Buying a Home – The Mortgage Application

The Mortgage Application is a complex, but important, part of the process.

The Mortgage Application

Your contract to purchase a home contains many different clauses. And many of them don’t pertain to you. However, one that may states that you must be able to obtain a mortgage in order to actually purchase the home . It’s simple – if you can’t get a mortgage, you can’t purchase the home. The clause in the contract which confirms that you’ll get your mortgage is called the mortgage commitment. This is usually the last part of the contract that makes it a firm, binding contract. In addition, the contract calls for a date when you’ll need to provide a written mortgage commitment.

Mortgage Pre-Approval

Many people think that  the mortgage commitment is the same as the mortgage Pre-Approval. However, they’re very different.

One of the very first steps you should take, even before you begin to look at homes, is to  speak with a mortgage representative to get “Pre_Approved”. This can be done over the phone or in person, and it usually takes 10 – 15 minutes. There’s no charge for this service, and no commitment. The mortgage representative will look at your credit report, and ask questions about your income, debts and assets. After entering your info into the computer, they’ll let you know if, indeed, you can get a mortgage and for how much. A letter saying so will be given to you and possibly your Realtor.

Our recommendation is that you go through this process before looking at homes, because this will allow you to look at homes that you can afford. Then, once we find you the home you want, and write the contract, we’ll include a copy of the letter with the contract. By doing this, the seller knows that you should be able to proceed with the purchase.

The Mortgage Commitment

The mortgage commitment is different than the Pre-Approval.  The process takes time. We recommend that as soon as attorney review is concluded, you should formally apply for your mortgage. The mortgage lender will need copies of tax returns, pay stubs, proof of funds, investment statements and more. If the mortgage lender asks for any paperwork, you should supply it in a timely fashion.

In the contract, it  usually states that you’ll have the written mortgage commitment within 30 -40 days of signing the contract. Sometimes it takes a little longer. Therefore, if you’re unable to get the mortgage commitment by the due date, contact your attorney and request  an extension.

Once you’ve received your commitment, don’t make any major purchases such as a car or anything large. That’s because that will affect your debt to income ratio. Your lender will pull a  final credit report a few days before closing. Also – if at all possible, don’t change jobs until after closing, as this will affect the mortgage also.

When you’re ready to either buy or sell a home, please contact us.

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