--- title: The Ultimate Guide to Working With a Lender - Bailey & Wood description: Here is the ultimate guide for working with a mortgage lender and what all you should know image: https://www.bawfg.com/hubfs/MJTW%20Assets/images/Bailey%20%26%20Wood%20Social%20Image.png --- - [Contact](https://www.bawfg.com/contact-us) - [Employee Portal](https://www.bawfg-employee.com) [Search ](https://www.bawfg.com/resources/guide-to-working-with-a-lender#) [![bailey-and-wood-logo](https://www.bawfg.com/hubfs/MJTW%20Assets/logos/bailey-and-wood-logo.svg) ](https://www.bawfg.com/) - [Mortgages](https://www.bawfg.com/mortgages) - [How It Works](https://www.bawfg.com/mortgages/loan-process) - [Products](https://www.bawfg.com/mortgages/loan-programs) - [FHA](https://www.bawfg.com/mortgages/loan-programs/fha-loans) - [USDA](https://www.bawfg.com/mortgages/loan-programs/usda-loans) - [Conventional](https://www.bawfg.com/mortgages/loan-programs/conventional-loans) - [VA](https://www.bawfg.com/mortgages/loan-programs/va-loans) - [Doctors Only](https://www.bawfg.com/mortgages/loan-programs/doctors-only-loans) - [Jumbo](https://www.bawfg.com/mortgages/loan-programs/jumbo-loans) - [Find a Mortgage Consultant](https://www.bawfg.com/find-a-mortgage-consultant) - [Find a Mortgage Consultant](https://www.bawfg.com/find-a-mortgage-consultant) - [Mortgage Consultants](https://www.bawfg.com/consultants) - [Locations](https://www.bawfg.com/locations) - [For Real Estate Professionals](https://www.bawfg.com/real-estate-professionals) - [About](https://www.bawfg.com/about-us) - [Community Outreach](https://www.bawfg.com/about-us/community-outreach) - [Hometown Hero Program](https://www.bawfg.com/about-us/hometown-hero) - [Leadership Team](https://www.bawfg.com/about-us/teams/leadership) - [Marketing Team](https://www.bawfg.com/about-us/teams/marketing) - [Culture + Careers](https://www.bawfg.com/career) - Resources - [Hear from Our Spokespersons](https://www.bawfg.com/resources/testimonials) - [Blog](https://www.bawfg.com/blog) - [The Ultimate Guide to Working With A Lender](https://www.bawfg.com/resources/guide-to-working-with-a-lender) [Apply](https://www.bawfg.com/resources/guide-to-working-with-a-lender#) Are you working with a Mortgage Consultant? Yes [No](https://bawfg.mortgageexpressapp.com/homehub/signup/THENSLEY@BAWFG.COM) Search Mortgage Consultants [![AJ Sweeney Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/aj-sweeney-featured.png) AJ Sweeney Mortgage Consultant ](https://www.bawfg.com/consultants/asweeney) [![Bart Beach Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/bart-beach-featured.png) Bart Beach Mortgage Consultant ](https://www.bawfg.com/consultants/bbeach) [![Brian Brent Headshot](https://www.bawfg.com/hubfs/brian-2024.png) Brian Brent Mortgage Consultant ](https://www.bawfg.com/consultants/bbrent) [![Brooklynn Saylor Headshot](https://www.bawfg.com/hubfs/3.png) Brittany Olds Mortgage Consultant ](https://www.bawfg.com/consultants/bolds) [![Brooklynn Saylor Headshot](https://www.bawfg.com/hubfs/brooklynn.png) Brooklynn Saylor Mortgage Consultant ](https://www.bawfg.com/consultants/bsaylor) [![Carolyn Darr Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/carolyn-darr-featured.png) Carolyn Darr Mortgage Consultant ](https://www.bawfg.com/consultants/cdarr) [![Cory Walradth Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/cory-walradth-featured.png) Cory Walradth Corporate Sales Manager ](https://www.bawfg.com/consultants/cwalradth) [![Courtney King Headshot](https://www.bawfg.com/hubfs/B.png) Courtney King Mortgage Consultant ](https://www.bawfg.com/consultants/cking) [![Courtney Schroeder Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/courtney-schroeder-featured.png) Courtney Schroeder Mortgage Consultant ](https://www.bawfg.com/consultants/cschroeder) [![D. 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](https://www.bawfg.com/consultants/jharding) [![Julie Nolan Headshot](https://www.bawfg.com/hubfs/julie-headshot.png) Julie Nolan Mortgage Consultant ](https://www.bawfg.com/consultants/jnolan) [![Kaleena Coles Headshot](https://www.bawfg.com/hubfs/updated%20headshot%20Kaleena.png) Kaleena Coles Mortgage Consultant ](https://www.bawfg.com/consultants/kcoles) [![Kevin Eames Headshot](https://www.bawfg.com/hubfs/kaylyn.png) Kaylyn Neibert Mortgage Consultant ](https://www.bawfg.com/consultants/kneibert) [![Ken Dilger Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/ken-dilger-featured.png) Ken Dilger Mortgage Consultant ](https://www.bawfg.com/consultants/kdilger) [![Kevin Eames Headshot](https://www.bawfg.com/hubfs/kevin-headshot-columbia-city.png) Kevin Eames Mortgage Consultant ](https://www.bawfg.com/consultants/keames) [![Kevin Walters 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](https://www.bawfg.com/consultants/mhawkins) [![Paul Lang Headshot](https://www.bawfg.com/hubfs/paul-2.png) Paul Lang Branch Manager/Mortgage Consultant ](https://www.bawfg.com/consultants/plang) [![Ryan Gertiser Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/ryan-gertiser-featured.png) Ryan Gertiser Regional Sales Manager ](https://www.bawfg.com/consultants/rgertiser) [![Bart Beach Headshot](https://www.bawfg.com/hubfs/forbes-1%20(1).png) Sarah Forbes Mortgage Consultant ](https://www.bawfg.com/consultants/sforbes) [![Bart Beach Headshot](https://www.bawfg.com/hubfs/sj-7.png) Sarah James Mortgage Consultant ](https://www.bawfg.com/consultants/sjames) [![Scott Saylor Headshot](https://www.bawfg.com/hubfs/MJTW%20Assets/images/Headshots/consultants-hubdb-headshots/scott-saylor-featured.png) Scott Saylor Mortgage Consultant ](https://www.bawfg.com/consultants/ssaylor) [![Shanna Warner Headshot](https://www.bawfg.com/hubfs/shanna-headshot.png) Shanna Warner Mortgage Consultant ](https://www.bawfg.com/consultants/swarner) [![Steve Hostetter Headshot](https://www.bawfg.com/hubfs/Steve-headshot-2.png) Steve Hostetter Mortgage Consultant ](https://www.bawfg.com/consultants/shostetter) [![Vellum Brant Headshot](https://www.bawfg.com/hubfs/Vellum-headshot.png) Vellum Brant Mortgage Consultant ](https://www.bawfg.com/consultants/vbrant) ![woman on cellphone](https://www.bawfg.com/hs-fs/hubfs/MJTW%20Assets/images/woman_on_cellphone.jpg?width=830&height=650&name=woman_on_cellphone.jpg) # The Ultimate Guide to Working With a Lender ## Application Checklist What you need to start your application Your Property - Copy of signed sales contract including all riders - Verification of the deposit you placed on the home - Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved - Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget) Your Income - Copies of your pay-stubs for the most recent 30-day period and year-to-date - Copies of your W-2 forms for the past two years - Names and addresses of all employers for the last two years - Letter explaining any gaps in employment in the past 2 years - Work visa or green card (copy front & back) If **self-employed** or receive **commission** or **bonus**, **interest/dividends**, or **rental income**: - Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.) - K-1’s for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1’s are not attached to the 1040.) - Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.) If you will use **Alimony** or **Child Support** to qualify: - Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year If you receive **Social Security** income, **Disability** or **VA** benefits: - Provide award letter from agency or organization Source of Funds and Down Payment - Sale of your existing home – provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement) - Savings, checking or money market funds – provide copies of bank statements for the last 3 months - Stocks and bonds – provide copies of your statement from your broker or copies of certificates - Gifts – If part of your cash to close, provide Gift Affidavit and proof of receipt of funds - Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation Debt or Obligations - Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements - Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years - If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation - Check to cover Application Fee(s) ## Mortgage Glossary Mortgage terms to help understand the process better - A - Adjustable Rate Mortgage (ARM) Unlike a fixed rate mortgage, an adjustable rate mortgage has an interest rate that changes throughout the length of the loan. The interest rate either increases or decreases, depending on market indexes. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Adjustment Date The date on which the interest rate changes for an adjustable rate mortgage (ARM). [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Amortization The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Annual Percentage Rate (APR) The annual cost of a loan, expressed as a yearly rate. APR takes into account interest, discount points, lender fees and mortgage insurance, so it will be slightly higher than the interest rate on the loan. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Assessment The total value of your property. This number is usually used for taxes. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - B - Borrower The party that receives funds in the form of a loan with the obligation of repaying the loan in full with interest, if applicable. A borrower is also referred to as a mortgagor. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - C - Cash-Out Refinance A mortgage loan whose proceeds are distributed for debt consolidation, cash-in-hand, payoff of non-seasoned closed-end subordinate mortgages and payoff of lines of credit with cash advances in the past 12 months. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Closing The official act of transferring homeownership (and all associated titles, deeds, and paperwork) from the seller to the buyer. Both buyer and seller normally have to pay closing costs at this time. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Co-Borrower Describes any borrower other than the primary borrower. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Collateral Assets that are pledged as security for the loan’s repayment—normally the house and the property that are listed on the mortgage. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Conventional Loan A mortgage that isn’t insured by the FHA or guaranteed by the VA. These loans are harder to get because qualification is based on the buyer’s credit history. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Credit Score Credit score evaluates and considers only the information in a borrower’s file at a credit reporting agency. As an index, the score reflects the relative risk of serious delinquency, default, foreclosure or bankruptcy associated with a borrower. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - D - Debt-to-Income Ratio (DTI) The percentage of a consumer’s monthly gross income that goes toward paying debts, commonly referred to as DTI. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Default A term used to describe a borrower who doesn’t uphold the agreement with the lender, normally by failing to keep up with punctual payments. After 90 days of breaking the contract, the borrower is considered to be in default. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Delinquency When a borrower is more than 30 days late making a payment. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - E - Equity The portion that the borrower owns of the home. Calculate this by subtracting the unpaid loan balance from the value of the home. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Escrow All funds collected by seller and/or designated servicer to cover expenses of the borrower required to be paid under the security instrument, including, but not limited to, taxes, special assessments, ground rents, water, sewer and other governmental impositions or charges that are or may become liens on the mortgaged property prior to that of the mortgage loan, as well as hazard, flood, and mortgage insurance premiums. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - F - Fannie Mae The government sponsored enterprise formerly known as Federal National Mortgage Association, or any successor thereto. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Federal Deposit Insurance Corporation (FDIC) An independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Federal Housing Administration (FHA) The Federal Housing Administration (FHA) does not actually lend money, but it does insure loans that are made by private lenders. This insurance gives the lenders the opportunity to offer mortgages with more favorable terms and interest rates. Many people who can’t obtain conventional loans can get one through one of the FHA’s programs. [The FHA is part of HUD](http://portal.hud.gov/hudportal/HUD). [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) FHA Loan Any mortgage loan subject to an insurance policy granted by the FHA, and is eligible for reimbursement under the insurance policy. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Fixed Rate Mortgage Unlike an adjustable rate mortgage, a fixed rate mortgage has an interest rate that is agreed upon at initiation of the loan and never changes over the life of the loan. This also means the principal and interest payment is fixed and will not change over the life of the loan. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Flood Insurance Insurance that compensates the property owner for physical property damage resulting from flooding. Flood insurance is required if the property improvements are located in federally designated Special Flood Hazard Areas. If the land is in the flood hazard area, but the improvements are not, flood insurance is not required. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Foreclosure If the borrower defaults, the lender can repossess the home. Foreclosing is a legal procedure where the borrower forfeits all rights to the home and property. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Freddie Mac The government sponsored enterprise formerly known as the Federal Home Loan Mortgage Corporation, or any successor thereto. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - G - Grantee The grantee is the person buying the real estate. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Grantor The grantor is the person selling the real estate. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Gross Income An individual’s total earnings before any taxes or deductions are paid. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - H - Hazard Insurance Insurance coverage that compensates for physical damage – by fire, wind, or other natural disasters – to the property. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Homeowners' Association (HOA) An owners group that manages common areas whether in a PUD, condominium, or single family subdivision that establishes general guidelines for the operation of the community, as well as its standards. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Homeowner’s Insurance Policy Also known as “hazard insurance,” homeowner’s insurance compensates the homeowner if their real estate is damaged due to theft, fire, or other dangers. It often covers the entire value of the home. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) HUD Housing and Urban Development (HUD) is a government agency that manages federal housing and several different programs dedicated to urban development. The FHA is a part of HUD. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - I - Interest Rate Cap To protect both the lender and the borrower, many mortgages have an interest rate cap. The cap is a safeguard built into ARMs; it lists the highest and the lowest percentage of interest that can be charged. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - L - Late Charge To encourage punctual payments, many lenders charge a late penalty if the borrower makes a tardy payment. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Loan Submission When a borrower applies for a loan, it is submitted to the underwriters. The underwriters consider the potential borrower’s credit and financial history, and then they decide if lending to that borrower is a wise choice. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Loan to Value Ratio (LTV) In a mortgage loan, the amount borrowed relative to the value of the property. An LTV of 80% means that the mortgage loan is for 80% of the value of the property, with the borrower making a 20% downpayment. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - M - Market Value Not to be confused with the assessment (the total value of the property), the property’s market value is the highest price a buyer would pay and the lowest price the seller would sell for. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Mortgagee The person lending the money for the mortgage. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Mortgage Insurance (MI) Mortgage insurance is insurance needed for mortgages with low down payments, usually less than 20% of the price of the home. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Mortgage Insurance Premium (MIP) A monthly payment, usually part of the mortgage payment, paid by a borrower for mortgage insurance. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Mortgagor The person borrowing the money for the mortgage. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - N - Net Income Also called “take-home pay.” This part of income already has taxes, insurance, social security, and any other necessary payments subtracted. This is most commonly used when lenders are making an FHA or a VA loan. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) No Cash-Out Refinance A refinance transaction in which the amount of money from the new loan is used to repay the existing first mortgage, to pay closing costs, point, prepayment penalties, and any seasoned subordinate mortgage liens. Incidental cash back may not exceed the lesser of 2% of the principal amount of the new mortgage or $2,000. Also referred to as a rate and term refinance. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - P - PITI Most monthly housing payments cover the costs for PITI (Principle, Interest, Taxes, and Insurance). [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Prepayment Penalty When paying for a mortgage, it’s important to stay on schedule. Just as you’re penalized for paying too late, you may also be fined for paying more than you’re supposed to or finishing the loan earlier than scheduled. This is not a common practice. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Primary Borrower If more than one person is obligated to repay the mortgage loan, the primary borrower is considered to be the individual whose credit score is selected for grading and qualification purposes. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Principal The amount of money borrowed for the mortgage. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) Private Mortgage Insurance (PMI) Many borrowers are required to pay for PMI. It is generally needed for mortgages with low down payments, usually less than 20%. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - T - Titles Legal documents that state who has ownership of a property. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - U - Underwriting Underwriters review a borrower’s credit and financial situation and any property appraisals, and then they assess the amount of risk. If they deem the borrower trustworthy and assess it as a good fit, they give the final approval. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) - V - VA The [Veteran’s Administration](http://www.benefits.va.gov/homeloans/) (VA) supports service members, veterans, and eligible spouses in purchasing, renovating, and building homes. While the VA does not lend money, they do guarantee loans so that the private lender can offer more favorable terms. [back to top](https://www.bawfg.com/resources/guide-to-working-with-a-lender#top) VA Loan A mortgage guaranteed by the Department of Veterans Affairs (VA). 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