Get a comfortable table or desk and spend the
time to fill out your mortgage application neatly and
correctly. If you are given a paper application at the bank or
credit union, ask permission to bring it home and complete the
application when you are not under pressure, and have all of your
documents handy. If you are doing it online, use extra caution,
watching out for mistypes, misspellings and make sure that you put
the correct info into the correct form fields.
One way to smoothly go through the mortgage application process is
to create your own application package approximately one year and no
later than six months prior to applying for a
residential mortgage loan.
Gather all of your information, check your credit report and that
way you can be aware of any surprises before you speak to a lender.
Here are some of the things you should prepare during this period:
List of debts
Make sure you know exactly how much you owe and to whom the money is
owed. If you are married or you are purchasing the home with a
partner, help of a parent or some other second party, everyone
should be aware of the total sum of all individual and joint debts.
Gather your documents for auto loans, school loans, personal loans,
other mortgage payments, alimony payments, child support payments,
credit cards and any other type outstanding debt. Create a master
list with all of the items, account numbers, addresses, amounts
owned, interest rates and monthly payments.
If you can pay off a significant portion of any one medium to large
debt perhaps you should consider waiting an additional year before
applying for the loan.
If you have moved recently or have been upwardly mobile for a while,
it can be difficult to remember all the addresses, apartment numbers
and cities where you lived. Your address history should also be on
your credit report, but you need something else such as old
statements or information from your address book to make sure that
your credit report is accurate.
Get a copy of your credit report from all three credit bureaus.
Check the information from each report against your records and also
against each other. Sometimes when an outstanding debt has been paid
or settled, and you get out of
debt, the information might be sent to only one bureau. Call
your lender and ask if and when they information will be provided to
the credit bureau.
Then, follow up with the credit bureaus to make sure the information
has been added to your file. What type of information are you
looking for: social security numbers, addresses, dates on accounts,
opened accounts, closed accounts, outstanding debts, negative
information that is incomplete or inaccurate.
List of assets
Frankly, how much are you worth? Do you have any stocks, bonds,
savings accounts, retirement plans or own another home? Again,
create a master list with the items, account numbers, worth or
potential worth if liquidated and addresses or contact information.
If you are planning to sell any type of asset to use the money as
down payment, try to complete the sale at least six months prior to
filling out your mortgage application. Mortgage lenders always want
to see that you have the money on hand for all of the costs
associated with getting a mortgage. They generally look down on last
minute buying and selling to come up with your cash. They want a
snapshot of your current financial situation going back at least six
If you are getting alimony or child support payments and want this
to be included in the calculations prepare the documentation to show
how much money you are receiving and projections for how much you
think you’ll receive in the future.
Bankruptcies and foreclosures
Your lender will be able to find out just about everything they want
about your financial history so don’t try to hide foreclosures and
bankruptcies. Just make sure the information is accurate. Gather all
of your paperwork including dates, settlements or outstanding
balances at the time the debt was discharged and keep it handy.
Collect W-2 forms for the last 2 to 3 years that show your
employment history and income. As with your payment habits, try not
to make any sudden job changes within the 6 months to 1 year period
prior to applying for the loan. Income changes look especially
suspicious. If you experience a sudden dramatic increase or decrease
in income be prepared to provide a full verbal or written
explanation along with your paperwork.
Remember that the purpose of all this data collection is to make
sure that you have the most accurate and update picture of your
financial history to make the mortgage application process smooth
At times your mortgage application might be
turned down. The possible reasons with some suggestions are
The US finance market uses sophisticated
credit searching and credit scoring procedures to determine each
applicant’s credit worthiness. Vast databases are maintained by
credit reference agencies listing current and past misdemeanors -
how you have conducted your previous borrowing arrangements will
affect future applications for finance such as loans, mortgages and
credit cards. Any late payments, missed payments or arrears will
lower your credit score, particularly if they are recent.
Most high street mortgage lenders do not want
customers who have an imperfect financial past. Their computer
systems are set to reject applications from people who have credit
problems listed as they pose a higher risk.
In the past these lenders have offered
mortgages with high fees and interest rates to borrowers who had few
other options. But recently new lenders have come into an expanding
non-conforming market with much better interest rates and terms and
they are being closely followed by some of the larger lending
institutions. The mortgage options available for a non-conforming
borrower are now actually very good with a reasonable ‘risk’ margin
being charged through slightly higher interest rates.
An experienced Independent Mortgage Broker
will probe extensively into your financial affairs and ask about
past credit problems. Gaining a copy of your credit report from a
credit agency will enable your broker to more accurately assess any
problems. Once all of the facts have been established your broker
can begin to search for the best lender and the best interest rate
package. They will then also continually liaise with the new lender
to ensure your mortgage application progresses as smoothly as
If all goes well, in a few
years time your credit profile will have improved and you should be
able to re-mortgage onto a “normal” mortgage rate, which will almost
certainly be cheaper.
Suvadip Das is a
research fellow in management and at the same time a web developer.
Web design is his passion. He has worked for Freelance Writer
Organization and various websites including