The Application Process
Here's what you can expect when you're ready to apply for your loan.
March 2009
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You've found the mortgage you want and you're ready for the next step: loan application.
The process costs money. Lenders levy the fee to cover the costs of running credit reports, filling out mortgage-insurance applications, having appraisals conducted, and the like. Some lenders will charge you a flat fee, anywhere from $100 to $400, while others will charge separately for the different services required. These fees are usually non-refundable.
What to expect
Be prepared to give the name and phone number of someone who can verify financial information about you -- most likely, your employer's personnel office. If you have substantial income from investments, you'll be asked to substantiate this through an accountant, stockbroker, trust officer or similar source. If you are self-employed (a definition that could be triggered by as little as a 5% to 10% ownership stake in a closely held company you work for), you may be asked to submit financial information about the company.
Application forms are usually filled out during the interview or over the phone, with the help of a loan officer, but you could also fill them in at home and return them.
For conventional loans carrying private mortgage insurance (PMI), check with your lender regarding the necessary documentation.
You may be asked to pay a "loan origination fee" or "prepaid point" -- typically 1% of the loan amount -- when you apply. This is in addition to the application fee. This fee is basically another way of charging you prepaid interest -- the points you may have to pay at settlement. Remember that the more points you pay up front, the lower the rate should be on the loan.
Find out what will happen to your origination fee if the lender decides not to approve your loan. Will the 1% origination fee be refunded? Get the answer in writing before you pay.
Check whether the quoted interest rate is guaranteed, and for how long. If you think that interest rates may rise while your application is being processed, ask for a "lock-in."
The federal Real Estate Settlement Procedures Act (RESPA) requires a lender to provide you with a "good faith" estimate of closing costs once you complete a loan application or within three business days. The estimate must include costs for such items as points, an appraisal, title search, title insurance, survey, recording of deeds and mortgages, and attorney's fees. You can ask for a hypothetical calculation of such items as property taxes and hazard insurance, based on your anticipated closing date.