Illustrated by Cristi Cash
Last Updated December 12, 2023

Working with a Mortgage Lender

In this article:

To qualify for a mortgage loan, you’ll need to complete an application, which serves as a comprehensive financial profile. Effective collaboration with a mortgage lender can simplify the process.

Your mortgage application, which includes income, debts, and house price, is what lenders use to determine whether you qualify for a mortgage loan.

Because of the Federal National Mortgage Association (FNMA), or “Fannie Mae,” the application has to meet certain requirements. These requirements make it unlikely that applications change much from lender to lender.

Lender Requirements

In addition to the application, lenders will need the following:

  • A property survey or an official surveyor's drawing encompassing the land and its structures. In many cases, the lender arranges for the property survey as part of the loan processing. They will hire a licensed surveyor to conduct the survey, and the cost may be included in the closing costs or added to the loan amount.
  • An application fee and an origination fee to cover the costs of processing the application. Lenders typically charge fees for processing your mortgage application and origination, which may include costs like an appraisal fee. These fees can vary, so it's important to inquire with your specific lender to understand the exact charges associated with your mortgage application.
  • Private Mortgage Insurance (PMI). When your down payment is less than 20% of the home's purchase price, many lenders will mandate the inclusion of private mortgage insurance (PMI) to provide added security in case of loan default.
Which Mortgage is Right For You?
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Conventional Mortgage

No bells, whistles, or fine print here. A conventional mortgage is a standard loan that isn’t backed by the Federal Housing Administration (FHA). It’s the most straightforward type of loan that gives you the money you need to buy a house, which is paid back over the life of the loan, usually during 15, 20, or 30 years.

Conventional loans usually require you to purchase private mortgage insurance. It’s basically an insurance policy that covers your lender in case you can’t pay the money back. That can increase the overall cost of your loan, but conventional loans usually require less borrowing and lower closing costs than other types—even if the interest rate is slightly higher.

Pros:
  • Simple, straightforward terms
  • Lower closing costs
  • Rewards good credit with good rates
Cons:
  • Interest rate may be higher than that of other loans
  • Requires higher down payment than other loans
  • Requires private mortgage insurance
Best For:

Conventional loans are ideal for borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent.

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The Application

A mortgage application serves as the lender's means of assessing your creditworthiness and deciding whether to extend a loan. While it may seem daunting, maintaining well-organized financial records can give you a competitive edge. It's particularly crucial to provide a comprehensive list of your investments, including funds allocated to retirement plans.

Details of Purchase: how much you plan to borrow, your down payment, or cash part of your purchase (if applicable), and the source of the remaining funds

abstract house
Illustration: Cristi Cash

Monthly Income: This category encompasses various income sources, including non-salary earnings like investment returns or rental income. However, you'll need to provide evidence of consistent income. Alimony or similar payments can also be considered.

Job Information: This section primarily addresses traditional employment, often requiring verification from your employer. If you're self-employed, be prepared to furnish additional details, including income documentation.

Monthly Housing ­Expenses: This includes your current and anticipated housing expenses, encompassing costs such as taxes, utilities, and homeowners insurance for the new property.

Credit History: This section of the application scrutinizes your financial past, including any history of bankruptcy, outstanding liens or legal claims against your assets, and your current debt obligations, all of which play a crucial role in evaluating your creditworthiness.

Net Worth: Your net worth represents the overall value of your assets minus your liabilities. Assets encompass items such as cash, bank accounts, investments, and real estate. Liabilities encompass debts, loans, credit card balances, leases, alimony, and child support obligations. Mortgage applications often necessitate disclosure of these figures, including the specifics of your accounts, loans, and credit cards.

Finding a Lender

If one lender declines your application, don't hesitate to explore other options. While lenders rely on the same foundational information, their evaluation criteria can vary. Seek assistance from your real estate agent or a mortgage broker to help you identify alternative mortgage providers.

If you find yourself apprehensive about meeting your monthly payments, consider having a candid conversation with your lender. They may offer solutions such as payment adjustments or help you determine if borrowing a smaller amount aligns better with your budget.

Disclaimer
While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified, licensed professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.

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