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Application to Closing

Our mission at Loanwise is to make getting a home loan as smooth and stress-free as possible, which is why educating our customers about the process is one of our top priorities. This section will help you understand the different requirements for mortgage approval, closing costs and the reasoning behind them.

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How Do You Get a Mortgage?

Getting a mortgage is more complex than most other financial transactions. For most people, a home is the most expensive thing they will ever buy, and home loans are a similarly serious investment for lenders. Because there is so much wealth at stake in the mortgage business, the government enforces many regulations and guidelines to protect consumers, lenders and the national economy at large.

The application processThe application process for a mortgage allows a lender to collect all the information they need to decide whether or not to approve a home loan. The lender has to be confident that loaning the money for the mortgage is an acceptably safe investment.

When you get a mortgage, the loan is secured by the home. That means if you default on your mortgage payments, the lender gets to keep the home by foreclosing on it. This is why the lender has the home appraised by an independent third-party agency to ensure it is not overpriced.

Foreclosures are as bad for lenders as they are for homeowners.

You’re probably familiar with the word “foreclosure” and all the negativity associated with it, and the one thing you need to know about foreclosure is your lender wants to avoid it just as much as you do.

It is impossible for a lender to profit from repossessing a home, because if they sell the foreclosed home for more than what is owed, the extra money goes back to the original homeowner. Before a lender can approve a mortgage, they need to make sure you will be able to make all your payments.

Government regulations exist to make mortgages safer for everyone.

The Root of All Application Requirements

There was a time not so long ago when many mortgage lenders had a very different attitude toward risk. Before the Great Recession, the real estate market was booming and there were fewer regulations in place to prevent lenders from creating risky mortgages. Many homebuyers were approved for mortgages they could not realistically afford.

When the housing market finally began to decline, it led to the subprime mortgage crisis and a disastrous domino effect throughout the whole financial system. Now there are more thorough regulations and guidelines in place to help prevent another economic crisis like that from happening.

Application to Closing Topics

View Sources
  1. Consumer Financial Protection Bureau. (n.d.). What Do I Have to Do to Apply for a Mortgage Loan? Retrieved from http://www.consumerfinance.gov/askcfpb/144/what-do-i-have-to-do-to-apply-for-a-mortgage-loan.html
  2. MortgageCalculator.org. (n.d.). Mortgage Loan Qualification. Retrieved from http://www.mortgagecalculator.org/helpful-advice/mortgage-qualifications.php
  3. Smith, Lisa. (n.d.). Mortgage Basics: How to Get a Mortgage. Retrieved from http://www.investopedia.com/university/mortgage/mortgage7.asp
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