If you are planning to move within the next year, you should start thinking about your mortgage loan or other financing options now. Based on the projected down payment you have available and the monthly mortgage payments your income can sustain, you will decide what amount of home you can afford and are comfortable buying. Before beginning to house-hunt, you should examine your credit history and gather the documents required by your lender.
You can look at your credit history through the free credit check service the federal government provides at annualcreditreport.com. Under this service, every 12 months you can review your credit from three credit-reporting companies at no cost to you. When you do this, fair warning from personal experience, you must be able to print from the device you are viewing your credit on, as once you close each free report, you will not be able to access that report again until the following year! This intel is invaluable for preparing yourself to enter the buying process.
If approved for a mortgage, you will be allowed to purchase a home based on the lender’s pre-approval letter that states the amount you are qualified to purchase. Applying for a mortgage loan will be easier if you know what information is needed. Different lenders may have different mortgage requirements, but this post will cover the majority of documents and financial information you should gather. Scroll down to get started:
Past: Tax, Residential, and Employment History
The standard requirements for most lenders include your federal income tax information and W-2 statements from the past two years. Your lending institution will also run a credit check to examine your credit score and any credit issues from the past few years. Your credit score is what primarily helps determine your interest rate, so examine it now and address any issues before moving forward with the mortgage application.
Some lenders will ask about your residential history, including your current place of residence but also prior landlord information for up to two years. If you have recently sold your home but have not closed, you will be asked to provide the sales contract. If you are using your sold home for a down payment on the new property, include the HUD settlement statement.
Your application will also require employment verification, which includes your employment history for up to two years. In addition to W-2 forms, you may need to supply dates and addresses as well as your salary and recent pay stubs.
Present: Current Income Verifications
Preparing to apply for a mortgage means disclosing your finances. Depending on your jobs, income verification can be more complicated than simply listing your present employer. Special cases that may require additional information include:
- Self-employed
- Employed in family business
- Non-salaried incomes
- Alimony/child support
- Retirement income
For example, individuals who are self-employed may need to submit profit and loss statements and a current balance sheet in addition to recent tax returns. Non-salaried incomes for your lender to consider may include bonuses, overtime, interest/dividends, trust funds, or profit from rental properties. Individuals who are divorced must supply a divorce decree and settlement agreement. If you are retired, the lender may need to verify your retirement income using pension, social security, IRA, or 401K statements.
Future: Record of Assets and Expenses
After evaluating your income and employment histories, your lender will want to examine all assets and debts. The types of assets you may need to include information about include:
- Bank Accounts: Be prepared to supply the location, account numbers, and balances of your checking and savings accounts, as well as the last three months of bank statements if needed.
- Investments: Do you have stocks, bonds, CDs, or other investment accounts? Gather all necessary data about these investments for your lender.
- Life Insurance Policies and Retirement Plans: Give your lender a copy of your latest policy statement as well as the approximate vested interest value.
- Properties and Automobiles: Property is an investment, so collect any pertinent information and specifications about your holdings. Cars are also considered types of assets, so have the make, model, and approximate resale value of your car handy. You may need to calculate the total market value of your other household and personal properties.
In addition to listing assets, you must also disclose expenses. Create an itemized list of monthly expenses such as rent and credit cards. Car loans and student loans should also be taken into consideration, as well as any other liabilities or additional non-mortgage debt. Although it may be tempting, do not leave anything out. Providing full financial information to your lender will help them calculate the mortgage lending limit and create a repayment schedule tailored to your needs and income.
Applying for mortgage approval is often one of the first steps to begin house hunting. For help along the way, contact the Eric Stewart Group, experts in residential real estate for over 27 years. Based on your budget and criteria for your new home, we can set up a search so that you receive daily email updates of homes that meet your requirements, or you can set up your own search at EricStewartGroup.com, or via other real estate sites. You can start evaluating homes and neighborhoods long before you sign off on the purchase agreement! For more guidance and tips on the home buying process, download our FREE Savvy Buyer Guide or listen to The Eric Stewart Show, which airs weekly on Sundays from 7am – 8am on WMAL AM 630/105.9 FM where Eric covers buying, selling…and everything in between!
