Buying a home is an exciting experience. It’s a step toward gaining freedom, increasing your wealth, building your future, and achieving the American Dream. It can also be a confusing experience, though, especially if you’re a first-time homebuyer. Several steps are involved in the process, and there are numerous factors to keep in mind.
Whether you’re just starting to explore the housing market, researching how to find a mortgage lender, or actually getting ready to apply for mortgage loans, you need to have the right information and documents on hand. Being prepared before approaching lenders can help you avoid unexpected problems and even bolster your chances of qualifying for a home loan. This checklist can help ensure you have everything lenders are looking for.
Proof of Identification
One of the first things you’ll need when applying for a home loan is proof of identification. A government-issued photo ID, like a driver’s license or passport, is generally required. You’ll also need your Social Security number. Most lenders require proof of residency as well. That could be a current rental agreement or utility bills that are in your name and that show your current address. A notarized affidavit of residency may also be acceptable.
Proof of Employment and Income
Lenders also want to see proof of your employment and income. They need proof that you make enough money to cover mortgage payments and other expenses, which could entail providing check stubs for your last several paydays or recent tax returns. They want to know that you have a history of steady employment too. That gives them added reassurance that they’re not taking on necessary risks when approving you for a loan. Most lenders ask for records of an applicant’s job history going back at least two years.
Bank Statements
You’ll probably need to provide copies of your bank statements from the last two or three months as well. They can give lenders insight into your financial habits. They’ll show how much money you generally keep in the bank versus how much you spend. As is the case with your proof of employment and income, bank statements can help lenders determine the level of risk you pose. That, in turn, may factor into how much money you’re eligible to borrow and the interest rates you receive.
Credit Report and Score
Lenders likewise look at potential borrowers’ credit reports and scores. Before approaching lenders, consider checking your credit report to to be sure it’s accurate and that they’re aren’t any unexpected blemishes working against you. Know your credit score too. Your borrowing history and credit score will play a major role in determining your borrowing power. If there are issues on your credit report or your credit score doesn’t fall into the “fair” range or better, you may want to spend some time improving your situation before applying for a mortgage loan.
Getting Your First Home Loan
Forging through the process of buying a home can be intimidating, especially when the time comes to apply for a mortgage loan. It doesn’t have to be overwhelming and stressful, though. With the right documents and information on hand, you’ll be ready to talk to lenders and possibly more likely to qualify for a loan with favorable terms and interest rates. Gathering those documents and reviewing your credit report before applying for a home loan takes a bit of time and patience, but it’s well worth the extra effort.
