Qualifying for a Mortgage

Information for Home Buyers Who Are Ready to Buy a House

CALL LENDERS WITHIN A SHORT TIME FRAME

Buyers must shop for a mortgage lender during one two-week period rather than talking to one lender and then waiting two weeks before talking to another. If mortgage shopping is not confined to a two-week window, the credit report will show too many “hits” and lower the buyer’s credit score.
If you are unsure as to your credit status, you can get a free copy of your credit report and clear up any problems that may be being reported incorrectly by going to AnnualCreditReport.com.

I can put buyers in contact with reputable mortgage lenders in our market with whom my buyers have had successful working relationships in the past. It is important to shop around, because different lenders have different programs, and there may be one that is just perfect for you with one lender that is not available from another. A good loan officer will counsel and guide a buyer as to the most advantageous and appropriate products that meet their needs. Just remember to concentrate your shopping to a very small two-week window of time.

Some local lenders whom you can call to pre-qualify for a home loan include but are not limited to:

THE GOOD FAITH ESTIMATE

The loan officer will give you a Good Faith Estimate of the closing costs involved with the financing. There are recurring costs that you pay that are included in the monthly payment, such as homeowner’s insurance and property taxes (the monthly payment consists of principal, interest, taxes, and insurance and is referred to as PITI).

The one-time closing costs are the origination fee, usually one point (or 1% of the loan amount) and any other points, sometimes called discount points (the more points, the lower the interest rate). The appraisal fee, credit report, and other lender fees, such as document preparation and underwriting fee, are also one-time closing costs.

LOAN APPROVAL DOCUMENTATION

The lender will ask you to bring documentation supporting your statements regarding your income and employment. Documents usually required by lenders include, but are not limited to:

  • two of your most recent pay stubs
  • your W-2s for the last two years
  • OR self-employed 1040s for the last two years
  • federal tax returns for the last two years
  • the last two months’ bank statements
  • long-term debt information regarding:
    • credit cards
    • child support
    • auto loans
    • school loans
    • installment debt
    • etc.
  • proof of funds for your down payment

Checklist: Your Mortgage Application

Every lender requires documents as part of the process of approving a mortgage loan. Here are documents you’re generally required to provide..

  • W-2 Tax returns — or business tax returns if you’re self-employed — for the last two or three years for every person signing the loan.
  • At least one pay stub for each person signing the loan.
  • Account numbers of all your credit cards and the amounts for any outstanding balances.
  • Two to four months of bank or credit union statements for both checking and savings accounts.
  • Lender, loan number, and amount owed on installment loans, such as student loans and car loans.
  • Addresses where you’ve lived for the last five to seven years, with names of landlords if appropriate.
  • Brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.
  • Your most recent 401(k) or other retirement account statement.
  • Documentation to verify additional income, such as child support or a pension.

APPLY FOR YOUR MORTGAGE LOAN WITHIN 5 DAYS

The terms of the contract provide for a Conditional Loan Approval from the lender based on a loan application and Trimerged Residential Credit Report within 5 days of the Seller’s Acceptance (unless specified differently in the contract). This means loan application should be made immediately after the offer is accepted.

POSSIBLE TAX ADVANTAGES OF HOME OWNERSHIP

Most homeowner’s are able to qualify for tax breaks which make home ownership highly preferable to renting. To understand the possible tax breaks, it is important to consult a tax expert or see the Realty Times article, “What’s Your Principal Residence? Tax Experts Not Always Certain.” There are a number of tax advantages available for most American homeowners, but to benefit, you have to understand them and report them properly to the Internal Revenue Service.