When qualifying begins, the lender will ask the borrower to complete a home loan application. Three days after the borrower submits the application, the lender will give the home buyer a Loan Estimate Disclosure that breaks down the home financing. The Loan Estimate covers the principal amount, interest rate, and the estimated monthly payment (including taxes and insurance). The document will also display the down payment, and the projected closing costs, which includes, title insurance, appraisal fees, underwriting costs, and pest inspection charges.
Once that is established, the loan will undergo underwriting. An underwriter will review the Regulatory Guidelines and request documentation from the borrower to qualify them under the terms set in the home financing program. The qualification process analyzes the borrower’s current debt, employment history, savings ability, and liquid assets needed to close the loan. It order to aid in the approval process it is wise for the borrower not to change jobs, open new credit lines, or make major purchases during this time. An adjustment in the qualifying documents may lead to a decline in the loan.