Mortgage Loans: 5 Things to Expect when Applying for Your First Home Loan

Applying for a mortgage loan is similar in many ways to applying for any other type of loan. However, because of the large amount of money a lender is giving you, the process of approving an application is generally more thorough. Let’s look at the key things to expect when going through the mortgage application process for the first time.

You’ll Need a Lot of Information

You will need to present official tax returns from the last two years. Lenders will also likely ask for pay stubs or evidence of any other income that you have generated in the past two years. If you are self-employed, be ready to provide income and tax information about both yourself and the business.

Income Can Be Averaged

Let’s say that you made $100,000 this year and only $20,000 two years ago. It is likely that a lender will average those two numbers together when determining your qualifying income. This helps to smooth out fluctuations in your income and allow a lender to better assess your ability to repay the loan.

Your Finances Will Be Monitored until Closing

Lenders such as Home Mortgage of America will likely keep track of your credit report prior to closing. If you make a large purchase, are late on a credit card or other debt payment or otherwise alter your financial situation, it could reduce the odds of the purchase closing. Therefore, be sure to put off any major financial decisions until after the loan closes.

The Approval Process Can Take Several Days or Weeks

While you may see advertisements for mortgage companies that offer approval instantly, that isn’t necessarily common. You should allow for days or weeks for the loan approval process to play out as the lender or an underwriter could have questions or need more information to make a decision.

Don’t Forget to Prequalify

Ideally, you will get prequalified for a loan before you actually apply for it. The prequalification process takes only a few minutes and will provide valuable insight into how you should set your housing budget.

By applying for a mortgage, you are asking a lender to give you tens or hundreds of thousands of dollars. Therefore, the lender will want to make sure that you are able to repay that money in a timely fashion. This means getting ready to spend many days or weeks on your phone doing whatever it takes to get a mortgage request approved.