When you decide to buy a home, whether it’s your first or your third, there are a lot of steps you need to take. But before you do anything, including meeting with a realtor or starting to look at houses, you need to apply for a home loan. Getting pre-approved for a mortgage will determine how much money you can spend on a house, so this is important to know before you actually go look at houses you’re interested in. And to help you prepare to apply for a home loan, this article is going to discuss a few types of documents you’ll need when meeting with potential mortgage lenders.
Proof of Income
One of the first things lenders look at is proof of income—you should bring your tax returns, W-2s, and pay stubs from the past two years. Mortgage lenders want to be able to see the big picture when it comes to your finances and this includes how much money you’re bringing in on a regular basis. This can be a little more complex if you’re self-employed, but the process remains the same. You want to be sure to choose a lender who won’t approve you for more than you can really afford, which would set you up for a lot of financial stress.
When choosing a lender, it’s important to look for one that has plenty of experience. For example, if you’re looking for a loan to buy or renovate a non-owner occupied property, Bay Mountain Capital would be a good choice. With plenty of experience and knowledge on financing both residential and commercial properties, this establishment is going to be able to come up with a loan plan that works for your specific needs. Choosing the right lender is the most important part of applying for a loan.
You need to show lenders that you have adequate funds in your bank account to pay for a downpayment and to help make monthly payments. Bank statements should be obtained from any and all establishments you have accounts with. This can also include statements of other assets, like investments or insurance. Showing lenders these statements will prove that you’ll be able to pay upfront costs and pay your mortgage if your income decreases or halts temporarily.
Lenders look at your credit history to ensure that you pay credit card bills on time, how many credit cards you’ve opened or applied for, and your overall credit score—this essentially shows lenders whether or not you’re responsible with your money and your credit score does play a role in determining if you qualify for a loan.
Your credit report will also show information like bankruptcy or foreclosure details. If you’ve filed for bankruptcy or foreclosure in the past, this may impact how soon you can apply for another home loan. In this case, the lender will need to see proof that your debts are no longer outstanding and that you no longer own the previous property.
While it may seem silly, you do need to bring some sort of photo ID, like your driver’s license, to prove you are who you say you are. You’d be surprised at the number of people who apply for loans, credit cards, and other important financial assets pretending to be someone else. So lenders always ask for personal identification to validate your identity.
If you have gotten a divorce and have financial responsibilities attached to the divorce, you should bring your divorce decree when you meet with your lender. This will show them how much you have to pay in alimony or child support—these additional expenses may impact how much you’re approved for during the loan process. Lenders may also be able to look up your marriage records using online tools to get further details about your divorce if needed.
Applying for a home loan can be a long and complicated process. But if you know what to bring to meet with potential lenders and choose the right lenders for your situation, you’ll be able to make the process go as easy as possible.