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What are the Documents Required for a Home Loan?

If you’ve had it with cramped apartment living and dealing with the hassle of unpleasant landlords, or you’re simply ready for a housing upgrade (or housing cost downsize), it’s time to consider making the move to owning your own home

Buying property is a tried-and-true path toward increasing your net worth and having more financial freedom. But many people feel overwhelmed when they ponder exactly what it might take to apply and qualify for a mortgage loan. 

Let’s demystify the whole process and help more members of our community find a home they truly love. 

The first step to getting a mortgage is gathering the various documentation that lenders require to determine if you qualify and how much you can borrow. Here’s a comprehensive checklist of everything you’ll need — and if you have any questions, feel free to give me a call.  

Assemble the Necessities

It all starts with your cash flow. Your eligibility depends on proving that you have a steady source of income and that you make enough money to pay your mortgage every month. 

Lenders will also want to look at your employment history. Just like you would when applying for a new job, you should have the names, addresses, and phone numbers of the places where you’ve worked for at least the past two years.

If you haven’t kept copies of your pay stubs, don’t panic. Just about everything you need from your employer should be available online, as most businesses in this day and age use some sort of payroll software that can easily create the reports you’ll need. 

Do you prepare your own taxes? If so, it’s time to dig out those files and locate your full, signed tax returns for the past two years, including all W-2 forms and schedules. Having trouble locating an elusive piece of paperwork? Your friendly federal IRS may be able to help you track it down. Ultimately, we can order returns as well, after you’ve completed a form. 

Log into your banking institution’s website to download your last two months of bank statements for every account you have, or leverage our built-in tools in our Glyde application system to connect your institutions to our system to ensure we can keep everything up-to-date.

While not everyone needs to or enjoys driving, it’s crucial that you make sure you have a valid state ID or a passport to prove your identity. Not a US citizen? That’s not a deal breaker — but you’ll want to have your resident alien card or US permanent visa ready if applicable.

Got an individual retirement account, stocks, bonds, or a 401(k)? Go ahead and compile the latest statements from these as well to show potential additional income to your lender.

Divorced applicants may be asked to submit the final legal divorce decree and paperwork regarding any existing child support or alimony arrangements. 

If you or your partner has been through bankruptcy in the past, that doesn’t necessarily mean that you can’t qualify for a mortgage loan. While you might not receive the lowest possible interest rate, there are still financing options available, especially if some time has passed and you’ve put in a lot of effort to improve your situation. 

Ratios and Scores

Now let’s look at another huge element in applying for a home loan — your credit score. 

Not sure exactly what the number is? It’s easy and free to find out. If you have a car loan or a credit card, check your statement or log in to your online account, as most of those companies now keep track of it for you. I generally advise my clients to let me do a “soft credit pull” if they’re not certain of where they stand, and if we find any surprises, we’ll have some specific things to work on by taking a “hard credit pull.”

The higher your credit score, the more likely you are to be approved for a mortgage with a low interest rate, which saves you money monthly and in the long run. 

Want to boost that score up a bit? Here are a few simple ways to raise it fast. 

It’s also worth checking your credit report regularly. Mistakes and clerical errors are a fact of life and these occur more often than you think. Incorrect reporting can negatively affect your credit score so it’s vital that you find and dispute them as soon as possible. 

There’s another number that plays a key role in the success of your loan application: your debt-to-income ratio

It’s less complicated than it sounds. DTI is your total monthly debt (rent, car loan, credit card, utilities), divided by your gross monthly income (before taxes). Ideally, you want the ratio to be somewhere in the neighborhood of 30-35%. 

Some government-backed mortgage loan products through Housing and Urban Development, the Federal Housing Administration, or VA home loans for current or retired service members are happy to work with clients who might have a higher DTI.

Depending on the above factors you may be eligible for a variety of programs, so be sure to explore all the options in your area for first-time home buyers, down payment assistance, and other grants. 

Go for Pre-approval

Now it’s time to work with your lender and get your pre-approval letter. This lets you know exactly what budget you have to work with as you move into the next exciting phase of the homebuying journey — house hunting! 

Scrolling through listings online and downloading real estate apps is a great way to do some preliminary research, but you’ll enjoy much more success if you partner with an experienced broker who has deep local knowledge of your preferred area. After sixteen years in the industry, I know a few hundred (thousand, actually) real estate agents and can help to pair you with a guru in the neighborhoods you’re interested in, and with the skillset and personality you’re looking for. 

Coming to the table with a mortgage pre-approval shows sellers that you’re serious about making a purchase, and it gives your offer more weight in a competitive market.

Discover your dream home, make an offer, review the contract, then what? This is the final stretch and during this time period your mortgage lender will be performing the final review of your application and ensuring the title to your new property is free and clear of any encumbrances.

Closing day will be there before you know it, and you’ll soon be the proud owner of a place you’ll be thrilled to call home. 

Explore Your Options

No one ever said buying real estate was easy, but it’s definitely worth the effort. But navigating this unfamiliar territory alone can be a daunting task. 

Working with a skilled and compassionate real estate professional can save you time and money. I’ve been in this industry for over 16 years and I’m committed to helping my clients find exactly the right opportunities to thrive. 

If you’re ready to become a new homeowner, reach out today to see how I can make your dreams a reality.

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