Congratulations! You’ve finally found your brand new home, and you’re ready to begin the process of financing your purchase. Many homebuyers—particularly those going through the process for the first time—are often overwhelmed at the paperwork involved in getting a mortgage, and the number of fees, laws, and disclosures they have to sign or initial.
In this blog post, we’re going to cover some of the most important pieces of paperwork you’ll run across in the course of procuring your loan, and cover in brief what they mean to you as a borrower. We’ve also linked to examples of these forms, where available.
Good Faith Estimate (GFE). The GFE serves a dual purpose: protect borrowers from indiscreet lenders that may bury unfavorable terms deep in the loan paperwork, and ensure borrowers understand clearly the nature and cost of the mortgage for which they are applying. To that end, the GFE outlines all of the fees and charges associated with your loan, and clarifies the terms of the loan itself. The GFE also makes it easier for consumers to comparison shop for loans, since the costs of the loan are clearly stated. While the GFE is the current standard, a new mortgage disclosure form is in the works, so you may receive an entirely different form when you shop for your own mortgage.
Form 1003. This form is the core of your loan application, and as such should be carefully and thoroughly completed. The form outlines the amount of (and use for) the loan, then requests in-depth information about the borrower (and any co-borrowers), including marital status, assets (what you own), liabilities (what you owe), and the details of your monthly expenses. If you have any income from self-employment, you may be required to provide additional documentation in addition to the information you provide on this form. Once completed, you’ll return this form to your lender, who will then use the form to determine the amount and costs of your loan.
Rate Lock-In Agreement. If you decide to “lock-in” your mortgage rate (useful if you think that mortgage rates may rise before your loan is processed), you will be asked to sign this form. It stipulates the condition of the lock, and defines when it will expire. Some states require borrowers to sign lock/float agreement, in which they explicitly choose to either lock in the rate, or let it “float” (change along with market rates).
Credit Report Authorization. In order to process your loan, your lender will request your credit file from one of the credit bureaus, and possibly make inquiries to confirm information you have provided on Form 1003. Your signature on this form authorizes the lender to do so.
Keep in mind that the forms linked to above are just examples and are for informational use only! Laws vary from state to state, so the paperwork you receive from your lender may vary accordingly. Always request paperwork from your lender or broker, to ensure that you are filling out the correct forms.