The process typically takes 20-30 days. You will be notified by your lender who will also notify your sales agent so they can work together to keep closing on track. It is not unusual to be asked for updated information a few days prior to closing. Any changes in your financial situation could cause a delay in closing your loan.
Documents needed to apply for a mortgage
- W-2’s from the last two years
- Current pay stubs with year-to-date earnings
- Statements for checking, savings, other bank or investment accounts
- Proof of monthly rental or mortgage payments
- Two years of employment history
Along with a credit report, lenders will often request a credit score (FICO) to help determine whether or not you are eligible for a loan. A median credit score (FICO) ranges from 690 to 740. The score is a credit overview and is weighed by the following:
- 35% payment history
- 30% amounts owed
- 15% length of credit history
- 10% new credit
- 10% types of credit used
Ensure no changes during the loan process
From the time you apply for your home mortgage to the time you close on your home, keep the following in mind:
- Do not increase your debt by making any major purchases such as a car, furniture, or electronics.
- Do not move funds between accounts.
- Save all documentation on any deposits into your accounts.
- Keep balances on all revolving accounts as low as possible.
- Be sure payments on all current accounts are paid on time.
Closing your loan
Prior to closing, you must provide proof that homeowners insurance is in place. The closing attorney will prepare the closing package per your lender’s instructions. Usually the day before closing, the attorney’s office will provide you with the exact amount of money needed for closing. The money you are required to bring to closing must be certified funds. Don’t forget to bring your driver’s license to closing for identification.
Closing costs include charges associated with loan origination, underwriting, credit report, tax service, flood certificate, title search, title insurance, deed stamps, transfer taxes, inspections, survey, appraisal, hazard insurance, attorney fees, per diem interest based on days left in the month after closing day, lender-required escrows and homeowner’s association dues. Sometimes buyers negotiate for the seller to pay a portion of their closing costs. The purchaser will be responsible for all lender costs associated with "optional" programs such as interest rate buy-downs and discount points.
Basic mortgage terminology
Adjustable Rate Mortgage (ARM) – a mortgage whose interest rate changes periodically by adding a fixed number of points to the changing index.
Annual Percentage Rate (APR) – the total yearly cost of a mortgage expressed as a percentage. It includes interest and other finance charges such as points, origination fees and mortgage insurance.
Debt-to-Income Ratio – the ratio to qualify you for a mortgage. Compares your total monthly housing expense and other debt (the amount you pay out) with your total monthly gross income (the amount you earn).
Deed – the legal document conveying title to a property.
Down Payment – the difference between the sales price of the home and the mortgage amount. It is the amount of money a buyer pays with cash and does not finance with a mortgage.
Earnest Money – a deposit given to the seller to show that a prospective buyer is serious about purchasing the property.
FHA Loan – a mortgage that is insured by the Federal Housing Administration (FHA) helping low- to moderate-income families and first-time homebuyers qualify for mortgages. Interest rates for FHA loans are usually the going market rate, but the required down payment can be as low as 3% and the closing costs can be included in the mortgage amount.
Fixed-Rate Mortgage – a mortgage in which the interest rate does not change during the entire term of the loan.
Homeowner’s Insurance – Insurance that protects your home and possessions from theft and damage.
Interest – a fee you pay for borrowing money.
PITI – "Principal-Interest-Taxes-Insurance", the four elements that make up your monthly mortgage payment.
Prequalification – the process of pre-determining how much money a prospective buyer might be eligible to borrow. Prequalifying for a loan does not guarantee loan approval.
Principal – your loan amount, not including interest; the amount borrowed or remaining unpaid. Also, the part of the monthly payment that reduces the outstanding balance of a mortgage.
Purchase/Sales Agreement – a contract between the buyer and seller that defines the terms and conditions of the home purchase.
Title – written evidence that proves you are the owner of your property.
Underwriting – the analysis of your overall credit and property value and the determination of a mortgage rate and term.