Buying your first home, downsizing to a smaller home, Looking to expand? Need to finance your home? not sure where to start or what to do?
The first step in the home buying process is to find out the amount you qualify up to. This step is important for a couple reasons, It sets the bar for the home price range in which you need to look and you will already have the initial steps for qualifying when it is time to put in the offer. You are making that initial call to your bank or lender and they are going ask you all kinds of in depth personal questions relating to your financial history. They are supposed too, they are going to be analyzing your credit and your financial history over the course of the last 2 years. Every persons credit and financial history is different, like a finger print. It is the banks or Lenders job to analyze this and determine your eligibility. There are many different loan types and options in which your bank or lender will present to you. You will need to be prepared to provide all your financial document that are requested. Here is a list of some of the basic items a bank or lender will inquire about during the loan process.
- Identity Verification documents: you will need to provide your drivers license or whatever legal form of ID you have and another form of ID when obtaining a home loan. The lender will be verifying these documents and other documents you sign with government entities to confirm your identity. This is for your protection and theirs.
- Credit Explanations: Since the lender is analyzing your credit, they will ask for any explanations of negative credit that is shown in the last 2 years, be prepared to answer these questions and explain any circumstances or situations. This does not mean your loan is being denied, it just means the lender is requiring an explanation to the situation.
- Income Documents: You will be asked to provide your last 2 years of tax returns, and depending on if you are self-employed or not, you will either be asked for your last 2 years w2’s or 1099’s and your last 2 months of pay stubs. This is so the lender can verify your past and current income and make sure your income is and has been steady.
- Asset Documents: You will also be asked to provide your most recent bank statements, 401k, and stocks and bond accounts. Most people aren’t aware but verifying where your funds are coming from for the down payment or closing costs is one of the trickiest parts of obtaining your home loan. The lender is looking for these items to confirm all the amount you need to take to closing is in your accounts and ready for closing.
- Court Documents: If you have been divorced or had a bankruptcy you will be asked for this documentation. There are many different things a lender is looking for in reviewing these kinds of documents. Are you paying child support? How Much? this would be considered a debt or on the reverse of that, do you receive child support? How Much? Were you awarded a marital residence? Is that information for that home still reflecting on your credit? What credit items were included in your bankruptcy? Are those items still reflecting on your credit? These are all questions that are asked in considering your eligibility for a loan with these kinds of situations.
This should help you being an prepare you in getting ready to see what you qualify for and start your new home search.