Houston Mortgage First-Time Homebuyer – Frequently Asked Questions (FAQ) – Part 5

Houston Credit Report

Part 5: Understanding the Basics of Mortgage Loans

After learning the basics of mortgage loans, you are ready to take the steps that are necessary to secure the loan you need. To help with this process, Houston Mortgage has provided answers to some Frequently Asked Questions (FAQs) about securing a mortgage loan.

What can I expect from my mortgage loan application?

When completing a mortgage loan application, you will need to include all of the following information and documentation:

  • Pay stubs for the past 2 to 3 months

  • W-2 forms from the past 2 years

  • Proof of any additional income you may have

  • Tax returns from the past 2 years

  • Information regarding your long-term debts, such as student loans and car loans

  • Recent bank statements

  • A complete description and address of the property you wish to buy

  • Sales contract

As part of the application process, the lender will also order a credit report and will obtain a professional appraisal of the property you wish to purchase. In all, the application process typically takes anywhere from one to six weeks to complete.

How do I choose the right lender?

Care should be taken when choosing a mortgage lender. Aside from doing your own research, you should also ask family, friends and even your real estate agent for recommendations. Some things to look for in a lender include:

  • Financial stability

  • Reputation for customer satisfaction

  • The ability to approve and process your loan locally

You should also look for a lender who is capable of giving helpful advice, who takes steps to make you feel comfortable and who is familiar with home values and conditions in your area.

What is the difference between pre-qualifying and being pre-approved?

When a lender pre-qualifies you for a loan, that lender is informally telling you how much you will be able to borrow. Pre-qualification is a relatively simple process that does not require you to complete any paperwork. In fact, pre-qualification can be completed over the phone. All you have to do is answer questions about your income, how large of a down payment you can afford and your long-term debts. With this information, the lender can estimate how much you will be eligible to borrow. This is, however, no guarantee that you will actually qualify for a loan or be able to borrow the amount you have been pre-qualified to receive.

When you are pre-approved for a loan, the lender is actually committed to lending the quoted amount to you. In order to complete the pre-approval process, you must submit documentation to prove your income, your debts and your assets. By getting pre-approved, you are guaranteed to be able to borrow up to a certain amount from the lender.

What is a credit bureau score?

A credit bureau score is a number that represents the likelihood of you repaying a loan. This figure, which is based upon your credit history, is used by lenders to determine whether or not you will qualify for a loan and the type of terms you receive on the loan.

How can I improve my credit score?

The best way to improve your credit score is to take the steps necessary to maintain a good credit history. Paying your bills on time, taking care so you do not overextend yourself by buying more than you can afford, maintaining as little debt as possible and correcting mistakes on your credit report are all ways to improve your score.

How can I learn more about my credit history?

You can obtain a copy of your credit report from one or all of the three major credit reporting companies. These include:

  • Experian – 1-888-397-3742

  • Equifax – 1-800-675-1111

  • Trans Union – 1-800-816-8800

It is a good idea to obtain a copy from all three companies since the information contained on the reports could differ and any one of these three companies may be providing a report to your lender.

What should I do with my credit report once I’ve received it?

After receiving your credit report, you should double-check the report to verify its accuracy. Not only should you look for mistakes, but you should also look for items that you may wish to dispute. Things to double-check include the “high credit limit” on your credit cards, the “total loan” amount on your loans and the “past due” column on all of your debts.

What should I do if I find a mistake in my credit report?

If you find an error in your credit report, you should write to the credit reporting company in order to get the mistake corrected. When writing the company, be sure to point out the specific error and to provide any proof that you may have. You also have the right to add a comment to the report to explain the situation or the problem with the report. If you made a late payment because you were ill, for example, you can have a note added to your record to explain your situation.

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