To apply for a mortgage you need to go to a lender. The lender checks if you qualify for a loan and how much you can afford to pay per month. A background check will indicate your level of financial stability, and your credit rating. Lenders look at your employment history and credit history. They want to see if you have had steady employment for the past two years, if you haven't been overdue on payments and if your income is stable. If you are preapproved for a loan, it means your credit report has already been analyzed by the lender and your situation assessed. If you are prequalified, it means that your actual credit record hasn't been checked yet, and the amount you can afford to pay is just an estimate. You may not meet a lender's minimum requirements, and then the next step would be to talk to another lender, or pay a higher interest rate. The best interest rate is offered to people who can give a down payment of 10 to 20 percent, and who have high credit scores. [Source: Esswein]
Qualifying for a loan is the first stage, and then come the technicalities. Many documents need to be prepared, including a signed sales contract. You will need to provide details on all your deposit accounts, pay stubs from the past year's income, and bank statements including stocks and bonds. This information should cover current balances, loan balances, monthly payments and proof of income from alimony or child support payments. Personal information includes social security numbers of the applicants, W-2 forms from two years before the loan application, home addresses for the past 24 months (including landlords' names and addresses). Last but not least, you have to be prepared to pay the closing costs. All the paperwork and documents have to be presented at the loan closing.
Originally Published: Mar 29, 2011