How to apply for a mortgage

Buying a home can be confusing, especially since it’s not something most of us do very often. Even if you have gone through this in recent years, it can be hard to remember everything that you had to do, not to mention – things change. It’s helpful to know what to expect before you begin the process so that you can be prepared. Not only will this make you feel better, but it will also make everything go smoother and quicker.

Applying for a mortgage is not as complicated as it seems. Let’s walk through the basic steps here.

Check your credit

You should start out knowing exactly what your credit reports say about your financial history before you apply for a mortgage. These reports and your credit score play an important role in the loan approval process, but there are also ways to work around it if your credit isn’t stellar. This is an area where your Caliber Home Loans, Inc. ("Caliber") loan consultant can be an invaluable source, advising you of loan options available for those with less-than-perfect credit.

You might uncover late payments and other oversights from your past. That’s also common; don’t let that prevent you from going forward. You still may qualify for a mortgage.

Making a substantial payment to reduce a credit card balance may bring your credit score up pretty quickly, so pay as much as you can on your debts and don’t be late on any payments, including utility bills. If you’re going to have trouble paying a certain bill, call that creditor and discuss it. They may work out a new payment plan with you that will allow you to pay on time, and more importantly, won’t report you as delinquent to the credit bureaus.

You also need to review your credit reports for mistakes because errors are not uncommon and this is the time to get any mistakes corrected. Correcting mistakes usually involves mailing letters and following up with the credit bureaus.

Addressing credit problems early in the process can bring your score up in time to help with the loan approval.

Avoid delays
Once you decide to apply for a home loan, avoid any activity that may cause an issue or delay in the mortgage process. Your loan consultant can advise you on financial decisions that should wait until after you’ve closed on your loan, including changing banks or investment accounts.

New credit or other loans: It’s best to delay applying for other types of credit, like a car loan or a credit card, while you’re in the process of buying a home. Your loan application is evaluated based on how much you owe and what monthly payments you’re responsible for. A new loan changes your finances, so your application will need to be reevaluated. Wait until after closing to buy that car or get a new credit card.

Unexplained deposits: Be careful about moving money between accounts. You will be asked to provide bank statements and other financial statements. If there’s a significant deposit into your account, you’ll need to explain where the money came from. You’ll need to show that you didn’t take on new debt. If you’re moving cash among your accounts, you’ll need to provide an account history.

Changing jobs: Sometimes it can’t be avoided, but if possible, don’t change jobs until after you close on your mortgage.

*Caliber is not a credit counseling agency, a credit repair organization, or a similar service. We do not assist or advise consumers on how to improve their credit scores.

Select the best possible mortgages for you

There may be several loan programs that could be a good fit for you. You and your Caliber Loan Consultant can review the features and benefits of each and decide which you’d like to apply for.

If you choose to apply for several for a mortgage with several different lenders, it should not hurt your credit. Credit scoring models allow for comparison shopping, and your score should not suffer as long as you apply within 45 days. Before taking this approach, be sure to review each credit bureau scoring model to confirm how credit inquiries impact your score.

Gather documentation

To apply for a loan, you need to document your finances. You’ll find out exactly what you need as you go through the application process, but it’s never too early to start gathering documentation. Some items you will need are:

• Proof of income (pay stubs, W-2 forms, 1099 forms)
• 60 days’ worth of bank and investment account statements (or at least your username and password so you can get them when you need them)
• Financials for any self-employment income (profit and loss statements, tax returns, and more)
• Details on any other sources of income

Give yourself a few days to get this information. You may need to request documents by mail or wait for others to fulfill your requests.

Submit applications

Once you’ve narrowed down the field, apply for the loans you’re considering. That’s the only way to get a detailed, quote. Plan to spend roughly 45 minutes on your first application, and the next two applications should go more quickly.

Residential history: You’ll need to provide your current address as well as the addresses of any former residences during the previous two years. You’ll also need to list how much you spend on housing so that your current expenses can be compared to a new loan payment.

Income: Explain your income, including details about how you earn that income. At this point in the process, a total income amount is not sufficient—you need to break it down. For example:

• Base income (salary or wages) 

• Earning from overtime (and if you expect overtime to continue) 
• Bonuses and commissions 
• Investment income 
• Other sources of income (rentals, freelancing, etc. 

Compare offers

You will receive a loan estimate from each lender application. This three-page document describes the essential components of your loan, and it’s useful for comparing offers.

Loan estimates leave out the non-critical details and describe these important loan aspects:

• Closing costs required
• Whether or not the interest rate is fixed
• Monthly payment
• Cash required to close
• How much principal you would pay off in five years

Compare each section of the loan estimates carefully and ask your loan consultant for clarity on anything you don’t understand.

Choose a loan/mortgage

Once you understand the features of each mortgage, and you’ve discussed it with your Loan Consultant, choose the option that works best for you.

Request an appraisal

Once you’ve made your selection, you’ll need to commit to it by paying any fees required to process the application. This will include a home appraisal, which is required as part of the loan process and is done to ensure that the purchasing price of the home is in line with the home’s true value.  In some areas, appraisers can be extremely busy, so it’s wise to approve the payment and get that appointment scheduled as soon as possible.

You should also get the home inspected, which is different from an appraisal. After you make an offer on a home and the offer is accepted, you should arrange for a home inspection done by an independent, professional, third-party inspector. The inspection will determine if there are any issues with the property that need to be addressed.

Providing additional information

While your application is being reviewed, you may be asked for additional information or documentation. Don’t be concerned that something is wrong – it’s a common practice during a mortgage application. Guidelines often require that certain information be verified or clarified. It’s just part of the process.

Keep copies of everything you provide, in case you need to refer back to it.

The final review before closing

After everything has been submitted, an underwriter will conduct a final review. Once it’s been determined that you met all of the requirements, submitted all of your documentation, and paid any fees, then your loan will be clear to close.

Closing

The exciting finale – closing on your new home! At closing, you’ll finalize documents to fund the loan and complete your mortgage.

Read every document before you sign and verify that the loan is the same as described on the loan estimate.* Don’t be afraid to ask questions during the process—you’re making a significant commitment at closing.

After closing, you have a new home. Congratulations!

*The Closing Disclosure may not match the Loan Estimate. If they don't match, request to review a Change of Circumstances.