Mortgage Application Process | New Homes Market Center
To process your loan for your new home, the lender you are working with will request a certain amount of paperwork in order to verify the application information. The amount of paperwork varies with each individual. It is a good idea to start a file with this information – some of the information needs to go back two or more years before you plan to purchase a new home.
Be ready to provide the following information per your lender’s request:
- Two years complete tax returns
- Two years W-2 forms
- One months worth of pay stubs showing year-to-date values
- Name and address for employer(s) for last two years
- Up to three months of your bank statements (all pages)
- Most recent statements for investment accounts
- List of liabilities
- If you are using income from alimony or child support, a lender will need a copy of the divorce decree, court records, or three months worth of canceled checks
- Names and addresses of property owners and complete rental addresses for the past two years
- Complete and accepted sales contract for the house that you want to purchase
- Copy of your picture ID such as a driver’s license or passport
Closing Costs & Important Disclosures from the Lender:
After completing the formal application, often referred to as the 1003, you should receive a Good Faith Estimate (GFE) and a Truth in Lending (TIL) disclosure from your lender within 72 hours. The GFE is an estimate of the closing costs, interest rate, and loan amount that will be part of the fees to purchase your house. The TIL disclosure informs you of the actual cost of lending and the annual percentage rate (APR). On the TIL, make sure there is an APR and that there is a check in the box indicating that there is no pre-payment penalty.
The APR can be confusing because it is typically higher than the interest rate quoted on your loan. The APR is higher for the first year because it includes the amount the lender charges in closing costs, so it reflects the true cost of the loan. APR is a standard calculation lenders use to help borrowers compare different loans. For example, a loan with a lower stated interest rate may be a bad value if its fees are too high. Likewise, a loan with a higher stated rate with very low fees could be an exceptional value. APR calculations incorporate these fees into a single rate. You should compare loans with different fees, rates, and terms.
Closing costs the lender charges may vary, but they usually include origination, discount points, processing, underwriting, courier, flood certification, and the lenders title policy.
The following are typical closing cost fees:
Processing – This is the fee the lender charges to process your loan. Normal processing costs can range from $200-$495 and may vary with each lender.
Underwriting – This is the fee most brokers pay in order to have your loan underwritten. The underwriter is the one who gives final approval and reviews all the documentation. Normal underwriting costs can range from $300-$750 and may vary with each lender.
Origination – This is what the lender may charge to in order to take on the loan. The more you pay in origination, the lower the interest rate will be. Normal origination on a purchase is one percent or one point of the loan amount. One point is equal to one percent of the loan amount and two points is equal to two percent of the loan amount and so on.
Discount Points – Discount points are similar to origination fees. A lender might charge you points to discount your interest rate. Paying more points up front will increase your closing costs, but you will have a lower payment over time. You have to compare how long you think you will be in the house to see where your break-even point is.
Survey – Texas requires a survey on each property. If you are purchasing a resale home, you might be able to use the existing survey from the seller as long as there have been no changes. It is always to your benefit to get a new survey since you may not know from looking at the property if there are any changes or discrepancies from the last survey. Independent surveyors complete the survey and normal surveys cost around $300-$600. This might be one of the closing costs you ask the seller to pay. Remember, if you want the seller to pay some of your closing costs, the purchase agreement must stipulate it.
Title Insurance Policy – Title insurance protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.
Other fees for your new home loan might include: title search, application fee, appraisal, home inspections, attorney fees, document preparation fee, pre-paid interest, recording fee, courier fee, credit report, and taxes. Some or all of these fees may be paid by the seller or builder at closing depending on the structure your contract. If cash or assets are tight for you, this may be a smart option to negotiate upfront.
We keep an eye on builder incentives and new loan programs for buyers where you can get many of these fees covered. Register to receive emails on builder incentives and loan programs or visit or new home deals page to view specials.