What documents are needed to apply for a mortgage?

If you're a first time homebuyer, then the process can seem overwhelming. This video series, presented by Chase Home Lending, translates relatable experiences into tips and tools that equip you for every step of your homebuying journey.

The mortgage application process is an important one and a little preparation can make it less stressful. The key is getting organized and rounding up paperwork early on to ensure a smooth loan closing.

Understanding your mortgage application

Your mortgage application is a formal document detailing your financial information and the property to be purchased. It provides a comprehensive overview of your finances, helping lenders assess your eligibility for the requested loan. The application includes details about your income, credit history, assets, debts and other relevant financial details. Lenders review this information to determine your financial health and ability to repay the mortgage.

How long does a mortgage application take?

The time it takes to process a mortgage application can vary. Typically, it may take anywhere from a few weeks to a couple of months. Factors influencing the duration include the completeness of your application, your lender’s processing capacity and the complexity of your financial situation.

Mortgage application requirements

When you apply for a mortgage, your lender will require certain documents. Key components of your mortgage application may include:

• Personal information: Your name, address, date of birth and Social Security number.
• Employment and income details: Information about your employment and proof of income, such as pay stubs or tax returns.
• Assets and liabilities: Details about your savings, investments, properties and existing debts.
• Credit history: Your credit score and credit report.
• Property information: Details about the property you wish to purchase, including its address and purchase price.

Your lender may have additional or special requirements based on your specific financial circumstances or the property you’re interested in. For example, if you are self-employed, you may need to provide additional documentation to verify your income. If you are purchasing a unique or distinct property, such as a multi-unit building or a fixer-upper, your lender may require additional appraisals.

Self-employed applicants

• Tax returns: If you own a business, the lender will need the most recent two years of personal tax returns and any business returns you filed for your company (for example, 1120, 1120S, Schedule K-1/1065).
• P&L: This document may be requested. The P&L document outlines year-to-date business profit-and-loss statement for current year if more than three months have passed since the end of the tax year.

How to apply for a mortgage

The steps in the mortgage application process vary by lender and circumstance, but here’s a general outline of how it works:

1. Understand your finances: Taking time to understand your budget, review your credit health and gather your documents can help you streamline the process and make more informed decisions.
2. Choose a lender and loan: Researching different lenders and comparing their mortgage rates, fees and loan options helps you understand the full field of your options. Consider speaking with a qualified home lending advisor to determine the type of mortgage that suits your needs.
3. Get preapproved: Many lenders offer preapproval, which provides an estimate of how much you can borrow based on your financial information. Preapproval may also strengthen your offer, signaling to sellers that you are ready and able to complete a purchase.
4. House hunting: With an idea of your borrowing power in hand, your next step is to pick out the home you’d like to purchase.
5. Submit your paperwork: Once you have chosen your lender, loan and property, you’ll need to fill out the formal mortgage application. This is when you provide your lender with the necessary documentation for the review process.
6. Loan processing and underwriting: Your lender will review your application, financial information and property details. This may involve additional requests for documentation or clarification.
7. Close on your loan: If your mortgage application is approved, you could proceed to the closing stage, where you’ll sign the final paperwork and pay any closing costs. Once the closing is complete, you’ll become the official owner of your new home!

What can affect a mortgage application?

Lenders use your mortgage application to assess your ability to effectively repay the loan, effectively determining how risky it is to lend you money. There are several factors that may significantly impact the outcome of your mortgage application, including:

• Credit score: A higher credit score generally improves your chances of approval and may help you secure a lower interest rate.
• Debt-to-income ratio (DTI): Lenders assess your ability to manage additional debt by looking at your DTI, the ratio of your monthly debt payments to your monthly income.
• Employment history: Stable and consistent employment history is viewed favorably by lenders.
• Down payment size: A larger down payment can lower the loan amount and reduce the lender’s risk, improving your application.
• Property appraisal: The type of property and its appraised value can affect the lender’s decision, as some properties may be considered riskier investments than others.

What to expect after your mortgage application

Once you submit your mortgage application, a detailed review process begins. Here’s what you can typically expect:

1. Application review: The lender reviews your application and supporting documents.
2. Property appraisal: The appraisal is conducted to determine the property’s market value and make sure it aligns with the loan amount.
3. Underwriting: An underwriter evaluates your application to ensure it meets the lender’s criteria. This may involve further verification of your financial details and, in some cases, requests for further documentation.
4. Approval: If your application meets the lender’s requirements, you’ll receive approval for your mortgage. A mortgage approval may be contingent upon certain conditions being met, such as proof of homeowner’s insurance or making certain repairs to the property.
5. Closing: Once all conditions have been satisfied, you'll proceed to closing. Here, you’ll sign the final loan documents, pay any closing costs and down payment, and receive the keys to your new home.

In summary

A mortgage application involves providing your lender with a comprehensive breakdown of your finances. Understanding the requirements, choosing the right lender and staying responsive to your lender’s requests can help streamline the overall mortgage process. A qualified home lending advisor can guide you through the mortgage application and help you make more informed borrowing decisions.

Mortgage application FAQs

1. Do multiple mortgage applications hurt credit?

Applying for multiple mortgages within a short period can temporarily lower your credit score. Each application results in a hard inquiry on your credit report, which can slightly reduce your score. However, if multiple applications are made within a short timeframe, some credit scoring models may treat them as a single inquiry to minimize the impact. To avoid significant credit score drops, it’s generally recommended to limit the number of applications and time them strategically.

2. How much is a mortgage application fee?

Mortgage application fees can vary based on the lender and the type of loan you are applying for. Speak with your lender for a detailed breakdown of all the associated costs upfront to understand the total expenses involved in the application process.

3. Can I cancel a mortgage application?

Yes, you can cancel a mortgage application at any point before closing. If you decide to cancel, inform your lender as soon as possible. Keep in mind that you may still be responsible for certain fees incurred during the application process, such as appraisal or application fees.

4. Can I have multiple mortgage applications?

Yes, you can submit multiple mortgage applications to different lenders. This can help you compare offers and find the best terms for your situation. However, be mindful of the impact on your credit score, as multiple applications may result in several hard inquiries.

5. Does mortgage application affect your credit score?

Yes, submitting a mortgage application affects your credit score. When you apply for a mortgage, the lender performs a hard inquiry on your credit report, which can cause a slight decrease in your score. However, this impact is usually temporary and, if you manage your credit effectively, your score typically recovers over time.