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How Are Mortgage Applications Processed?

How Are Mortgage Applications Processed?

A mortgage application involves a bit more work than applying for a credit card - but it's not an impossible task if done right. We hope this guide will help you navigate through the process and keep your eyes open to some of the most delicate points of your mortgage application.

A Mortgage Application Starts with Trust and Lots of Paper

The first official gate to cross is to fill out and submit the Uniform Residential Loan Application, which is a detailed 10-section document specifying what you are applying for, your income, and current debt status.

You will also have to provide some documentation—most likely your Social Security number, recent pay stubs, tax returns, contact info for your past employers, and proof of any other financial assets (such as savings accounts or stock packages). Specific requirements vary by lender, but fear not—your loan officer will be there to guide you through it all.

Your Mortgage Application Is Being Evaluated, Please Hold

Once you submit your mortgage application, the bank will then examine and verify all the information you have presented to determine how much you can afford to pay for a mortgage payment each month considering your current financial situation and obligations and how likely you are to pay it all back. This process is known as underwriting.

If the lender determines you are too much of a risk, they may ask for additional information, make a counter offer, or deny the application altogether. In the latter case, they are required to tell you why - and often you may be able to fix it.

If they found no problems with your application during this review, you'll be approved, and the ball will be in your court again.

What You Should Expect to Receive

At this point in the mortgage application process, the lender is legally required to get back to you with extra documents, including:

  • Good Faith Estimate: It lists an estimate of the terms of your mortgage, including the cost of completing the transaction. If your desired home requires a pest inspection or flood hazard insurance, it should be listed here.
  • Truth-in-Lending Disclosure: It should list all costs and fees attached to your loan, as well as the full amount you'll be paying back.
  • HUD-1 Settlement Statement: This document is "the final deal" and it will list the entire cost of closing the process and your final mortgage rate.

These documents are usually full of legalese and complicated terms, however, you have every right to ask for clarifications and explanations. Your loan officer will be able to walk through the documents with you and answer the questions you have.

Your Mortgage Application Process Will Be Easier with the Right Help

While the mortgage loan applications process can be overwhelming and confusing at times, an experienced and caring loan officer will make it much simpler. Sign up now and get expert help with your mortgage application.

Posted May 18, 2016 by Midland Mortgage Corporation