Mortgage application: What’s included and how to prepare

With many mortgage lenders, you can apply for a mortgage online and complete the process in 45 minutes or less — if you have all of your information ready beforehand. That’s a big if, of course. But you might well be able to, if you know what the form’s going to ask.

Even if you aren’t in a hurry, it’s good to be informed ahead of time. Here are questions to expect on a mortgage application.

What is included in a mortgage application?

The mortgage application is an individual’s formal request for funds to purchase a specific property. So the information it needs includes details about the home and its price, as well as the borrower’s employment history, credit history and income information.

Most lenders in the U.S. use the Uniform Residential Loan Application, but you might come across another similar application in the process of finding financing for a home. All applications have the same purpose: “to gauge whether a potential borrower is financially stable enough to pay back a home loan,” says Chuck Meier, senior vice president and mortgage sales director at Sunrise Banks in Minnesota.

The home loan application will ask borrowers for information regarding their financial situation, including income and assets, as well as personal information like their Social Security number. You will also be required to provide documentation corroborating the information you provide.

Bankrate insights

Mortgage lenders received 14.3 million home loan applications in 2022, which were reported under the Home Mortgage Disclosure Act (HMDA). Of those, 8.4 million resulted in loan originations.

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 number 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: Dividends or interest, pension, Social Security, alimony, child support, etc.
• Account statements from the past three months: Checking and savings accounts, CDs, money market accounts, 401(k) or other retirement accounts
• Form 4506-T or 4506T-EZ: A form from your loan officer authorizing the lender to access your tax returns
• Signed purchase agreement: The contract drawn up between you and the home seller stipulating things like the purchase price, closing date, closing costs and more.

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 — such as P&L statements — from the past several years

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.

Questions in a mortgage application

The Uniform Residential Loan Application, specifically, includes the following sections:

Section I: Type of mortgage and terms of loan

The first section of the mortgage application asks you to indicate the type of mortgage you’re seeking, such as conventional or FHA. You’ll then need to define other basic details such as the amount being borrowed, the interest rate, the loan term and the type of amortization (fixed, adjustable, etc.). A loan officer can help you determine which loan is right for you and help you identify the loan’s terms and conditions.

Section II: Property information and purpose of loan

In this section, the home loan application will ask you to provide the property address and indicate whether the loan is for a purchase, refinance or construction. It’ll also ask whether it’s a primary residence, second home or investment property, who will own the property and how it will be titled.

Section III: Borrower information

This section asks for detailed information about the borrower and co-borrower, including your Social Security number, current address, years of school completed and marital status. You’ll also have to provide your residence history.

Section IV: Employment information

Both borrowers will need to provide the contact information for their employer, how long they’ve been on the job and in the profession, their position or title and the type of business. You’ll need to provide previous job details if you’ve been at your current job for less than two years.

Section V: Monthly income and combined housing expense information

This section compares your income and expenses to determine whether you can afford the mortgage. You’ll need to fill in your monthly income, including your base income, bonuses, overtime, commissions, dividends and interest, rental income and any other income.

You’ll also need to fill in your monthly housing costs, both current and proposed, such as rent or your first mortgage, HOA fees or mortgage insurance. Note that self-employed borrowers likely have to provide more information.

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 and the land price (if it’s being purchased separately). This section also includes estimated prepaid items and closing costs, mortgage insurance premiums (if applicable) and any discount points the borrower is paying.

Section VII: 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 process

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.

When to apply for a mortgage

When you’re in the process of buying a house, there are several steps to take before officially applying for a mortgage. These include:

• Checking your credit score: Generally, the higher your credit score, the more mortgage options you’ll have. There are options for low credit scores, such as an FHA loan, but know that you’ll likely have to pay more fees and a higher interest rate with a lower score.
• Saving for a down payment: If you save 20 percent for a down payment, you can avoid paying private mortgage insurance and save money on your monthly payment. But you don’t need to put 20 percent down to buy a home. The truth is, the average down payment is lower than that. You may be able to get a conventional mortgage, for example, with as little as 3 percent down.
• Minimizing your monthly debt payments: Lenders use a measurement known as the debt-to-income (DTI) ratio to compare the amount of monthly debt payments you make to your income. In general, you want your DTI to be 36 percent or lower, though you may still qualify for a mortgage with a ratio as high as 50 percent.

After that, you can reach out to lenders to get preapproved for a mortgage. A preapproval doesn’t guarantee that you’ll get a loan, but it shows sellers that you’re a legitimate buyer.

From there, you can begin house-hunting. When you find a place you like, you’ll make an offer — and if it’s accepted, you’ll apply for a final mortgage. You can do this with the lender that preapproved you, or you can apply with another lender.

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:

• Compare offers. Before applying for a mortgage, compare offers from at least three different lenders, looking at rates as well as fees.
• 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 you will use them for.
• Keep your job the same. If you can help it, avoid quitting your job or starting a new one while the lender is processing your home loan application. 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. The same goes for 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.
• Consider your current debt load. While having a lower DTI is ideal, it doesn’t necessarily mean that you have to pay off all of your debt before applying for a mortgage. “Speak with a lender before deciding to pay off or reduce debts,” says Rose Krieger, a Washington-based Senior Home Loan Specialist for Churchill Mortgage. “They can provide insight into which option would be more beneficial for you, potentially resulting in a higher pre-approval amount.”
• Ask about your rate lock. Locking in your rate can help you secure a low rate. But you need to know how long the rate lock lasts and what fee, if any, you’ll pay to lock your rate.

Mortgage application FAQ

• How long does the mortgage application process typically take?

  The mortgage application process can take around 30 to 60 days on average, from having your purchase agreement signed through underwriting to closing on the home. In April 2024, it took an average of 42 days to close on a purchase loan, according to ICE Mortgage Technology.
  

• What happens after my mortgage application is approved?

  After your application has been approved, your lender will set a date for closing. About three days before closing, your lender will give you a closing disclosure statement, which outlines the total costs you’ll need to pay at closing.
  

• Can I apply for a mortgage if I have a low credit score?

  You can apply for a mortgage with a low credit score. FHA loans are available if you have a score as low as 500, provided you have a 10 percent down payment saved up. With 3.5 percent down, you can get an FHA loan with a score as low as 580.
  

Additional reporting by Taylor Freitas