A loan transaction typically takes about two or three weeks from the time the application is submitted until approval. This varies, depending on the specifics of the application as well as the lender’s current policies.
Here are the basic steps and list of general documents and paperwork that are required by lenders when applyingÂ for a home loan.
1) Call different lenders and find out what loan programs they offer.
To find a reputable lender, get referrals from friends, co-workers, family, and local real estate agents. Also check for lenders online to compare rates.
2) Compare the different plans and rates offered.
The plan that is best for your specific situation will depend upon:
- How long you intend to live in the home.
- Your current income and anticipated future income.
- Other factors unique to your situation.
- Your financial history and other factors will play a large part in:
- Whether you are eligible for a loan
- How much you can borrow
- What interest rate you will be offered
3) To get the best interest rates, a borrower needs to have a substantial down payment and a good credit score. Lenders may impose limits on how much of your down payment can be borrowed.
4) Choose a loan program that suits your particular financial and personal needs. Then see if you can negotiate the amounts of fees or loan points charged by the lender. A point is one percent of the loan amount. You may have an option of lowering your interest rate by paying more points.5) What The Lender Will Need From You:
- A completed loan application.
- ProofÂ of identification.
- Your recent pay stubs.
- Federal tax returns from the last two years.
- Copies of your W-2 forms from the last two years.
- Recent purchase agreement (if you have one).
- Previous three months statements on all of your bank accounts (this is to verify the down payment).
- If you are self-employed, you need to show profit/loss statements and tax returns for your business for at least two years.
- If you own a corporation you need your corporate returns from the last two years.
- Bankruptcy papers (if applicable).
6) Factors that may be considered when you apply for a home loan include:
- Your age.
- How many credit lines you have.
- The number of recent inquiries into your credit history.
- The ratio of your balances to available credit.
- Whether you own a home.
- How long you have had credit in the credit bureau database.
- How long you have been at your present home address.
- Any derogatory items including collections against you, foreclosures, bankruptcies, or slow pays. Note: Any unpaid debt that is past due, such as judgments and collections, must be paid before obtaining a mortgage loan. These outstanding debts represent potential liens on the property. Your loan will not be approved unless these debts are paid (there may be exceptions if the statute of limitations has expired).
8) A credit score of at least 620 used to qualify you for a good interest rate, and anything less would only qualify you only for a sub-prime rate (which is higher). Generally a score of 680 or above is considered excellent, and along with other factors should allow you to get the best rates available. In today’s economy standards may be even higher so check with reputable lenders on their criteria.
9) Closely review the final loan documents. Loan papers will be ready for your review about one week before closing. Check these papers closely and make sure the loan amount and terms match the original information you were given.