Applying for a loan to buy a house

Couple applying for a loanWhen you apply for a mortgage, the lender will require a variety of documents to process the mortgage application. All banks and mortgage brokers will request the same documentation at mortgage application (and pre-approval) because mortgages must meet federal loan guidelines. Make sure you have a driver’s license or state identification card for all applicants. The lender may also want a copy of your social security card for each applicant and co-applicant.

The mortgage application can be somewhat worrisome for the first time home buyer or can be a dull, monotonous procedure for someone who has previously applied for a mortgage. The best way to get your mortgage application approved quickly is too gather all of your personal documentation and have it ready when you apply for a mortgage.

Income documents for a mortgage application

The lender will request all of your W-2s for the past two years when you apply for a mortgage. The lender needs the employment dates and phone numbers for the employers also. The lender must have pay stubs covering the most recent thirty days. Do you have your tax returns for the previous 2 years? If so, take them with you to the mortgage application. It can't hurt. The loan officer will use a formula called debt to income to determine whether the monthly income and monthly debt is in proportion to the monthly mortgage payment. For example, if the monthly debt is $1,000 (including mortgage payment) and the monthly income is $5,000, the lender will divide the monthly debt ($1,000) by the monthly income ($5,000), which results in 20% debt to income ratio.

Bonus income, overtime and employee business expenses need to be thoroughly documented.

Any money received from Social Security, retirement, or disability can be used as income when you apply for a loan. The lender will require copies of the direct deposit bank statements and the award letter.

Self employment and commission income triggers additional paperwork. If you receive 25% or more from a business or earn commission income, the lender will require tax returns with all schedules, including K-1’s, if applicable for the previous two years. Be prepared to provide a current profit and loss statement and balance sheet from an accountant. Corporate or partnership tax returns for the previous two years need to be documented if you own 25% or more of the company in addition to copies of any W-2s and/or 1099 forms

You need checking & savings statements for a mortgage application

Gather up all checking and saving account statements for past three months. Make sure you have all pages, even the last page. Be ready to explain any large deposits. Large deposits are a red flag for mortgage underwriter because a large deposit may be a loan, and mortgage applicants are prohibited from borrowing money to be used for the down payment and or closing costs.

Also included with savings are the most recent IRAs, CDs, money market funds, stocks, 401k, and profit sharing statements. Even if you are not using CDs, money market funds, stocks, 401k, and profit sharing savings toward the purchase or refinance loan, showing the lender additional savings improves the likelihood of approval.

If you are using gift money from your parents, relatives, or organizations to help cover the down payment or closing costs, the lender will provide you with a gift letter . DO NOT MOVE ANY MONEY INTO YOUR SAVING OR CHECKING ACCOUNT BEFORE MORTGAGE APPLICATION. The money transfer from one person to you must transition is a precise way. This usually requires a copy of the bank statement from the gift-giver and a deposit slip of the gift money going into your account.

Bankruptcy, divorce, child support documentation

If you’ve had a bankruptcy, you may need to bring a copy of the petition for bankruptcy and discharge, including supporting schedules.

Divorce decree and property settlement will be required. If you are in the middle of a divorce, the lender may permit the mortgage to go through, provided the settlement agreement is recorded.

Child support may be used as income if the child support was received over the previous 12 months. Child support is used as a monthly debt if paid. Either way, have your child support papers ready for the loan officer.

Drivers license or government issued photo identification

The Patriot Act requires lenders to obtain a copy of a photo identification card. Acceptable photo ids' include valid driver’s license, a valid state issued ID card (must include photo), military ID, or a passport.

Certificate of eligibility for a VA home loan

VA home buyers need a certificate of eligibility and copy of DD214 discharge paper for VA application, however, the lender may be able to obtain the DD214 electronically from the Veterans Administration. Also required is the name and address of nearest living relative.

Amendatory clause for FHA, VA and USDA home loans

The Federal Housing Administration (FHA) does not require additional personal information, however, the FHA does require the sales contract to contain the "amendatory clause and real estate certification form". This form is required for the FHA, VA and USDA home loans. The form states in so many words that there are no side agreements between the buyer and seller that are not stated in the sales contract; and that the home seller can not require the buyer to purchase the home if the appraisal is lower than the sales price. The FHA will still allow the sale if the appraised value is lower, however, the home buyer must pay for the difference between the low appraised value and sales price. Home buyer, seller and all real estate agents are required to sign this document.

Refinance documents

Homeowners who apply for a refinance loan will need a copy of the note, deed of trust (mortgage) or mortgage, deed and previous settlement statement (if available), survey and insurance information.

Purchase documents

The lender needs a copy of the sales contract signed by all parties. Please make sure the copy is legible. If the lender is unable to read the contract, he will require a legible copy signed by all parties.

If you want to impressive the loan officer and shorten the application time, complete the Uniform Residential Loan Application.pdf

Frequently Asked Questions About Loan Application

How long does loan application take?

A good estimate is 1 hour. Loan applications require significant paperwork and data input. The best way to shorten the application is to have all the required documents available.

How long does a mortgage application take to be approved?

A mortgage application can take a few days or can take up to month or more. The lender is required to verify employment, income, assets, and credit. Each applicant is different. If the applicant is single, has the same employer for two years, and only one bank account, then the approval process can occur quickly. But if the applicant works as a union carpenter and worked with 40 employers over the previous two years and doesn't have all of his W-2's, then, expect a month or better.

How many months bank statements for a mortgage application?

You should have the three most recent bank statements . . . all pages

The lender must provide you with a loan estimate


The loan estimate provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product. The lender must provide you with a Loan Estimate within three business days of receiving your application.

SOURCE: Consumer Financial Protection Bureau (CFPB)

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