The mortgage application process is all about the paperwork and you can generally determine your eligibility for a home loan in advanced of making any decisions on a particular property. There are a few things that you can do that will put you in a position of strength at the bargaining table. One of the most powerful of those is having a clear understanding of the mortgage application process and knowing exactly where you stand with the funding that you can achieve.
Gathering Information On The Uniform Residential Loan Application
Collect all of the documents that you will need and make certain that you qualify. Lenders and the financial institutions that back them have extremely rigorous standards and procedures when it comes to lending to homeowners. There is a standard procedure for qualifying the borrower.
The first documents that you will need are your up-to-date credit reports from all three of the major consumer credit reporting agencies. Go through each one with a proverbial fine-toothed comb. You want to make certain that you know exactly the finance company will find when they pull your credit as part of the decision-making process.
The Four Cs Of The Mortgage Application Process
The attributes of your financial life that are going to be examined and judged are an easy list to remember because they all begin with the letter C.
- Capacity – You must demonstrate that you have the financial capacity to make your payments now and into the future, after all, the standard terms for mortgages range from fifteen to thirty years.
- Capital – Cash is still king in this world and the more capital reserves you have the better your prospects for borrowing funds to purchase your home.
- Collateral – The value in the property that you purchase will act as the security or collateral for your loan. It will face careful scrutiny before you get the go-ahead to close the purchase.
- Credit – The reason you need to check your credit reports is because your lender will look at them very closely to determine whether you are going to be allowed to have the funds to purchase your home. Statistically, lenders know that credit history is a good indicator of character and whether you will make all of your payments on time.
Appraisal Qualifies Your Collateral
Getting an appraisal of the property you intend to purchase is the other side of the equation from qualifying the borrower. At this point you are getting the home qualified for purchase. It is the qualifying examination of the collateral that is ultimately the basis of your home loan.
Once you have taken these three steps you will be expected to write a letter of commitment. Your real estate agent should be able to help you through this final stage. All that remains is to negotiate the final details and get ready to close on your new home.
The Proactive Practice of Mortgage Pre-Approval
Real estate agents are always second-guessing inquiries about their properties and services. There is nothing they like to hear more from a prospect then that you are prequalified. It means that you are serious and that you took the time and trouble to work with a lender before you went house hunting.
So before you do anything else talk to your bank or mortgage lender and get pre-approved. This agreement in principle will make a positive impression and get the most difficult part of the mortgage application process out of the way.