkshire Hathaway HomeServices Towne Realty in Virginia Beach, Virginia.

In the mortgage application process, your lender will ask for financial and personal details on either the Uniform Residential Loan Application (Form 1003) or a similar standardized form. Here’s what to expect.

What is included in a mortgage application?

There are 10 main sections in the Uniform Residential Loan Application:

1. Type of mortgage and terms of loan

In the first section, you’ll be asked to indicate the type of mortgage you’re seeking — whether it’s a conventional, FHA, USDA or VA loan, as well as other basic information about the loan. A loan officer can help you with determining which loan is right for you, along with providing case numbers, the loan amount, interest rate, term and type of amortization.

2. Property information and purpose of loan

In this section, you’ll be asked to provide the property address and indicate whether the loan is for a purchase, refinance or construction, as well as whether it’s a primary residence, second home or investment property, who will own the property and how it will be titled.

3. Borrower information

Here, you’ll enter your employment history along with contact details for your employers so the lender can verify your income. Both the borrower and co-borrower need to supply this information. If you’ve been at your current job for less than two years, you’ll also need to provide previous job details.

4. Employment information

Here, you’ll enter your employment history along with contact details for your employers so the lender can verify your income. Both the borrower and co-borrower need to supply this information. If you’ve been at your current job for less than two years, you’ll also need to provide previous job details.

5. Monthly income and combined housing expense information

The information you input in this section helps the lender compare your income and expenses to understand whether you can afford the mortgage.

On the income side, you’ll need to include your earnings or salary, any overtime, bonuses and commission or other sources of income such as interest payments or rental income. If you’re self-employed, you’ll be asked to supply additional documentation, such as tax returns or financial statements.

On the expense side, you’ll be asked to provide your monthly housing costs, such as rent or your first mortgage, HOA fees or mortgage insurance.

6. Assets and liabilities

In this section, you’ll list assets including savings, checking and retirement accounts and any properties you own. Under liabilities, you’ll include all debts such as car loans, credit cards, other mortgages and any alimony or child support you’re obligated to pay.

7. Details of transaction

“Borrowers may think a small loan or car payment nearly paid off is not significant to disclose, and then when their credit is pulled it pops up,” Baisden says.

8. Declarations

Here, you’ll confirm whether your financial history includes outstanding judgments or a bankruptcy, foreclosure or any lawsuits. If you or your co-borrower have these issues, discuss them right away with your real estate agent and loan officer so they’ll know how best to guide you.

9. Acknowledgement and agreement

Like any application, this section is so the borrower can confirm that the information they’ve included is accurate, and acknowledge that the lender and other parties have permission to verify the information (or verify it again, if needed, in the course of doing business with the borrower). Here, you and any co-borrowers will sign and date the application.

10. Information for government monitoring purposes

In the final section, you’ll be asked if you’d like to share the information on the application with the government so that they can ensure the lender is compliant with federal laws pertaining to discrimination. If you do want to share this information, you and any co-borrowers can indicate your ethnicity, race and sex. If you don’t, you’ll simply check off “I do not wish to furnish this information.”

What you need to apply for a mortgage

Your lender will ask you numerous questions on the mortgage application, so you’ll need to know things like contact information, specific dates, numbers and more. Here are the main documents and information you’ll need to answer them:

  • Employment information (name, address and phone of all employers in the past two years)
  • Income information (W-2s from the past two years, and pay stubs from at least the past month)
  • Additional income information from the past two years (e.g., dividends or interest, pension, Social Security)
  • Bank statements from the past three months (e.g., checking and savings, CDs, money market accounts, 401(k) or other retirement accounts)
  • Form 4506-T or 4506T-EZ from your loan officer authorizing the lender to access your tax returns
  • Signed purchase contract

If you’re self-employed, own a business or get paid through commissions, you’ll likely also need to provide additional information such as:

  • Federal tax returns from the past two years, including business tax returns (such as Form 1120, 1120S or Schedule K-1/1065)
  • Business records from the past several years (e.g., P&L statements)

Note your lender may request more documents during the underwriting process. This is common and expected — sometimes, a lender just needs more information so that they can clearly understand your risk level and determine your ability to repay.

How to apply for a mortgage

1. Check your credit score

Before you get a mortgage, check your credit scores to see where you stand. If your score isn’t as high as you think it should be, remember that there are low-credit mortgages out there, such as FHA loans, that could be a fit for your situation.

There are several ways you can boost your credit score if needed, such as paying down your credit cards, bringing any past-due accounts current and reviewing your credit reports for errors. If you spot a discrepancy, now is the time to contact the credit bureaus to correct it.

2. Know your budget

The last thing you want to do is to take on a mortgage that’s outside your financial means. One way to determine your budget is to look at your debt and estimated mortgage payment in comparison to your income. The general rule is to spend no more than 28 percent of your income on housing, and no more than 36 percent on housing and other debts combined (known as your debt-to-income, or DTI, ratio). Lenders can allow a DTI ratio as high as 45 percent or 50 percent, depending on the type of loan you get and other factors.

3. Build up your down payment

When buying a home, you have to not only account for your mortgage payment, but also for the down payment and closing costs. To bolster your savings to pay for these upfront expenses, consider:

  • Setting aside a portion of your pay into a dedicated savings account
  • Asking family and friends for help
  • Saving your tax refund

4. Find the right mortgage and lender

The right mortgage for you depends on your credit and financial profile as well as your goals. If you’re a first time homebuyer, for instance, you might want to consider an FHA loan, which has lower minimum credit score and down payment requirements. If you’re looking to pay off your mortgage sooner and can afford a higher monthly payment, a 15-, 20- or 25-year loan versus a 30-year one might be the better option.

It’s worth receiving rate quotes from several mortgage lenders. Be sure to compare the APR, fees and terms. If searching for deals on your own isn’t your cup of tea, you can work with a mortgage broker to help secure the best possible loan for your situation.

Once you have a lender and loan in mind, you can get a preapproval.

5. Start house hunting

With preapproval in hand, you can begin your home search. It’s important to take your time and look for a home that fits your price range, location and size preferences and other criteria. Once you’ve found the right property, you can submit a mortgage application to your lender.

Tips for applying for a mortgage

Overall, preparation is key when applying for a mortgage. In addition to having all of your paperwork in order, there are a few things you can do to help ensure a successful application:

  • Document the source(s) of the down payment. If a family member is helping you make a down payment, for example, have them sign a gift letter confirming where the funds came from and what they will be used for.
  • Keep your job the same. If you can help it, avoid quitting your job or starting a new one while your application is being processed. The lender can deny your loan if your employment situation changes.
  • Refrain from large purchases. Big-ticket charges can be a red flag to lenders, who may become concerned about your capacity to afford the mortgage. Ditto to opening a new line of credit or missing a debt payment, which can impact your credit history. “If you’re preapproved for a $500,000 mortgage for a home that you’re purchasing for $600,000, you’re close to the maximum affordability,” explains Melony Swasey, a real estate agent with Unlimited Sotheby’s International Realty in Jamaica Plain, Massachusetts. “Then suddenly you buy a car with a car note — that could affect whether you get approved.”

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Written by
Jeanne Lee
Contributing writer
Jeanne Lee writes about mortgages, personal finance and enjoys finding ways for people to hack their finances.
Edited by
Mortgage editor
Reviewed by
Senior mortgage loan originator, American Fidelity Mortgage
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