Lenders need to consider five key factors in determining whether or not they are able to approve your loan:
- INCOME. The lender needs to feel confident that you earn enough money to pay your mortgage.
- DEBT. The lender needs to know that your other bills (not including utilities and taxes) will allow you to pay your mortgage.
- CREDIT HISTORY. The lender wants to see that you have a history of paying your bills on time. And if you haven’t been able to, the lender looks for a reasonable explanation.
- CASH. The lender needs to be assured that you have enough cash to make the down payment and cover closing costs.
- PROPERTY VALUE. The lender needs to be sure that the property you are buying is valuable enough to support the sale price.
The mortgage application has sections that address all five factors.
After your loan application is complete, we will begin the process of collecting the documents required to support the information on the application.
First, we will obtain a Credit Report, usually from one of the major credit reporting agencies.
Second, we will send a Verification of Employment (VOE) form to your employer(s) to verify your salary and employment history.
Third, we will send a Verification of Deposit (VOD) form to your savings institution(s) to verify your savings.
Fourth, a professional appraiser will visit the property to determine its value, taking into consideration location, zoning, and size, as well as the sale price of similar properties in the same neighborhood. This is known as a Property Assessment.
We may also need to obtain other documents, including:
A Gift Letter – If any of your down payment is to be in the form of a cash gift from a relative, you’ll need a letter from that relative explaining that the cash is a gift and no repayment is expected. (There are usually limitations regarding the percentage of the down payment that can be a gift. We will be able to provide details.)
Other Sources of Income – If you receive income from sources such as rental property, social security or disability, alimony, and/or child support, we will need to document these.
Self-Employment Information – If you’re self-employed, lenders need tax returns, financial statements, and a profit and loss statement.
Investment Income – If you earn any income from investments or dividend income, you’ll need to provide these records.
Divorce Decree – If applicable.
Within three business days of receiving the application, we will provide you with a “Good Faith Estimate” of the anticipated closing costs. These costs include origination fees, points, mortgage insurance, title insurance, escrow reserves, hazard insurance, miscellaneous lender fees, and our fee.
You’ll also receive a Truth-in-Lending Disclosure. This will show you the estimated monthly payment and the total cost of all finance charges.