The application is simply placing all of the debt to income ratio information on paper and submitting a formal request to the bank for your funds. Your mortgage originator can guide you through the application process. Some lenders have placed applications on their company web sites for easier access.

Most likely your, mortgage originator will pull your credit report as apart of the application process. Yes, typically there are fees involved in completing an application. More specifically, the lender acquires costs in pulling your credit report and some additional costs may be acquired when submitting the application to the bank. Check with your mortgage originator to see what application fees may be involved. Sometimes these fees can be financed into the loan.

One of the goals in submitting an application is receiving a "pre-approval" letter and a Good Faith Estimate (GFE). In most cases the pre-approval letter simply states that you qualify for a specific amount of funds from a specific loan program, provided the financial institution does not locate any discrepancies while processing your application (more on processing, later).

The GFE is a document that details most costs associated with the purchase of your new property (some items are most likely neglected; e.g. whole house inspection.). The GFE is just that - an "estimate". The values contained with in it are based upon and "estimated" purchase price and most likely an estimated "tax" requirement (more on taxes, later as well). Keep in mind that the particular property that you decide to purchase may differ in price and tax requirements.

Your GFE, should also include:

1. Estimated monthly mortgage payment.
2. Annual percentage rate
3. Amortization schedule (sometimes)

Your estimated monthly mortgage payment will probably be a bit higher than expected. Most mortgage payments combine the Principle, Interest, Taxes and Insurance (PITI) into one payment. Also the interest rate should be shown on the GFE.

Some GFE's include an amortization schedule. If not, your lender should be able to provide you with one. The amortization schedule displays how each of your payments applies to the loan. It details the amount that is applied to the principle and the amount applied to the interest for each payment, over the course of the entire loan.

Normally, in order for a loan to proceed beyond application, a list of personal financial documents is required by the financial institution (e.g. paycheck stubs, personal bank statements, etc.) It's always a good idea to turn these documents over to the mortgage originator when applying so that the paperwork can immediately be forwarded to processing. The application checklist should guide you through all the necessary documents that you need to dig up before applying. However, you may want to cross-reference this list with your mortgage originator.

Once the application is complete you are free to go shopping for your new home while your mortgage originator submits your application for...... page 3 of 6