Introduction Applying For Your Mortgage For many home buyers, the process of applying for their mortgage is one of the most stressful financial transactions they ever make. It seems your lender wants to know everything about you and your finances. And you worry something will not be "up to par." But if you know what to expect and what your lender is looking for you’ll find applying for your mortgage isn’t so bad after all. It’s still time-consuming, but there’s no reason for it to be difficult. This material will help you know what’s coming when you apply for the mortgage that could pay for the house of your dreams!

Table of Contents   Section 1: What to expect when you apply for your mortgage Section 2: Your application checklist Section 3: What happens after you’ve applied Section 4: What you can do after you’ve applied Section 5: Getting the word and what’s next Section 6: Glossary of terms

(If a term is missing from this section, use our Mortgage Terms Lookup tool.)

Glossary
Quick definitions of some of the terms used in this booklet that may be new to you.

Annual Percentage Rate (APR)—a stated interest rate that reflects all the financing costs of a mortgage. The APR includes points, origination fees and other finance charges in addition to the interest on the mortgage, and includes them all in a yearly interest rate. As a result, the APR is usually higher than the interest rate alone. It also provides a benchmark for comparing different types of mortgages based on the annual cost for each loan.

Appraisal—an estimate of the value of a property, made by a qualified professional called an appraiser.

Closing—the meeting between the buyer, seller and lender (or their agents) where the property and funds legally change hands. Also called settlement.

Closing Costs—the costs and fees associated with the official change in ownership of the property and with obtaining your mortgage that are assessed at the closing or settlement. Closing costs include required certifications, insurance, taxes and other fees, and typically total between 3 and 6 percent of the mortgage amount.

Credit Report—a report that documents a borrower’s credit history and current status. Borrowers can examine their own credit reports, although most credit reporting companies charge a fee to provide a report.

Escrow—a special account set up by the lender in which money is held to pay for taxes and insurance. "Escrow" can also refer to a third party who carries out the instructions of both the buyer and seller to handle the paperwork at the settlement.

Interest—the sum paid for borrowing money, which pays the lender’s costs of doing business.

Loan Origination Fee—the fee charged by a lender to prepare all the documents associated with your mortgage.

Mortgage Insurance—an insurance policy the borrower buys to protect the lender from non-payment of the loan. Private mortgage insurance policies are usually required if you make a down payment that is below 20% of the appraised value of the home.

Principal—the amount of debt, not including interest, left on a loan; also the face amount of the mortgage.

Title Insurance—an insurance policy which insures you against errors in the title search, essentially guaranteeing your and your lender’s financial interest in the property.

Underwriting—the process of deciding whether to make a loan based on credit, employment, assets and other factors.