The mortgage application process can seem difficult, but it doesn’t have to be. If you take time before your application to get some basic information together, and take a few important steps in advance, the process can be very easy. Here are the documents and information you should have before you apply.
Your Credit Score
Perhaps one of the most important things to know when you’re going into the mortgage loan application process is your credit score. Credit scores range from 300 to 850, but most lenders won’t be able to secure a loan if your score is below 580, although some lenders have programs available to people with credit scores as low as 500. These programs usually require a larger down payment, though.
What You Can Afford
While the lender will give you the official amount that you can get qualified for on a home loan, it’s a good idea to do a little research on your own to find out approximately what that will be. The easiest way to do this is to calculate it using your current income and apply the 28/36 rule. This is a general guideline that says your mortgage payment should not be more than 28% of your gross income (before taxes) and your total debt should not be more than 36% of your gross income.
To calculate these numbers:
- Multiply your monthly income before taxes by 0.28 – this is 28% of your gross income
- Multiply the same monthly income by 0.36 – this is 36% of your gross income
You can use an online calculator to determine what that house payment translates to for a total home price, but keep in mind these are just estimates. What you actually qualify for may be less than what you calculated. If you have a lot of other debt from car loans, student loans, or credit cards, you may not qualify for as big of a home loan.
Your Income and Employment
To qualify for a loan you need to show the lender that you have a steady income and will be able to make the payments and (hopefully) avoid defaulting on the loan. Be prepared to show at least your two prior paycheck stubs, although if you have a new job your lender may ask for some additional history from your previous employer as well.
Your Bank Account Information
Most lenders will ask for two to three months of bank statements for all the accounts you have, including checking, savings, and other online bank accounts like a high-yield savings account. If you have any large withdrawals or large deposits that aren’t related to your employment, be prepared to explain those.
Lenders also need to see at least two years of IRS tax filings for your mortgage loan. If you are self-employed or have income that is not from a traditional source (a paycheck from an employer), the lender may ask for more than two years of tax returns.
Contact Integrity First Lending to get started on your mortgage journey and find out more about the process to buy your dream home.