What happens after you apply for a mortgage

Scientists who study and measure human behavior find that buying a home is one of the most stressful experiences of our lives. Contributing significantly to this anxiety is waiting for the mortgage to be approved. Much of the home buyers' unease results from not knowing what is going on. You know credit checks and verifications of employment are taking place-but what makes the difference between getting or not getting that loan, and how long does it take? This page can dispel at least some of that anxiety by detailing the steps the lender takes in making the loan decision-process called "underwriting." Listed below are the topics addressed on this page.

Are You a Good Risk?
The Initial Interview
Consumer Safeguards
Is Your Income Sufficient?
Income Requirements
Income/Expense Standards
Debt
Is Your Credit Good?
Credit Information Safeguards
Can You Make The Down Payment?
Is The House Worth The Price?
Do I Get The Loan?

Are You a Good Risk?
Just as wise stock market investors carefully research the companies in which they plan to buy stock, careful mortgage lenders investigate the financial background of each loan applicant. In lending the prospective home buyer the money to buy the home, the lender assumes a long-term risk. The assumption is that the borrower is going to eventually repay the loan and in the meantime make the loan payments on time.

Once all the information is collected and eligibility is established, the lender decides whether to extend the home buyer credit. In other words, lenders analyze the risk of lending (making the investment), and match it to an appropriate interest rate and loan term.

There are no established, industry-wide standards for underwriting, though most lenders follow standards set by government-related agencies, private mortgage insurers, private mortgage investors or institutional investors. The vast majority of mortgage lenders attempt to approve a loan application if at all prudently possible, but to approve a loan that will become delinquent serves no one's best interest. The burden falls on the lender to establish that an applicant is qualified.

The Initial Interview
The process usually begins with an interview where the prospective borrowers and a representative of the lender sit down to discuss the potential loan. Increasingly, however, lenders are not requiring a face-to-face meeting and accept a completed application by mail. Many lenders today will even qualify you for a loan before you begin to shop for a home. Many lenders advertise this service in the local newspaper, but any lender can provide it. Knowing approximately how much money you are qualified to borrow can save you time and prevent disappointment when you are looking at houses.

When going to see a lender for an initial interview, you should take:

Purchase contract for the house if you have one.
Certificate of Eligibility from the Veterans Administration (VA)

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