What You Need When Applying For A Mortgage
Applying for a mortgage can be extremely nerve-racking so it's important to prepare beforehand so that some of the stress of the situation can be avoided when it comes time to meet with a lender.
Having the necessary documentation available and on-hand will immediately show a lender that they are dealing with a responsible and organized individual and this just might work in your favor during the approval process.
The first thing needed in applying for a mortgage is preparation.
Steps in Preparing for Mortgage Application:
- Try to sustain a steady well-paying job for a few years before applying for a mortgage
- Find a reliable cosigner with a good credit history who can make payments if you cannot
- Pay all bills in full and on time
- Pay off all outstanding loans
What You Need
The most important thing to have when you apply for a mortgage is a clean credit history. If your credit history has been tarnished by past financial indiscretions it is essential to improve this situation as much as possible before meeting with a potential lender.
The first step in making yourself look like an attractive potential borrower to lenders is having a steady income that you have maintained for several years. Remaining a loyal and committed employee to a company for a significant number of years tends to indicate to lenders that you will also be a loyal and committed borrower who makes payments on time and in full when they are do. Maintaining employment also offers lenders security in that they know you are receiving a certain income each month that can be put towards mortgage payments.
Having a mortgage cosigner can also work in your favor when it comes time to meet with a lender. Cosigners aren't always necessary, but for people with a less than perfect credit they can make all the difference in terms of approval. A mortgage cosigner is a person with good credit (most often a relative) who is willing to assume responsibility for a mortgage and make payments if for some reason you can't.
Paying all bills off on time and in full should be something that every potential borrower does in anticipation of meeting with a lender. You can request letters from utility and credit card companies to bring to lenders as proof that you are a reliable client. This can really come in handy for people who don't have any assets and haven't had time to develop much of a credit history. These letters can also help establish credit for people whose credit history was damaged by a large indiscretion.
Paying off all other loans will also prove to lenders that you are working with a clean slate. Most lenders feel more secure knowing that they will be the only large financial obligation that you have to deal with.
Once you have properly prepared yourself for the application process it will be time to actually meet with lenders. When these meetings do occur you will need to bring along quite a bit of paperwork so that the lender can get an idea of who you are and exactly what you are looking for.
Information that Lenders Will Require:
- Property information
- Information about the type of mortgage you are looking for
- Income information
- Asset information
- Credit information
- Personal information
The first thing your lender will need to know is which sort of property you are looking at buying. For example, they will need to know whether the home you're looking at is a condominium, a townhouse or a detached single family home. They will also want to know what you will be using the home for whether it be a primary residence, a vacation home or a rental property. Be sure to have the address of the property on-hand because your lender will likely ask for it during the application process.
Right off the bat your lender will want to know how much money you are interested in borrowing. They will ask you about the purchase price of the house as well as monthly homeowner's dues that you will be expected to pay. Your lender will also ask you about the type of down payment you are prepared to make so be sure to have financial information on hand to prove that you actually have access to the money you are prepared to put down.
The income information you are able to provide to your lender will play largely into whether or not you are approved for a mortgage. Your lender will want to see proof of all of your sources of monthly income including your salary, any commission or bonuses you may receive, interest you cash in on and retirement plans you may be willing to cash in as well as information about any automobiles and property you own. There are a few absolute necessities that you must bring along as proof of income.
Income Information You Will Need:
- A few recent pay stubs
- Two-years worth of W2 forms
- Federal tax returns (if you are self-employed, have an extremely large income or live off of capital gains)
Lenders will expect you to include a summary of your current monthly expenses with your income information.
Your asset information will also be important to lenders. When you meet with potential lenders you should have two months worth of statements for any stocks, bonds and mutual funds that you own as well as two months worth of bank statements for every account that you hold. If you have just sold your previous home or you have a home on the market you should also provide potential lenders with a HUD1 statement.
Credit information is also important to have available. You should inform lenders of any creditors you might have as well as provide them with your landlord's name if you are currently renting a home. Also be prepared to explain unsavory details that appear on your credit history report such as liens, late payments and bankruptcies.
Along with your financial information and the details about the home and mortgage you are after, lenders will need some personal information. When you go to meet with lenders don't leave home without your birth certificate, driver's license and your social security number. You will also need to provide lenders with your legal name, marital status, your current address and the number of dependants that you have.
Approaching the mortgage application process doesn't need to be stressful. Looking into what lenders will expect before you meet with them will allow you to feel confident and well prepared when it comes time to sit down and discuss the details.
Asking for money is always somewhat intimidating, but becoming informed about the process will make approaching this initial step towards homeownership a whole lot easier.