Section VI: Assets and liabilities

In this section, you’ll list assets including savings, checking and retirement accounts and any properties you own. Under liabilities, you’ll include all debts such as car loans, credit cards, other mortgages and any alimony or child support you’re obligated to pay.

Section VII: Details of transaction

As the name suggests, this section includes details of the transaction like the purchase price or refinance amount, the cost of any home improvements or repairs, the land price (if it’s being purchased separately), estimated prepaid items and closing costs, mortgage insurance premiums (if applicable) and any discount points the borrower is paying.

Section VIII: Declarations

In this section, the borrower(s) must answer yes or no to questions about their past financial situation, including:

• Are there any outstanding judgments against you?
• Have you declared bankruptcy or had a property foreclosed in the last seven years?
• Are you party to a lawsuit?

If the answer to any of the questions is yes, you’ll be asked to include an explanation at the end of the application.

Section IX: Acknowledgement and agreement

This signature section is legally binding. In it, the applicants verify that the information provided in the mortgage loan application is true and correct, and acknowledge that the lender may verify the information provided.

Section X: Information for government monitoring purposes

The final section of the mortgage application is optional demographic information to be provided to government agencies. If you choose to participate, you’ll be asked to identify your race, gender and ethnicity so that the government can verify the lender’s compliance with fair housing laws.

Documents needed to apply for a mortgage

Before filling out the mortgage application, it’s smart to collect the necessary documents and information ahead of time, particularly if a mortgage lender is assisting you in person or by phone. Here are the documents you’ll want to have at the ready:

• Employment information (name, address and phone of all employers in the past two years)
• Income information (W-2s from the past two years, and pay stubs from at least the past month)
• Additional income information from the past two years (for example, dividends or interest, pension, Social Security)
• Bank statements from the past three months (for example, checking and savings, CDs, money market accounts, 401(k) or other retirement accounts)
• Form 4506-T or 4506T-EZ from your loan officer authorizing the lender to access your tax returns
• Signed purchase contract

If you’re self-employed, own a business or get paid through commissions, you’ll likely also need to provide additional information, such as:

• Federal tax returns from the past two years, including business tax returns (such as Form 1120, 1120S or Schedule K-1/1065)
• Business records from the past several years (for example, P&L statements)

Note your lender might request more documents during the underwriting process. This is common and expected — sometimes, a lender just needs more information so that they can clearly understand your risk level and determine your ability to repay.

Mortgage application tips

Preparation is key when applying for a mortgage. In addition to having all of your paperwork in order, there are a few things you can do to help ensure a successful application:

• Document the source(s) of the down payment. If a family member is helping you make a down payment, for example, have them sign a gift letter confirming where the funds came from and what they will be used for.
• Keep your job the same. If you can help it, avoid quitting your job or starting a new one while your application is being processed. The lender can deny your loan if your employment situation changes.
• Refrain from large purchases. Big-ticket charges can be a red flag to lenders, who may become concerned about your capacity to afford the mortgage. Ditto to opening a new line of credit or missing a debt payment, which can impact your credit history. Be especially careful if you’re already close to your maximum affordability.

Important considerations when applying for a mortgage

While applying for a mortgage won’t be a huge detriment to your credit score, your score can have an impact on the interest rate you get on your loan. When comparing rates, compare the whole loan offer and any fees, as well, which can affect your overall costs.

In addition, find out about the length of the rate-lock period, and whether you will need to pay additional points or fees to receive the quoted rate. There are typically 30-, 45- and 60-day rate locks that guarantee your rate for the specified time. It’s important to make sure that the lock period is long enough to allow you to close on the property.

If you have questions about locking your rate, or about the application in general, consult with the loan officer to talk through any concerns.