Must-Have Information You Need Before You Even Google “Mortgage Lender”
For many homebuyers, navigating your mortgage options can be a frustrating and stressful process. Before you hit Google, here’s some key pieces of information to have at the ready before you call a potential lender. This will help you be better equipped to discuss your specific financial situation and goals. It will also help the lender provide you with a more accurate assessment of the mortgage options available to you, making the application process smoother and more efficient.
First, we need some details about your plans:
Is this a first or second home for you?
If it’s an additional property you’re looking to purchase, we need to know that up front as there are different requirements depending on the type of property.
Are you self-employed?
Because the income in your business is different than getting a paycheck, there will be some extra documents that will need to be provided to the lender in order to provide proof of income. (See below.)
What’s your ballpark amount available for down payment and closing costs?
There are a wide range of mortgage options available, each with different requirements for down payment and closing costs. This is why it’s important to consider more than just the interest rate when comparing your loan options. Sometimes the upfront costs can negate any savings in interest during the life of the loan.
What is your total monthly budget for your home?
Yes, you need an idea of what’s affordable for your monthly mortgage payment. But it’s important to remember there are a lot of other expenses that you’ll incur each month as part of owning your home. This includes property taxes, mortgage insurance, upkeep, maintenance, etc…
Then, we get into the financial details.
Once you’re ready to submit a mortgage application, you’ll need to provide additional documentation. In fact, be wary of the many lenders who won’t even talk to you until they have this data in hand, which can feel a little bit like getting married before you even have your first date!
Here are the key pieces of personal and financial information a mortgage lender will need during the pre-approval or application process and why they matter.
1. Proof of Income
Lenders will want to see your most recent pay stubs and W-2 statements to verify your income. If you're self-employed, you'll need to provide tax returns and financial statements for your business.
2. Credit Report
Your credit score will play a big role in determining whether you're approved for a mortgage and what interest rate you'll receive. You can obtain a free copy of your credit report once a year from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Unlike other folks in the industry, we won’t automatically pull your credit score until we’ve had a conversation about it.
3. Bank Statements
Lenders will want to see your bank statements to ensure you have enough funds for a down payment and closing costs.
4. Employment Verification
You'll need to provide proof of employment, such as a letter from your employer or recent pay stubs.
5. Tax Returns
Lenders will want to see your most recent tax returns to verify your income and employment history.
6. Property Information
If you've already found a property you want to buy, you'll need to provide information about the property, including the purchase price and address.
7. Debt Information
You'll need to disclose any other debts you have, such as credit card balances or car loans.
8. Identification
You'll need to provide a government-issued ID, such as a driver's license or passport.
It's important to gather all of this information and documentation before starting the mortgage application process. This will help ensure a smoother and faster process, as well as increase your chances of being approved for a mortgage.
In addition to these items, it's also important to understand the different types of mortgages available and their requirements. For example, some loans require a higher down payment than others, and some have stricter credit score requirements.
Before applying for a mortgage, it's a good idea to research different lenders and compare their rates and terms. You can also work with a mortgage broker who can help you find the best loan for your needs.
Overall, the mortgage application process can be complex, but being prepared with the necessary information and documents can help streamline the process and increase your chances of being approved for a mortgage.