About Your Mortgage Loan Application

Applying for a mortgage is a big step in the homebuying process, and it's normal to have questions about how it works. The good news is that once you understand the basic steps, the process can feel much more manageable.

Before you start filling out an application, you should know when the timing is right and what to expect along the way. Understanding these basics can help you prepare your finances, avoid common surprises, and make your mortgage application process smoother.

When to Apply for a Mortgage

The first step when you are applying for a mortgage is to choose a lender, such as Freedom Mortgage, to help you select the loan type that's right for you.

If you're buying a house, you'll likely want to wait until your offer has been accepted before you apply for a mortgage. If you're refinancing, you can apply whenever you're eligible and it makes sense for you. Homeowners often consider refinancing when current interest rates are significantly lower than their current mortgage rate.

Once you've made your decision, you're ready to start the mortgage application process.

4 Steps to Apply for a Mortgage

While the exact mortgage process may vary slightly by lender, most mortgage applications follow a similar path. The steps below outline what you can typically expect when getting ready to apply for a mortgage.

1. Check Your Credit and Finances

Before applying for a mortgage, it's important to understand your financial situation. Lenders will review your credit score, income, debts, and overall financial history to determine whether you qualify and what loan terms you may receive.

Start by checking your credit report and credit score to see where you stand. You may also want to pay down existing debt, avoid taking on new credit, and make sure you have enough savings for a down payment and closing costs.

2. Get Prequalified

Getting prequalified is an early step that can help you estimate how much you may be able to borrow. During prequalification, a lender reviews basic financial information to give you a rough idea of your potential loan amount.

While prequalification doesn't guarantee approval, it can help you understand your price range so you can focus your home search. It can also show sellers that you're serious about buying and preparing to apply for a mortgage.

3. Gather the Required Documents

You'll need to provide copies of financial records and other mortgage documents to determine your ability to repay the mortgage loan, including:

• Income verification: This includes copies of W-2 forms from current and previous employers, recent pay stubs, income tax returns, and any alimony or child support. If you're self-employed, you'll need to provide copies of your personal and business federal tax returns, copies of 1099 forms, and other financial documents about your business.
• Debt verification: You may need to provide documentation for all your monthly debt payments, such as car loans, student loans, credit card payments, mortgage payments, and other debts.
• Asset verification: Lenders often look at statements from banks, retirement accounts, and investment accounts. If you're using money given to you by a relative to make your down payment, you may be asked to provide a gift letter confirming that you're not expected to repay the gift.
• Credit verification: Your credit information typically comes directly from the credit reporting agencies. You'll need to give your permission to request this information.

Many Freedom Mortgage customers can securely upload their mortgage application documents using our convenient electronic platform. We'll help you understand which documents you need to provide and how to submit them to us.

4. Complete the Uniform Residential Loan Application (Form 1003)

Most lenders, including Freedom Mortgage, will ask you to complete Fannie Mae's Uniform Residential Loan Application (also known as the 1003 Mortgage Application Form) when you want to buy or refinance a home with a conventional, VA, FHA, or USDA loan. The form will ask you to provide information about:

• The type of mortgage and terms of the loan you want
• The property and purpose of the loan (such as purchase or refinance)
• You and any co-borrowers on the loan, including your employment history, income and expenses, and assets and liabilities

You'll have to make certain declarations on the form, such as whether you're a U.S. citizen, and optional questions about your race, ethnicity, and sex, which the government uses to monitor compliance with fair housing and other laws. Choosing not to answer these questions won't affect your eligibility to have your mortgage application approved.

You and any co-borrowers on the loan will be asked to sign the mortgage application to affirm that the information on the form is true and correct to the best of your knowledge.

Considerations When Applying for a Mortgage

There are a few additional factors that can affect your loan terms and approval process. Understanding these considerations in advance can help you keep your application on track.

• Mortgage application fee: Mortgage application fees, also called "lender fees" or "mortgage origination fees," are fees a lender may charge you to review your mortgage application. The cost of these fees varies by lender. Sometimes you can include the cost of your mortgage application fee in your loan amount. Other times, you may be required to pay the fee in cash at closing.
• Interest rate lock: An interest rate lock allows you to secure a specific mortgage rate for a set period of time while your loan is being processed. This can protect you if rates rise before your loan closes. Rate locks typically last between 30 and 60 days, though the exact timeframe varies.
• Avoid new debt: Opening new credit cards, financing a car, or making large purchases can change your debt-to-income ratio (DTI) and potentially affect your loan approval. Lenders may review your credit again before closing, so keeping your finances stable during this time is important.

Mortgage Process FAQs

If you're preparing to apply for a mortgage, you may still have questions about what to expect during the process.

What Happens After You Complete Your Mortgage Application?

After you submit your mortgage application, the lender reviews your financial information during a process called underwriting. They may request additional documents to verify your income, assets, and debts before deciding whether to approve your loan.

How Long Does It Take to Get a Mortgage?

The mortgage application process can take several weeks to over a month from application to closing. The timeline varies depending on the lender, how quickly you submit the required documents, and whether any issues arise during underwriting.

What Are Common Reasons a Mortgage Application Is Denied?

Mortgage applications may be denied for several reasons, often related to your financial profile, including a low credit score, high DTI, unstable income, or insufficient funds for a down payment or closing costs. In some cases, issues with the property itself, such as a low appraisal, can affect approval. If your application is denied, the lender must provide a reason, which can help you understand what steps to take before applying again.

Final Thoughts: Preparing to Apply for a Mortgage

Applying for a mortgage can feel overwhelming at first, but understanding the steps involved can make the process much easier to navigate. By reviewing your finances and getting prequalified, you can feel more prepared and put yourself in a stronger position before submitting your application.

When you've determined the time is right to begin your homebuying journey, start by getting prequalified. We'll be here to help you find the right loan and move through our application process.