| Our loan application form asks for information on the property you are buying, as well as the employment and financial history of all loan applicants. We will verify the information shown on the loan application before deciding whether or not to make the loan, so it is very important to make sure that it is complete and accurate.
It is easier to complete the loan application process if you prepare for it ahead of time. We will ask about your personal finances, including bank account numbers and balances, current loan amounts and payments, and credit card account numbers. You need to be thorough and precise in providing this information, so it is best to assemble information before you meet with us. Following is a summary of the major kinds of information required on the loan application, the documents that may be needed, and the questions that you should be prepared to answer.
Details Of Purchase Contract & Property
Because the property is security for the loan, we may have an appraisal made of the property; and you will need to have the following information available:
- A complete copy of the sales contract, including any addendums, signed by all parties, showing the full names of the sellers and buyers as they will appear on the new deed, the amount of earnest money deposit and who is responsible for closing costs, origination fees, etc.;
- If the house is to be built, or is still under construction, a set of plans and specifications;
- The complete mailing address of the property, its age, and its full legal description; and
- Name, address, and telephone number of the real estate agent and/or the seller of the property who will assist the appraiser in obtaining access to the property.
We will need to obtain your and any other co-borrower's Social Insurace number, age, number of years of schooling, number and ages of dependents, current address, and telephone number If you have lived at your current address less than three years, be prepared to furnish former addresses for up to seven years. You will also be asked to detail your current housing expenses, including rent or mortgage payments, real estate taxes, and insurance (your mortgage payment may include tax and insurance funds). You will need the name and address of your landlord(s) or mortgage company(ies) for the past two years.
Employment History & Sources Of Income
Your ability to make the monthly payments on the mortgage and to afford the costs associated with owning a home are primary considerations in the loan approval process and should be your primary concern. Required information includes:
- At least two year's employment history with employer's name and address, your job title or position, length of time on the job, salary, bonuses, commissions, and average overtime pay;
- Recent paycheck stubs and T-4 forms for two years and perhaps full Federal tax returns;
- Records of dividends and interest received from investments;
- If you are self-employed, full tax returns and financial statements for two years, plus a profit and loss statement for the current year to date; and
- A written explanation if there are gaps in your employment record due to circumstances such as illness or layoffs, or for any other reason.
We may have you sign a Verification of Employment (VOE) form or a general credit authorization form. This will be sent to your employer to verify your employment and earnings. One may be sent to previous employers if you have been on the job less than two years.
If you are relying on income from other sources, such as rental property, Social Security, disability payments, child support, etc., you must provide adequate proof of the source. Appropriate documents could include canceled checks, copies of leases, Federal tax returns, certification of benefits, divorce decrees, and similar evidence.
A detailed listing of your personal assets is required on the loan application form. You will need to have the following information available to complete the form:
All bank accounts, both checking and savings with the name and address of the institution(s), name(s) on the accounts, account numbers, and current account balances;
- Recent bank statements for at least two months;
- Current market value of stocks, bonds, CDs and other investments;
- Vested interests in all retirement funds;
- Face amount and cash value of insurance policies in force;
- Make, model, year, and value of automobiles owned;
- Address and market value of all real estate owned, along with the amount of rents collected, the
mortgage on the property, the monthly mortgage payments, and a list of monthly expenses for
investment properties; and
- Value of other personal property such as furniture.
As with the Verification of Employment, we may have you sign Verifications of Deposit (VOD) (or a general authorization) for each of the institutions where you have savings or checking accounts. Differences between the account balances reported by the institution and the balance you give for the loan application will have to be reconciled, so be sure you have your correct current balances. Any recent large deposits will need to be explained.
We will look for the source of funds with which you will make the down payment and pay closing costs and fees. Gifts from a relative, church, employer, municipality, or non-profit organization may sometimes be used, but must be verified in writing. In some cases, the donor must be a relative and must provide a letter stating the donor's relationship to you, the amount of the gift, and the fact that no repayment is expected. Receipt of the gift funds must also be verified.
You will be asked to itemize all of your current bills, loans, and other debts, including current balances and monthly payments. Debts include automobile loans, credit cards such as Visa, Mastercard, and other retail store accounts, finance company, bank and credit union loans, and existing mortgages, including home equity loans. You should be able to give the account or loan number, the monthly payment, the number of payments remaining, and the outstanding balance.
The information you provide on the loan application will later be verified by a credit report ordered by us. Like employment and deposit verification, differences between your figures and those on the credit report will raise questions and may delay the approval of your loan. It is to your advantage to take time to get your data right prior to filling out the loan application.
If you have had credit problems, you should inform us promptly. We recognize that unemployment, illness, marital problems, or other financial difficulties can temporarily impair your credit rating. Provide a written explanation of the circumstances regarding the problem to be included with the loan application. We will consider such a written explanation as part of the underwriting analysis. Chronic late payments, judgments, or loan defaults, however, severely damage your credit standing and may prevent you from obtaining the financing you need to complete the purchase.
If you have been through bankruptcy or foreclosure proceedings within the past seven years, be prepared to give full details and copies of applicable documents regarding them.
You will also be asked to explain the details if you are obligated to pay alimony, child support, or separate maintenance.
You will be asked to sign a section of the loan application form which contains your certification that the information you have provided is correct to the best of your knowledge; your promise to advise us of any material changes in the information; and your consent to verification of the application data.
Because of the particular circumstances surrounding a loan application, we may require additional information or documentation regarding you or the property after the application has been submitted for approval. We make every effort to collect all data at the outset, but cannot foresee every eventuality. Requests for additional information are not necessarily bad omens, and your primary concern should be in responding promptly with the information.
If you begin fully prepared and have provided good documentation, you have done a great deal to assure prompt processing of your application and approval of your loan. In fact, we can usually have an answer for you in 24 hours or less!
After The Loan Application...What's Next?
After the loan application has been completed, a consultant will analyze your situation and pre-qualify you for financing if necessary. At the same time, it will be turned over to our processing department. Loan processors call to confirm the information you provided, or send out the Verifications of Employment and Deposit and order the credit report, property appraisal, and other documents. The time it takes to receive these documents affects the length of time required for approval of the loan.
Based on our analysis, we may recommend several different mortgages that would best suit your needs. Then, together, we choose the one that works best for you.
We then submit your application electronically to the chosen lender, where the decision to approve or reject the loan will be made. We get a response back for you within 24 hours. After some aggressive negotiation, we present their very best offer for your approval.
The Closing Process
After your loan has been approved by the underwriter, it is sent to the closing department. Once again, everything is checked for accuracy and the closing package is forwarded to the approved closing agent, usually your lawyer.
The closing agent in this transaction represents the lender and will conduct the closing on their behalf The closing agent at this point has run the title search and insured that the property is able to be conveyed by the seller without any encumbrances. The closing agent checks the survey and makes sure that the lender has proper coverage. The borrowers may insure their coverage in regard to survey and other title matters by purchasing an owner's title insurance policy issued by the closing agent.
Items typically requested for the borrower to bring to the closing are a proof of insurance and a certified (or cashier's check) for the cash needed for closing.
The closing agent will obtain the necessary signatures on the closing documents and disburse the money.