Navigating the mortgage loan approval process can feel overwhelming, but being prepared makes all the difference. Having the right documents in hand before you apply ensures a smoother, faster process and increases your chances of getting approved. A mortgage checklist can help you organize your information so you don't miss anything important.
Mortgage Document Checklist
Lenders use information from various documents to verify your income, employment history, and other information to ensure you can repay the money you borrow for your home. Gathering everything in advance with a mortgage application checklist helps you avoid delays with requests for additional information.
This checklist will help you gather everything you will need when applying for a mortgage loan.
What You Need To Do Before You Apply
Before you apply for a mortgage, it’s important to make sure you're fully prepared. Reviewing your finances and addressing potential issues ahead of time will help to make the process faster and smoother.
Determine Your Budget
Having a clear understanding of how much you can afford helps you save time so you can focus on homes that are within your price range. A good rule of thumb is to aim for a total monthly housing cost that doesn't exceed 30% of your monthly gross income.
You can estimate your budget by evaluating your income, expenses, and savings for a down payment. Don't forget to factor in related expenses, like property taxes, homeowners insurance, potential HOA fees, and maintenance costs. An online mortgage calculator can be used to estimate your monthly payments.
Review Your Credit Report
The information in your credit report directly impacts your credit score. Before you apply for a mortgage, review your credit reports from the three major credit bureaus — Equifax, Experian, and TransUnion.
Look for errors in the reports, such as incorrect account information, late payments that were made on time, or accounts that don't belong to you. If you see an error, open a dispute immediately. Removing incorrect negative information may help to boost your credit score.
Improve Your Credit Score (If Needed)
Your credit score is not found on your credit report, so you will have to check it separately. Having a high credit score not only improves your chances of loan approval, it may also help you qualify for a lower interest rate.
Some steps that may help you improve your credit score include:
- Reduce credit card balances
- Pay all of your bills on time
- Avoid opening new lines of credit
- Keep old credit accounts open
- Request a credit limit increase
- Diversify your credit mix
Improvements to your credit score may take a few months to a year or more, depending on the steps you take. Getting an early start gives you the time you need to build your credit to better position yourself for mortgage approval.
Calculate Your Debt-To-Income Ratio
Your debt-to-income (DTI) ratio is a comparison of your monthly income to how much you spend on your recurring debts. Lenders typically prefer a DTI ratio of 43% or lower.
To calculate your DTI, add up all of your minimum required monthly debt payments and divide the total by your gross monthly income. Then, multiply by 100 to express it as a percentage.
For example, if your gross monthly income is $6,000 and you have $2,000 in monthly debts, your DTI ratio is 33% ($2,000/$6,000×100).
Save For A Down Payment
The down payment you’ll need depends on the type of loan and the purchase price of the home. Conventional loans typically require 3-20%, while some government-backed loans, like VA and USDA loans, don't require a down payment at all.
A larger down payment reduces the amount you need to borrow, which can lower your monthly payments. Also, if you put down at least 20%, you won't be required to carry private mortgage insurance (PMI), which is another way you can save.
4 Steps For Easy Mortgage Pre-Approval
In addition to using a mortgage loan checklist, you'll also want to obtain mortgage pre-approval, which gives you a clear idea of how much home you can afford. It also shows sellers you're a serious buyer.
The mortgage pre-approval process is completed with the following steps.
1. Gather Necessary Documents
Just as you should use a mortgage borrower to-do checklist when applying for a mortgage, you’ll also want to use a mortgage pre-approval checklist. This helps to ensure you’re fully prepared so the process will be quick and easy.
It’s important to keep in mind that mortgage pre-approval is a preliminary review of your finances. Formal loan approval requires a more detailed review and may take more time.
2. Submit An Online Or In-Person Application
Many lenders now give you the option to apply online or in person at a branch for mortgage pre-approval. Online applications are convenient and allow you to upload documents from home. However, dropping by a branch to apply provides the opportunity to talk to a loan officer in person. Both options have their benefits, so choose what’s most comfortable for you.
3. Respond Promptly To Lender Requests
A lender may ask for additional documents or clarification about the information you've provided. The faster you provide the requested information, the sooner your pre-approval can be finalized. To stay ahead, keep your financial documents organized and accessible, monitor your email, and keep your phone handy to respond quickly to calls.
4. Receive Your Pre-Approval Letter
If you are approved, you will receive a mortgage pre-approval letter that states how much you are qualified to borrow. The letter will be valid for 60-90 days and tells agents and sellers you have the financial backing to buy a home. A mortgage pre-approval letter can be renewed after it expires by providing updated financial information.
Why Choose APGFCU For Your Mortgage Loan?
Whether you're a first-time homebuyer or you're upgrading to your forever home, APGFCU offers a variety of mortgage options to fit every need. We offer fixed-rate mortgages, variable-rate mortgages (ARMs), jumbo loans, lot loans, and government-backed loans, like FHA loans, VA loans, and USDA loans.
In addition to our competitive rates and low fees, we also offer personalized service to guide you through every step of the mortgage process. Our dedicated team is here to answer your questions, help you understand your options, and ensure a smooth process.