Steps in the Process

When you apply for a mortgage, several things happen:

  • Your lender will get an appraisal.
    The appraisal will determine the market value of your new home, which will be used as collateral for your loan. You'll be charged a fee for this service; it will likely be included in your closing costs.

  • Your lender will look at your credit report.
    Your lender will look at your credit report to verify your credit history. You'll be charged a fee for this document as well. If you're pre-approved, this step may have already been completed.

  • Your lender will verify your personal information.
    Your bank account and employment information will be verified. Your lender may ask you for your 2 most recent monthly bank statements or pay stubs. If you can't provide them, a Verification of Employment (VOE) and Verification of Deposit (VOD) will be mailed on your behalf to verify the last 2 years of employment and banking information.

Your Documents

Your lender is required by law to provide you with the following documents:

  • Loan Estimate.
    The Loan Estimate tells you important details about the loan you have requested. The lender must provide you a Loan Estimate within three business days of receiving your application.

    The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product.

    The form uses clear language and design to help you better understand the terms of the mortgage loan you've applied for. All lenders are required to use the same standard Loan Estimate form. This makes it easier for you to compare mortgage loans so that you can choose the one that is right for you.

    When you receive a Loan Estimate, the lender has not yet approved or denied your loan application. The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, the lender will ask you for additional financial information.

    See an interactive example of the "Loan Estimate" on the CFPB website here: Sample Loan Estimate

  • "A Home Buyer's Guide to Settlement Costs."
    This guide is a government publication that describes the closing or "settlement" process, associated costs, and your rights.

  • Adjustable-Rate Mortgage (ARM) disclosure.
    This disclosure includes information about terms and costs associated with an ARM, past performance of the index to which the interest rate will be tied, and the "Consumer Handbook on Adjustable-Rate Mortgages."

  • Annual Percentage Rate (APR) information.
    This is the cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fee and any other charge you're required to pay in order to obtain your mortgage loan.

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