What Documentation Will I Need at Application?
Depending on the originator, they may ask for basic documentation, such as pay stubs and bank statements before they meet with you, to get a feel for what you have to bring to the table. Others may ask for full, signed tax returns, and a list of other documents. The more information you can provide though, the more complete of a profile your originator will be able to develop when shopping for a mortgage program for you.
In the appendix there is a complete list of documentation that a lender will ask for in the home finance process.
Credit will be pulled, either before or after the meeting, and will be part of the overall strategy that your originator will lay out for you. You can definitely talk options when you have your meeting, but more than likely your originator will want some time alone, perhaps a day, to thoroughly review your documents, including the credit report before charting a course of action.
Obviously people with super high credit scores, no debt, and substantial income will have an easier time getting the go-ahead to shop for homes than someone with a less stellar borrower profile. Keep in mind though that home financing is serious business, and you want to give your originator a little bit of room to be able to do their job.
Automated Underwriting System
Part of the prequalification process, as suggested by Maureen Martin, is to run your information through what is called the Automated Underwriting System, or AUS. This will be done by either the mortgage originator, or their processor.
Once your application is complete, your information is uploaded into the computer of the mortgage program that you are going to use. This can be either Fannie Mae or Freddie Mac for Conventional mortgages, or FHA, and even VA.
These computers, analyzing dozens of criteria will come back in seconds with an answer as to whether you have an initial approval.
If you do get this initial approval, and you of course want this, the rest of the qualification process will involve verifying the information that you provided at application. This is so that a human underwriter can review the file and give the final approval. If anything less than an approval comes back, the AUS will explain why in very specific detail.
Reasons include too much debt, insufficient assets, and so on. Keep in mind that if an initial decision comes back other than approved, there are many things that can be done to get it there. An initial approval though will usually be enough to get you on the road to house hunting.
Per Federal law, there are certain disclosures that have to be provided to you once you have a signed contract in hand, as at that time you will have concrete numbers to work with, some of which the lender will be held to. We will cover this in more detail later, but for now you may get an estimated fees sheet.
You can still shop lenders if you would like to do that, and compare the numbers that you get from each. Hang on to these estimates, and compare them to what you see when you are under contract, to see if there are significant differences.
Lenders may or may not charge you an application fee. Normally if they do, they will apply it towards expenses that come up, such as the processing of your loan. It is more than anything a commitment fee, to help ensure them that you aren’t going to jump ship midway through the process.
There will be disclosures provided to you that will state whether it is refundable. If you are entering the transaction in good faith, and are uncomfortable with paying this fee to someone you may never use to get a mortgage, and given the fact that you may not even have found a house, then go and find another lender.
As far as a credit report goes, they may charge you to pull it, and this OK, and well within their right to do so.
Should You Have Already Pulled Your Credit Before Meeting with a Lender?
My recommendation is to have your lender pull it, even if they want to charge you for it. There are many free websites that offer to do this for you, and in my experience, the free reports will have different, and higher scores than what I used to pull through my company.
These freebies are great to give you an idea of what is going on with your credit, but at the end of the day, the lender will only use the credit report that they themselves pull. Better to start from the source.
Along these lines, the question comes up of pulling credit too often and dropping scores. What I would say is that the scoring models used by the credit bureaus take into account the fact that people shop for homes, and factor this in.
Even if scores were to drop by a couple of points, it would be unlikely that it would make a significant difference as to which programs you would be able to qualify.