Questions to ask when applying for a mortgage

Everything you need to know to be ready to apply for a mortgage

Purchasing a new home is one of the most exciting things you will ever do. To get there, you must first go through the process of applying for a mortgage. To many, this is a long and daunting step that they dread. In truth, this process is relatively simple if you are prepared. Part of being prepared involves being informed and knowing what questions to ask when applying for a mortgage.

This guide gives you a better understanding of the mortgage application process and helps you become familiar with the documents you will need to have prepared throughout. Since many of these documents will need to be signed and legally transferred, we will focus our attention on documents that require notarization. Having a notarization plan in advance will save you a lot of time and effort throughout the home buying process. With access to Remote Online Notarization (RON), this has never been easier.

Read on as we take a look at everything you need to know about the mortgage application process and how you can make sure you have everything you need.

1. What’s the mortgage application process like?

Applying for a mortgage can seem like an intimidating process, especially for first-time homebuyers. Having an understanding of what that process looks like before starting can be a significant advantage. It allows you to make sure you have everything you need in place so that the process goes smoothly. It will also help you be prepared if you have any questions to ask when applying for a mortgage to ultimately make the best decision.

The mortgage process can generally be broken down into seven stages:

Determine how much you can afford

Before you begin the mortgage loan process, you need to determine how much you can realistically afford. The emphasis here is on remaining realistic.

This is not a matter of determining the absolute highest home purchase price that you can afford. Instead, you should be thinking about how much you can reasonably afford to pay each month. From there, you can start adding on factors such as current interest rates and any other housing costs to determine how much you can afford.

Pre-approval

Getting a pre-approval for your mortgage loan will make you more attractive to a seller once you’ve found a home you like. It will also help ensure the overall mortgage loan process goes as smoothly as possible.

A pre-approval letter from a mortgage lender states that they have already agreed to lend you a predetermined amount of money based on your personal details such as income, savings and credit. These letters are vetted and verified and tell a seller that you are indeed ready and able to purchase a home.

Finding a home and making an offer

Now that you know how much you can generally afford to purchase, you can finally search for a home. This will involve visiting houses until you find one that you want to make an offer on.

When you are ready, you and your real estate agent will begin to structure the offer. Your agent will handle the majority of this part, as they will know the ins and outs of how to structure your offer. You will also pay a small earnest money deposit at this point in order to secure your offer as you begin the purchasing process.

Home inspection

Once the offer you made has been accepted, the next step is a home inspection. A home inspection will help you get a complete picture of the house’s condition beyond what meets the eye. This includes evaluating the home’s structure, foundation, roofing, plumbing, electrical or any potential issues.

This is an essential step for the buyer as it will tell you how much they need to spend on repairs and updates. The extent and estimated cost of these repairs can be used as negotiation points to offset some of the purchase prices.

Home appraisal

The next step involves having an independent appraiser evaluate and estimate the value of the home. The appraisal serves two purposes. The first is to confirm to the buyer that the home is worth the price they are paying. The second reason is that for a loan agreement to be approved, its appraised price must match the contracted purchase price.

Mortgage processing and underwriting

At this stage, you will have completed the application on your end. Once the application is submitted, it must then be processed.

Processing involves a final verification of the documents and records you have submitted with the application. Once this is all verified, the application is sent to an underwriter. In simple terms, an underwriter’s job is to comb over every little fine detail of the application to make sure everything is correct.

During this process, an underwriter may contact you with questions about the application. These should be responded to promptly, so you don’t hold up the process.

Closing day

Reaching closing day means that you successfully made it through the mortgage application process — congrats! When you have been approved, the lender will send a packet of closing documents for you to sign and close the deal.

This will have you sign many documents, but among the most important will be your closing disclosure. It should look nearly identical to the loan estimate that you received. This document confirms the costs that come with your agreement.

2. What documents do I need to apply for a mortgage?

So far, we have discussed the process involved with applying for a mortgage, but you may have questions about which documents will be required along the way. While there will probably be a good handful, knowing in advance what you will likely need can help you begin preparing months ahead of time.

Here are some of the most common types of documents you will want to have ready to go in order and why they are helpful.

Tax returns

Tax returns help to prove to a lender that your income is what you say it is, and that is consistent over time. Typically you will want to provide a minimum of 1-2 years worth of consistent tax returns. Consistent returns without any dramatic fluctuations in income are what a lender is looking for.

They will most likely have you sign a Form 4605-T which allows the lender to request access to your tax returns directly from the IRS.

Pay-stubs/ W2’s

While tax returns help provide lenders with your overall long-term financial situation, pay-stubs provide a look at your current earnings. If you are unemployed or have different sources of income, other types of proof of income that may be required include direct deposit records or 1099 forms.

Photo ID

As with any major financial dealing, you will need some sort of photo proof that you are who you say you are. This could include a driver’s license, state ID, passport, company-issued ID or other types of official identification.

Bank statements/ assets

A lender would want to review bank statements to ensure that you would be able to still make some payments in case of an emergency or change of circumstances. The best way to do this is to ensure that you have at least a few months’ worth of back payments in your account for some months prior to your application. Large quantities of money that mysteriously show up in your account overnight are a red flag to lenders that you may be dishonest about your finances to secure a better rate.

The lenders will also look at any assets you have, such as any insurance you pay for and any investments you may have.

Credit history

Credit history is important to lenders as it shows how you have handled any previous credit loans. Any marks against your history, such as missed payments or foreclosure, will work against you. It may be beneficial to draft a letter to explain these negative items.

Many lenders are willing to overlook one-time circumstances if everything else on your application looks good. They are much less likely to be lenient with a lendee who has a history of delinquent credit history.

3. Which documents need to be notarized?

When you are in the process of signing your closing disclosure, certain documents will require notarization. Some of the documents include:

Mortgage: This is the actual mortgage document itself and is one of the most important documents you will sign. Without notarization, the document will not be considered valid.
Deed of trust: This document details the agreement between the borrower and the lender, as well as its terms.
Subordination agreement: A subordination agreement ranks the debts taken on in order of priority. This is done in case the borrower goes through a foreclosure or bankruptcy.
Various affidavits: There are a handful of affidavits you will sign. These are certifications that the documents and signers are valid.
Promissory or Real Estate Note: A promissory note simply details how much you have borrowed and the terms on which you have agreed to pay it back.
Truth in lending disclosure statement: This breaks down all of the costs associated with your loan.
Notice of right to cancel: This document allows borrowers a certain period of time to reverse their decision after signing the documents. Usually the period is three days. This is to allow borrowers a period to review and consider the terms of their loan agreement in detail.

4. How do I get my mortgage documents notarized?

There are three main ways that you can get a document notarized. These three forms of document notarization include:

Walk-in notaries: This type of notary works out of an office, which you go to for services.
Traveling/ mobile notaries: You pay a traveling notary to come to your location on a predetermined day and time.
Remote Online Notarization (RON): Remote Online Notarization is a service where the signers of a document appear before a notary using online, audio-visual technology to provide notarization services. This can be used with greater flexibility than more traditional notarization services.

While walk-in and mobile notarization services are more familiar to some people, RON is quickly becoming the preference for businesses and individuals who require notarization services without compromise. Rather than having to schedule a place and time to meet or go out of your way to travel to a notary, RON helps you get the services you need without any of the cost or hassle.

The recent COVID-19 pandemic has posed many issues and interruptions for walk-in and mobile notaries due to social distancing restraints. This has been the deciding factor for many who have recently switched to RON for uninterrupted access to notarization services.

After all, you don’t want to be waiting on the keys to your brand new home any longer than you have to.

5. How can PandaDoc Notary help?

Applying for a mortgage loan is a lot of work. Throughout the process, you will be signing a lot of paperwork, and as such, you will require notarization.

PandaDoc Notary provides a reliable, easy-to-use Remote Online Notarization Platform for Mortgages and a nationwide network of experienced, commissioned notaries ready to meet the specific needs of our partners and their clients.To learn more about how PandaDoc Notary can help you, request a demo.