Mortgage basics, in plain words.

• Photo identification for everyone on the loan
• Recent pay stubs, and W-2s or tax returns for the last two years. If you are self-employed, your business returns and a year-to-date profit and loss statement
• Recent statements for checking, savings and investment accounts
• A list of your monthly debts: car loans, student loans, credit cards, child support
• Where your down payment and closing money is coming from, including any gift
• A short explanation of anything unusual: a gap in work, a large recent deposit, a past bankruptcy
• If you have found a home, the signed purchase contract and your agent’s contact details

You apply once, at the one door at the top of this page, and we ask for documents when the file needs them.

Lenders use your credit report and score to decide whether a loan is available and how it is priced.

• Pay every bill on time. Late payments weigh the most.
• Keep card balances low compared with their limits.
• Hold still while your loan is in process. Do not open new credit, co-sign, or make large purchases on credit until after closing.
• Check your reports before you apply. You can get your reports from each national credit bureau free through AnnualCreditReport.com, and dispute anything that is wrong.
• Shopping is allowed. Several mortgage credit checks within a short shopping window are generally treated as a single inquiry for scoring.

• Lender charges — origination, and any discount points you choose to pay.
• Third-party services — appraisal, credit report, title search and title insurance, settlement or attorney fees, recording and government fees.
• Prepaid items — homeowners insurance, prepaid interest, and the opening deposit to your escrow account.

Within three business days of applying you receive a Loan Estimate that itemizes these costs. At least three business days before closing you receive a Closing Disclosure with the final figures. Compare the two, and ask about anything that changed.

• Conventional loans usually carry private mortgage insurance (PMI) until you have built enough equity, and it can generally be removed after that.
• FHA loans carry their own mortgage insurance premium, charged at closing and with the payment.
• VA loans use a one-time VA funding fee. Ask us how it applies to you.
• USDA loans carry an upfront guarantee fee and an annual fee.

Your Loan Estimate shows exactly what applies to your loan.

The lender orders the appraisal, and a licensed appraiser who works for no one in the deal writes it. It protects you and the lender from borrowing more than the home is worth, and you are entitled to a copy before closing.

If the value comes in below the price, the usual paths are to renegotiate, bring more cash, challenge the appraisal with better comparable sales, or, where the contract allows, walk away. Your loan officer will tell you which ones are open to you.

• Fixed rate — the interest rate stays the same for the life of the loan, so the principal and interest portion of the payment does not change.
• Adjustable rate (ARM) — the first rate holds for an initial period, then adjusts on a schedule based on a published index plus a set margin, within caps written into the loan. It can fit a borrower who expects to sell or refinance before the first adjustment, and it carries the risk that the rate rises.
• Specialty structures — interest-only loans, and graduated-payment loans whose payments step up over time, exist for particular situations. They carry real trade-offs, so ask before you choose one.

Most loans collect property taxes and homeowners insurance along with the mortgage payment and hold them in an escrow account, then pay those bills when they come due. Once a year the servicer reviews the account. If taxes or insurance went up, the escrow part of the payment goes up with them, and a shortage can usually be paid at once or spread out.

A refinance replaces your current mortgage with a new one, to change the rate or the term, remove mortgage insurance, or take cash out. A home equity line of credit leaves your first mortgage alone and borrows against the equity behind it.

Call your loan servicer before you miss a payment. Forbearance, repayment plans and loan modifications are much easier to reach early. Free housing counselors approved by the U.S. Department of Housing and Urban Development can help you understand your options; HUD’s line for finding one is (800) 569-4287. Be wary of anyone who asks for an upfront fee to save your home.

1003

The Uniform Residential Loan Application, the standard mortgage application form.

Amortization

Paying a loan down over time through regular payments of principal and interest.

Annual percentage rate (APR)

The yearly cost of a loan, including interest and certain fees, stated as a rate so that loans can be compared.

Appraisal

An independent, licensed appraiser’s opinion of a property’s market value.

Cash to close

What you bring to closing: your down payment plus closing costs, less any credits and deposits already paid.

Closing Disclosure

The final statement of your loan terms and costs, delivered at least three business days before closing.

Conforming loan limit

The largest loan Fannie Mae and Freddie Mac will buy. A loan above it is a jumbo loan.

Debt-to-income ratio (DTI)

Your monthly debt payments divided by your gross monthly income.

Discount points

Optional charges paid at closing to lower the interest rate.

Earnest money

A deposit made with a purchase offer to show good faith, usually credited toward your cash to close.

Equity

The part of the home you own outright: its value minus what you still owe on it.

Escrow account

An account the servicer uses to pay property taxes and homeowners insurance on your behalf.

HELOC

A home equity line of credit: a revolving line of credit secured by your home.

Loan Estimate

The standard estimate of your loan terms and costs, delivered within three business days of applying.

Loan-to-value ratio (LTV)

The loan amount divided by the property’s value.

Mortgage insurance

Insurance that protects the lender, not the borrower, if a loan is not repaid.

Non-QM

Loans written outside the standard qualified-mortgage rules, for borrowers whose income or situation does not fit conventional documentation.

Pre-approval

A review of your credit, income and assets that shows what you are likely to qualify for, subject to final underwriting.

Principal

The amount borrowed, or the part of it still owed.

Rate lock

A commitment to hold an interest rate and terms for a set period while the loan is completed.

Servicer

The company that collects your payments and manages the loan after closing.

Title insurance

Insurance that protects against claims or defects in the ownership record of the property.

Underwriting

The review that verifies income, assets, credit and property against a loan program’s rules before a decision is made.