The Mortgage Application Process: getting a mortgage the right way!

If you recall our previous post, WHAT'S YOUR RATE?, then you're aware of the pitfalls surrounding the mortgage application process. Surely as you get started, you'll have several questions. Questions such as:

“How do I get started?”
“Where do I start?”
“Should I go with a Banker or a Broker?”
“Can I shop around? How do I know I’m getting the best rate?”

These are all questions that I’m going to answer for you in this Home Buying 101 Series. So, without further ado...

As you get started on your mortgage application process, there is something you must do…

Get your paperwork in order!

For the sake of explanation, let’s use an analogy… Applying for a mortgage is much like:

Taking an airline flight from destination A to destination B

You’re moving from initial Application to Closing

Now, just as you wouldn’t board your flight without your luggage, don’t begin the application process without gathering your paperwork.

I know this might sound cliché, but this purchase is the biggest liability you’ll ever acquire, so plan appropriately.

What's more, if you gather your documents BEFORE you start looking around (a.k.a. shopping for rates), you'll ensure that you're quoted accurate rates and nothing less!

Here’s what you need:

• Prior (2) two years W-2s; for self-employed individuals, this includes prior (2) two years tax returns.

• Recent (2) two months pay stubs. Here you want to be sure that the address reflected on your pay stubs is your appropriate work address. Additionally, be sure to write down the appropriate work number for the department that handles employment verifications.

• Recent (2) two months bank statements; this includes Checking, Savings, 401(k)s, Stocks, Bonds, etc. As a side note, it’s important that when you gather these statements, you have ALL pages of the statement and not just the first page summary.

• If you have been divorced, you want to gather a copy of your Divorce Decree.

• If you have filed for Bankruptcy within the last (7) seven years, you will need a copy of the filing paperwork as well as the Discharge Statement.

Now that you’ve gathered all of those documents, the next thing you want to do is fill out a Residential Loan Application (initial 1003); You can download a copy of the form here. 

Now wait, don’t walk into you local branch, sit down, and get to filling out a loan application. Not just yet anyway!

We're still working on creating a full financial profile (a Credit & Income Package) on you.

When you fill out the 1003, make sure you've done so on the basis of full disclosure! Be truthful, for the obvious reasons, but also because as the market has changed, so has the mortgage application process. The better prepared you are, the better chance you have at qualifying for your mortgage and negotiating the best terms!

The next thing you'll need, is to obtain a copy of your tri-merged Credit Report (Equifax, Transunion, and Experian). If you fill out a Quick-App. here, I will give you a copy of your Credit Report for free! If you already have a copy of your Credit Report from a service like www.annualcreditreport.com, have it handy, you'll need it to complete your Credit & Income Package.

Once you have your (1) 1003 completed, (2) a copy of your Credit Report and (3) your additional paperwork, you’re ready to consult a Mortgage Planner and get started on negotiating the terms of your new mortgage.

In our next article, we’ll answer “The Broker v. Banker Debate” and we’ll give you some suggestions on where to locate a suited Mortgage Professional. Remember, a lot of people do mortgages, few give qualified expert advice! And as my colleague Brian B. will tell you,

"if you thought working with a Professional was expensive, wait until you see how much an amateur will cost you!"

Comments

[Renee Burrows]

Hey Ricardo this is a perfect primer for everyone from first time buyers to seasoned buyers! Great outline and I may be asking permission in the future to link to it if that is OK with you :wink:

[Ricardo Bueno]

Hi Renee!

Thank you for your blessing on this article :)

By all means you "do" have permission to link back anytime in the future!