5 Things to Know Before Filling Out a Loan Application
Getting your hands on and filling out a home loan application is the first thing you’ll likely do when deciding it’s time to buy and finance a home. You can complete an application in the presence of your loan officer (preferred) or you can DIY at a lender’s website. But whenever and however you apply for a mortgage, there are a few things you need to know beforehand. Here are five of them.
First, there’s a difference between filling out a loan application for a loan approval compared to completing some basic information to receive a prequalification letter. In order to get a full preapproval, be prepared to complete all fields on the app. If you’re not sure how to answer a particular question, leave it blank and your loan officer will follow up with any needed additional information. A prequal is very basic and you’ll be answering primarily just a few basic questions. A loan application for an approval is far more detailed.
You’ll be asked to complete information regarding your income and assets, so be ready to fill the application in with approximate account balances along with account numbers and institution’s name. A prequal just takes your word for how much you make, a loan application needs more detail. You don’t need to enter the current balance to the penny, but an approximation will do.
If you’ve been known by any other name or if you’ve applied for credit using a different name, be ready to explain the discrepancy and provide some proof. Perhaps there’s a maiden name in your credit file, your lender will want to know the background.
When entering your income, have handy your most recent paycheck stubs. That piece of paper will have your gross monthly earnings and year-to-date income. Gross monthly earnings are used to calculate debt-to-income ratios. If you’re self-employed or are using income more than 25% of your monthly pay, tax returns will typically be asked for. Gather these returns because your lender will use those to verify and calculate qualifying income.
Finally, understand up front that even when you provide the required documentation for your lender to review and validate, the lender might very well ask for more info. Usually it’s nothing more than updating items in the loan file, but whenever you’re asked to provide some information, don’t wait around. Be timely.