Home Loan Information Home Loan Information From A Former Industry Insider

5 Steps to Prepare to Apply for a Mortgage

Seems like you should just be able to pick up the phone or go online and apply, right? Well technically you can. If, however, you want to help the results here are five things you can do, starting right now, to help yourself get the best mortgage for your buying and credit power.

1 – Pull Your Own Credit – A little inside joke, not funny because it’s at the borrower’s expense, is when a loan officer asks during the initial consultation, “you have any late payments or other derogatory information on your credit” and the application prospect answers “no” only for the loan officer to pull the credit of the applicant and find a couple of pages of nothing but late payments. Don’t let this be you. You can pull your own credit a any number of websites and usually for free. All you really need to look for is if you have late payments, judgments or liens against your credit, if you see something that isn’t yours, and get a general familiarity with your own credit report. You should do this at least once every year anyway.

Caution: You do not know how to make credit decisions so the advice above is not meant to have you think just because you have a late or two on your credit you are not going to be approved. Every loan solution is different. The advice above is just so that you already have some familiarity with your credit record which you always should anyway. Even if you see lates on there go ahead and call a licensed professional in your area.

2 – Know Your Finances – If you are the type of person who has no idea how much you have in your checking account you should take this time right now and review. If you never balance your checkbook this may be a difficult process for you because you’re going to be digging for some paperwork regardless of where you close your loan. Take the time before starting the application and familiarize yourself with your assets. Check your banking balance, retirement accounts and other liquid type investments so you’ll know the answers when asked and you won’t have any surprises later.

Caution: Every loan program is different and loan purposes are different, too. Purchase loans where you are making a large down-payment will require you to demonstrate you have the funds for the down-payment and closing costs and that they are, indeed, your funds. In other words you’ll have to prove it’s your money and it didn’t come from the seller trying to “help” you buy the home. If you have had the money for at least 2 months it is now called seasoned and the burden of proof diminishes rapidly to nil.

3 – Know Your Work Info and History – All mortgages require 2 years of employment history. Sometimes that can be a little crazy especially if you, or the borrower, work temp jobs. What this means is the lender (we) need to know everywhere you have worked for the last two years and if there are any gaps in employment a good reason. Go ahead and map this out and get the contact information and your pay history for each of these employers.

Caution: Even if you have gaps or have worked at multiple places in the last 24 months you cannot count yourself out.

4 – Know Your Residence History – You would be surprised how many people don’t know their last address when it’s needed on the loan application. We, any lender, will need to know where you have lived for the last two years and to whom you paid rent. If you are currently or have lived rent free we will need what is called a “rent free” letter that we get from the person who owned the home or had authority to permit you to live with them for free. Examples of this are room-mate, friend or even family. This is important because we are trying to prove your ability and intent to repay the money we are about to buy your new home with.

Caution: Only a mortgage professional who knows the guidelines and makes the lending determination can make the final decision on this. Don’t think you can’t buy just because your residence history is jumbled or obfuscated.

5 – Get Your Records Together – Most lenders for most loans are going to need (at least) some or all of the following so you may as well start getting them together right now. Find the last 2 (or even 3) years of tax returns, all pages, all schedules. Find the last 2 months of your bank statements for checking and savings all pages – even blank pages believe it or not. Find the last 2 years of your W2 forms. Find your last 1 month’s worth of your pay stubs. Some lenders need more, some lenders may not ask for all of these though most do.

Caution: Chances are you’re going to asked for some verification or statements about something so be prepared when you get asked by the loan officer or processor to provide them. Arguing about it really doesn’t do much good so it helps to be prepared and understand you are asking someone to “let you hold” $100k to $500k or more to purchase a property with really no guarantee you’re ever going to pay it back. It is their job to protect both you and the investor in the transaction.

Most of all it is better to not be surprised at the things that come up during your approval process. If you are a detailed record keeper you will be just fine. On the other hand if you’re a little shakey in the personal history department you may have a bit of a bumpy ride with the underwriter “making” you look for things. The best thing to do is find them now, before you apply.

Avoid online mortgage companies or big banks where you may be nothing more than a number and a dot on the page. Call a local, licensed, mortgage professional and be prepared to help them get you approved!

I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
Contact form on this web site