One of the advantages to applying for a loan online is that borrowers can get quick loan approvals so that they can begin the search for a home. Your lender will "pre-approve" a certain amount so you will know how much home you can buy. You'll be issued a letter to show to sellers and their representatives that you are ready to buy.

Online loan transaction underwriting platforms such as Freddie Mac's Loan Prospecter® or Fannie Mae's Desktop Underwriter® are used by online mortgage brokers such as E-LOAN and Onepipeline.com to go one step further from pre-approval to approval. They can now give borrowers instant loan approvals online, along with customized rates and real-time rate locks. These low-doc (low documentation) loans require as little as a salary history, the price range of homes you are considering, and how much you would like to borrow.

In addition to speed of service, the online lenders offer other advantages to borrowers, expanding the levels of "paper" currently being offered by lenders. Lenders typically categorize loans into "A", "B," or "C paper" based on the borrower's credit profiles. The new underwriting platforms encourage lenders to broaden the paper categories into a continuum of plus and double plus columns. For example, you might fall short in qualifying for an A-paper loan, but may well qualify for a "B+." You'll qualify for a better rate than a typical "B paper" customer. With loans more accurately customized for each borrower, you should be able to get the best possible rate for your individual credit situation.

Once you put an offer on a home, then your approval must be confirmed on the back end with a few documents that the lender can verify in order to fund the loan. At this time, you will decide once and for all which loan product is best, how much you will put down, and what terms are best for your situation. To assure that your loan is the right product for your needs, be ready to show the following items:

Loan Application Checklist

• a copy of your sales contract, signed by both you and the seller;

• a legal description of the property you are buying (often included in the contract;)

• W-2 forms and tax returns for the last two years;

• One or two recent pay stubs;

• The names of the banking institutions and the account numbers of any savings, checking or investment accounts in which you have made deposits;

• Three months worth of statements from any of your savings, checking, or brokerage accounts;

• A list of your major assets including your car, personal insurance, other properties or any other possessions;

• Information about other income such as dividends, interest earned, rental properties, gifts, or other proceeds that will affect your ability to repay the loan;

• If you are self-employed, supply an up-to-date financial statement;

• A list of your outstanding debts including the name of the companies, addresses, and account numbers to which you owe money;

• A check to cover the application fee, credit report or other up-front charges; and

• If you are divorced, include a copy of your divorce decree and custody agreement.

Editor's note: Loan checklist excerpted from homesurfing.net: The Insider's Guide to Buying and Selling Your Home Using the Internet.

Published: May 3, 2000

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