By: Holden Lewis / Bankrate.com
Put yourself in the mortgage lender's shoes: Before giving someone a big loan, wouldn't you want to know a lot about the borrower?
Expect your mortgage application to ask these questions about your income, credit history, the home you want to buy, how much money you have saved and more.
Employment and income
- Where do you work?
- How much do you make? (You'll be expected to document income with copies of income tax statements. If you collect a paycheck, you'll provide copies of pay stubs and W-2s.)
- How long have you been at your job?
- How is your income derived -- steady salary or irregular income? (If your income varies, you may need to provide details.)
- What works in your favor: You can prove steady employment (two or more years) with the same employer or in the same line of work.
- *What makes your application more complicated: You are self-employed or a contract worker.
- What recurring debts do you have?
- How much do you pay a month for auto loans and credit cards? (You might be asked to document your recurring debts by providing copies of your bills.)
- What works in your favor: Your monthly debt payments account for 36 percent or less of pretax income, and you haven't made a major purchase (like a car) recently.
- What makes your application more complicated: Your credit cards are maxed out or your monthly debt payments account for more than 36 percent of your pretax income.
Savings and assets
- How much money do you have in the bank? (You will be asked to provide copies of bank statements.)
- How much do you have saved in stocks, bonds, mutual funds and other assets? (You will be asked to provide copies of brokerage statements.)
- What works in your favor: You can show that, after closing, you will have at least two months' worth of mortgage payments in the bank.
- What makes your application more complicated: You will have little cash in the bank after paying for the down payment and closing costs.
- What is the size of the down payment?
- Where does the down payment money come from -- is it all from your savings, or did some of it come as a gift from family or a grant from a nonprofit? (You will have to document the source of your down payment by providing copies of several months of bank and brokerage statements, and letters from gift-givers and grantmakers.)
- What works in your favor: The down payment comes from savings or from equity from a home that you're selling. Even better: The down payment is 20 percent or more.
- What makes your application more complicated: You have trouble documenting where your down payment money comes from, or some of the money was a gift or a grant.
- Are you borrowing to buy a home or to refinance the current mortgage?
- If it's a refinance, do you want to take cash out at closing? If so, how much?
- What works in your favor: The loan is for a home purchase or a simple rate-and-term refinance, without taking cash out.
- What makes your application more complicated: You're getting a cash-out refinance.
Property use and type
- What's the address?
- Do you plan to live in the house year-round, or is it investment or vacation property?
- Is it a house, duplex, condominium or co-op?
- What works in your favor: The house is a detached single-family home to be used as a primary residence.
- What makes your application more complicated: The property is a duplex or condominium, to be used as a vacation home or to rent out to tenants.
Credit surprises are the last thing you want to deal with during the mortgage process.
* "More complicated" doesn't mean "impossible." It means you might have to provide more documentation, the loan decision might take more time and you might have to pay a higher interest rate or higher fees. You might endure more frustration than a borrower with a simpler loan application.