Dreaming and looking at all the possibilities of buying a house can be an exciting time. However, before you start shopping you need to know how much house you can afford. Dreaming is fun, but it is heartbreaking when you fall in love with a $350,000 home and are only qualified for $270,000. So, to avoid this disappointment you will want to get pre-approved for a home loan.
To become pre-approved, a mortgage lender will review your financial history. This helps them verify you have the ability to pay back the loan. Once confirmed, your income, debt, and credit score is taken into consideration to determine how much of a home loan you will qualify for. It is then a pre-approval letter is issued. Being pre-approved will help you shop within your budget and show others you are a serious buyer. Most pre-approvals are valid for 90 days.
To expedite the pre-approval process, you will want to go ahead and start gathering documents that are required for any type of home loan.
Documents to gather:
- Last 2 years of tax returns
- Last 2 years of W-2’s or 1099’s for self-employed
- Last 30 Days of pay stubs
- Other Income documents- social security income, child support, disability, retirement, etc.
- Last 2 months of ALL bank account statements
- Send ALL pages front and back
- Statements can be emailed – Online banking official statements
- Retirement and investment plan statements “Current Copy”
- Last 2 years of employment history
- Last 2 years of residence
- Drivers License
- Social security card
If you are applying for a VA Loan (Military Veterans), also include:
- VA disability award letter
For some borrower’s additional documents and information will be required.
Between your pre-approval and loan closing, financial consistency and planning are key. Changes to your financial status can raise a red flag and possibly cause delays. We have listed a few tips to follow that can help keep the home buying process on track until your closing.
What to DO when applying for a home loan:
- Maintain your credit score and keep your loan originator informed
- Advise your loan originator of any changes in address, salary
- Track all bank transactions, especially large transfers
- Get quotes for homeowners insurance
What NOT to do when applying for a home loan:
- Change jobs or employment status
- Take on additional debt or cosign for any loans
- Open or close financial accounts or update your portfolio
- Open any new lines of credit or close/consolidate credit cards
- Cause a drop in your credit score by paying off collections
- Make any large purchases
- Deposit Cash
At any point during the home buying process if your financial status changes or have questions make sure to talk to your Loan Originator. They can help guide you and clarify uncertainties that could slow down the home loan process.
If you are shopping around or need a suggestion, we highly recommend our in-house financing company, Motto Mortgage Borrowers First. They work with multiple wholesale lenders and can compare loan options simultaneously to find ones that best fit your needs.