Thinking about buying a house and applying for a loan? Your finances are the first thing you should get in order.
Buying your first home can be one of the most exciting, and daunting, experiences of your life. But if you go in armed with the right information, it’s a lot less stressful. Of course, knowing exactly what you can afford is a big part of that equation.
A Mortgage Loan
Finances are so important, in fact, that you should start working on them before you’re ready to apply for a mortgage. That way, if you need to repair your credit or save a little money, you’ll have plenty of time.
Trust us – Nothing is worse than finding your dream home and then discovering that you’re not financially qualified to buy it.
So, what can you do to get ready? You’ll need good credit, cash to close, and a verifiable income . . . and you’ll need lots and lots of paperwork.
Gather Necessary Information
When you apply for a mortgage loan, lenders want to make sure that you’ll be able to pay them back. Different banks look for different things, but be prepared for your financial history to go under the microscope! Some things they’ll look at will include your income, credit, how much you can afford for the down payment, debt ratio, recent expenditures, and much more.
Before you even start the process of applying for a mortgage, it’s a good idea to have all of the necessary paperwork ready to go. Regardless of lender, this is what you’ll likely need:
• Two years of employment history
• Job titles
• Dates employed
• Address and phone numbers of employers
• Two years of residency information
• Pay stubs for the last 30 days prior to closing your loan
• Tax returns from the last two years, including Federal and State returns, W-2s, 1099s, all Schedules, etc.
• Bank statements, including checking, savings, investment accounts, 401(k), etc.
In addition, if you’re a candidate for a no down payment loan, such as a VA loan, you’ll need the documentation to prove it.
Get Prequalified Loan
Next step? Get prequalified for a mortgage. This doesn’t just expedite the closing process but makes it easier to find a home that suits your needs. How? Right from the start, you’ll know exactly what you can afford, and your agent can make sure to only show you homes that fall within your price range.
It is worth noting that a pre-qualification and a pre-approval are not the same thing. While a pre-qualification gives an estimate of how much you may be able to spend on your home, it is not a guarantee that you will actually receive that money. A pre-approval is much more valuable, as the lender has already checked your credit and verified your documentation to approve a certain loan amount. Typically, the offer is good for 90 days, and you can ask for documentation to submit when you make an offer on a home.
When it comes to mortgages, they’re not all created equal. Go through the pre-qualification process with several lenders to see who can offer you the best deal before it’s time to sign on the dotted line. In the end, you’ll get the home you want faster and at a better rate. Because of the complex nature of real estate transactions, Katchen Company’s trained team is experienced in financial analysis and financing requirements necessary to close a deal. Our well-established relationships with local, regional, and national lending sources do allow us to obtain the most competitive rates in the real estate industry. Let us guide you seamlessly through the process.