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Mortgage Application Process

In the beginning !

When a person begins the mortgage application process if they know what to expect the journey from applicant to homeowner becomes considerably less stressful.   For a person that is a planner the application process will test their very being. The mortgage industry is now so heavily regulated so the layers of checks and cross checks from the Mortgage Loan Officer to the Loan Processer to Underwriting to Full Approval and clear to close can be daunting. Knowing the rules can give a borrower much more confidence (2016 FHA Guidelines) but knowing what to expect will keep you in check when you are asked a question you may feel like you already answered. Much like married couples, the wife will almost always have more questions, the husband will be much more likely to get frustrated and end the game.

Application for Mortgage

The first step towards home ownership is making application. Many times a person finds the home then will apply but finding a home is one thing but finding one that is available and you are ready to place a contract on will put the buyer in a better position for negotiation.  At the very beginning a borrower will need to complete application, this begins the mortgage application process. This part can be easily done on the internet A visit here for example will allow a Smart App to be processed after someone reaches out to you. With your permission a Credit Report can be pulled and with that in hand a pre-approval can be issued. A Realtor or a Sales Representative will give you undivided attention with a pre-approval in hand.

Being Prepared

At some point during the mortgage application process a borrower will need to also provide the following documentation.   One time years ago I walked in to the lender with all my documents in hand, the officer didn’t even request it and was going to let me leave without telling me what to expect. When I handed him a folder with it already together he was lost. It is laughable now, but it seems the one best service a mortgage loan officer can provide is advising the borrower what to expect.


  • 30 days pay stubs
  • 2 years W2’s
  • 2 years tax returns
  • copy of Drivers license
  • copy of Social Security Card
  • 2 months bank statements
  • verification of rent
  • documentation of source of down payment (401K, Gift, Sale of previous home, gift letter, sale of vehicle will need receipts and who it was sold to
  • Certificate of VA eligibility if applicable

Information required:

  • Full name and date of birth
  • Address and postal code, how long have you lived there
  • Previous address and how long you lived there
  • Social Security Number (above with copy of SS Card)
  • Number of dependents
  • Home and work phone number
  • Name and address of employer
  • How long you have worked there and your current position’
  • Your gross annual income (providing the above 2 years Taxes may answer this)
  • Previous employer details may be needed if you have been employed less than 3 years
  • Your current assets and liabilities (to determine debt to net income)
  • How much down payment do you expect to apply (what was the source, reference the above documents)
  • All monthly payments

Gross Annual Income

The mortgage application process will require a borrower to calculate gross annual income. This is  the compensation in pay you receive from an employer before any deductions are subtracted out.   Example of this using a weekly salary of $1200.00.   52 weeks in a year multiplied by $1200.00 = $62,400 annual pay. Determine monthly pay divide annual pay by 12, in this examples = $5200 monthly. Before State and local taxes is the gross monthly income. The Lender will require employment verification and usually request you obtain an employment letter from your payroll department confirming your information.   Some lenders will accept the two years of income tax returns and current pay stubs as mentioned above in documents needed. If the lender request a letter of verification it should contain:

  • Current gross or base income
  • Date your employment started with the company
  • Your current position or job title
  • Your status – full time, part-time or contract(If you are contract the letter should also state the details of your contract, make a copy it may be required)
    • Full-time or part-time the letter should state the number of hours per pay period you work and the amount per hour if you are paid hourly


During the mortgage application process there will be multiple verification of employments (VOE) done.   A VOE will be done shortly after the mortgage application is submitted, there may be another when the application is in underwriting and yet another, (sometimes a verbal via telephone) just before the clear to close is issued.

Bonus Income or other Income

If you are employed and received a bonus last year, you can use this towards income if you can show that a similar bonus amount was received for the past few years. Overtime income is treated the same way,   Some other types of income that may be considered are:

  • Pension income
  • Social Security income
  • Investment income
  • Dividend income
  • Income form annuities
  • Child tax credits
  • Child support income
  • Rental income


These are to be expected during he mortgage application process. For the self –employed the application will come under more scrutiny and I cover this in my informational blog titled My Father was was a self employed businessman. The lender will ask you to list all your assets, they can include

  • cash in bank accounts
  • cash value of a Life insurance policy
  • Guaranteed Investment Certificates
  • Stocks
  • Bonds
  • Vehicles
  • Other Real Estate owned
  • Mutual Funds
  • 401K or registered retirement accounts

Liabilities are any outstanding debts you may have, including

  • credit card balances
  • credit lines
  • consumer loans
  • consolidation loans
  • other mortgages or home equity lines of credit


All of your combined debts such as these listed as liabilities calculate into your Debt to Net (DTI) Ratio. Each one of these liabilities accompany a payment. To calculate the DTI the lender will add all monthly obligations, including your house payment (Principle, taxes, and Insurance) and divide it by gross income. For example using the $5200 month from above,   If total debts including house payment is $2600.00   (2600 divide by 5200 = .50 or 50% DTI.

Earnest Money and Down Payment

When a borrower makes an offer on a home an earnest money is required. This is not a set amount, it is usually $500 or $1000, a small percentage of what the purchase offer is. This is considered good faith. When the offer is accepted and you move on to mortgage application process the amount of down payment will need to be determined. Depending on the loan product and how fluid the buyer is but minimum on FHA is 3.5% and upward, the best interest rates are reserved for those able to apply 20% down or more on conventional financing.   This is all great to know but the big kicker here is the “source of downpayment” has to be shown.   Savings accounts, 401K’s, Sell of stocks, a paper trail of the source will be required. Lenders will need to see proof the borrower has funds to close.

The Larry Stepp Team at Gustan Cho Associates are a committed group of people from different locations in the United States from many different cultures.  I can be reached 7 days a week, holidays and weekends.

Larry Stepp     407-922-4755




The information contained on website is for informational purposes only and is not an advertisement for products offered by Loan Cabin or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates and do not reflect the policy of GCA, its officers, subsidiaries, parent, or affiliates.


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