The Mortgage Loan Approval Process

The mortgage loan approval process generally begins with an initial interview where the prospective home buyer and the mortgage lender meet to discuss the potential loan. You will need to bring information to verify your income and long-term debts.

Often people prefer to meet with the mortgage lender before house hunting to determine in advance what price range they can realistically afford and the mortgage amount for which they can qualify. This step is called pre-qualification and can save you much time and trouble by making certain you are looking in the correct price range.

What Information Does a Mortgage Lender Need?

1.  A purchase contract for the house (if you have one)

2.  Your bank account numbers and the address of your bank branch, along with checking and savings account statements for the previous 2-3 months 

3.  Pay stubs, W-2 withholding forms, tax returns for last two years, or other proof of employment and income verification [divorce settlement papers, if applicable]

4.  Credit card bills for the past few billing periods, or canceled checks for rent or utility bill payments, to show payment history and amount of revolving debt; and information on other debt, such as car loans, furniture loans, and student loans

5.  Balance sheets and tax returns, if you are self-employed

6.  Any gift letters, if you are using a gift from a parent or relative or other organization to help pay the down payment and/or closing costs. This letter simply states that the money is in fact a gift and will not have to be repaid.

Having these items on hand when you visit the mortgage lender's office will help speed up the application process. Usually an application fee and the appraisal fee will have to be paid when you submit the mortgage application. This is only done after you have successfully negotiated on a home and have had your offer accepted by the seller. Generally, there is no fee for pre-qualification.

After the initial meeting with the lender, you should have a general idea if you qualify for the size and type of loan you want. The lender should let you know if you qualify for the loan. If you are denied a home loan, the lender must explain the reasons. If this happens, the lender will usually discuss any options with you. The application process takes between 1-6 weeks.

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What happens after I have applied for a mortgage loan?

It usually takes a lender between 1-6 weeks to complete the evaluation of your application. It's not unusual for the mortgage lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing process with you. And after closing, you'll be able to move into your new home.
How are pre-qualifying and pre-approval different?

Pre-qualification is an informal way to see how much you may be able to borrow. You can be "pre-qualified" over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.  If the likelihood of approval is high, you will receive a pre-qualification letter to show to realtors.

Pre-approval is a lender's actual commitment to lend to you. It involves assembling your financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying. The process locks you into the loan.

Frequently Asked Questions About Mortgages