Attention all future home buyers, here is a layout of the basic information regarding pre-qualifications, pre-approvals, and what exactly it is you will need in order to purchase your home. I know this step can be scary and time consuming, but I urge you to just rip the band-aide off and get this step completed so you can get the keys to your future home.
A mortgage pre-qualification can be useful as an estimate of how much you can afford to spend on your home, but a pre-approval is much more valuable because this means the lender has actually checked your credit and verified your documentation to approve a specific loan amount (usually for a particular time period such as 90 days).
What do I need in order to buy a home?
Proof of Income
You must have you rW-2 statements from the past two years, recent pay stubs that show income as well as year-to-date income, proof of any additional income such as alimony or bonuses and your two most recent years of tax returns. It is about proving without a doubt that you have the necessary income to purchase a home.
Proof of Assets (Out of Pocket Money)
You will need to present bank statements and investment account statements to prove that you have funds for the down payment and closing costs, as well as cash reserves. An FHA loan requires a down payment of as low as 3.5% of the cost of the home, while conventional home loans require 5% to 20%, depending on the loan program. If you receive money from a friend or relative to assist with the down payment, you will need a gift letter to prove that this is not a loan.
Please note that a $200,000 home with a 3.5% down payment would be $7,000 dollars, 5% would be $10,000 dollars, and 20% would be $40,000 dollars. In addition, the general rule of thumb is to expect 3% of the purchase price for closing cost which would come to $6,000 dollars. Lastly, if you get under contract you will want to have a general inspection and termite inspection completed which can cost $350 dollars to $700 dollars. Do not be scared by these numbers, negations can take place to help reduce many of these cost. It is important to note that the out of pocket expense to purchase a home can add up.
Most lenders today reserve the lowest interest rates for customers with a credit score of 740 or above. Below that, borrowers may have to pay a little more in interest or pay additional discount points to lower the rate. FHA loan guidelines have tightened in recent months, too, so that borrowers with a credit score below 580 are required to make a larger down payment. Most lenders require a credit score of 620 or above in order to approve an FHA loan. Lenders will often work with borrowers with a low or moderately low credit score and suggest ways they can improve their score. Your agent should be able to put you in touch with lenders that work on improving credit scores in order to achieve the best rates.
Your lender will not only want to see your pay stubs, but is also likely to call your employer to verify that your employment and to check on your salary. If you have recently changed jobs, a lender may want to contact your previous employer. Lenders today want to make sure they are loaning only to borrowers with a stable employment. Self-employed borrowers will need to provide significant additional paperwork concerning their business and income.
Your lender will need to copy your driver's license and will need your Social Security number and your signature allowing the lender to pull a credit report. Be prepared at the pre-approval session and later to provide (as quickly as possible) any additional paperwork requested by the lender. The more cooperative you are, the smoother the mortgage process will be.
Author:Kelley Kemmis Phone: 602-531-5514 Dated: October 2nd 2016 Views: 229 About Kelley: Kelley Kemmis obtained her license from Arizona School of Real Estate and Business before joining Am...
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