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What Does The Mortgage Process Involve?

Updated: Mar 5


The time has come. You are ready to take a big step and buy a home. Depending on your situation, there are several documents that you might need when you apply for a mortgage loan. Because of the subprime mortgage crisis from 2007 to 2010, the mortgage process requires more work than it did before 2007. The economy faced issues because many borrowers couldn’t afford their mortgages and defaulted on their loans. To prevent a similar problem in the future, Congress passed laws that require creditors to better assess the ability of a borrower to repay the loan. To do that, the lender will need to have documentation to account for the assets of the homebuyer, their debt-to-income ratio, and their credit history.



You Can Still Buy A Home If You Have A Low Credit Score


Despite the new laws, you don’t need perfect credit to get approved for a loan. There are lenders that offer second chances and help those who traditional banks might not approve for a mortgage. But even these lenders who cater to less than perfect credit or those who have bad credit scores will need the proper documentation to get you approved for financing. Here are some of the forms that you might need to get a mortgage approval.

Photo ID – You will need to show a current photo ID, such as a driver’s license or state ID that is valid.


Proof of income – If you are self-employed, you will have to provide proof of income. This might include past 1099 forms, records of sales, and bank statements. If you are employed, you will need to bring in recent pay stubs. The lender will give you the specifics about what documents will be accepted as proof of income.


Tax returns – The lender will want to see the overall picture of your finances, so they will either ask you to bring in a copy of your tax returns or ask you to sign Form 4506-T, which gives the lender permission to get a copy of your tax returns from the IRS. Usually, the lender will just want to see the past year or two of returns to confirm the consistency of your earnings.


Credit history – The borrower will need to look at your credit history, so you must provide either verbal or written permission that they can do so. As previously mentioned, a low credit score or bad credit doesn’t mean you cannot get approved for a loan. Lenders will look at one-time avoidable circumstances differently. The lender might go over your credit report with you and ask you about any negative things on the report, so you can explain them.


Rental history – Your rental history might be able to help you with the mortgage process. If you haven’t owned a home, you should take in proof that you paid your rent timely. This shows that you can pay on time. This can be in the form of a letter from your landlord, a year’s worth of canceled checks cashed by your landlord, or money order receipts. Your rental history can also help if you don’t have extensive credit history.



Don’t Be Discouraged, Home Ownership is in Your Future


If you have a low credit score and negative marks on your credit, you can still buy a home. There are lenders who work with hard-working folks just like you and help you get things in order, so you can become a homeowner. There are people who have bad credit who find out they can buy a home! The friendly loan officers at Colonial Loan work to help clients secure loans to buy homes and rebuild their credit. The loan process is easy. You apply, then the loan officers work to get a decision quickly. Call today to learn more about mortgage options available at Colonial Loan. The experienced loan officers at Colonial Loan have helped hundreds of people throughout East Tennessee buy homes!


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