Buying a house can be a long and difficult process. For some, working with a mortgage company can seem like a mystery. Especially if it is your first time buying a home, you might be confused as to what documents you should have ready, how to work with the lender and how to prepare yourself. Here are some things first-time homebuyers should expect when they apply for a loan.
1. Proof Of Down Payment
In most cases, you will have a down payment when you purchase your home. As you apply, you will need to prove that you actually have the funds to make the down payment. They will ask for the bank accounts that prove that you have the money. These can be investment accounts, savings accounts, or even checking accounts.
If the down payment is a gift from a family member or a close friend, then you will need a gift letter. This gift letter is a signed document that states that the person is gifting the whole amount and that none of it is a loan. Then, they will also need to provide bank statements showing that they actually have the money as well.
2. Proof Of Income
One of the most important parts of getting a mortgage is proving your income. There are a couple ways to do this, but you should plan on showing the mortgage lender any W2 forms that you have, tax documents and/or your contract for work if you are a contracted employee.
If you are self-employed, this can become tricky. Generally, for self-employed individuals, you will need to give them 2 years worth of tax returns so that they can average out your income, seeing that each month might vary when you are self-employed.
3. Proof Of Student Loans
If you have any student loans, you will need to show how much you pay each month. Your credit report will show the full amount that you owe, but it may not show how much you pay each month for payments. The amount you pay each month is more important than the total amount owed. These monthly payments will be what they use to calculate your debt-to-income ratio. Then, from this number, they will determine how much you can afford in house payments each month.
By understanding what you need for applying for a mortgage, you can be prepared for the process. Click here to learn more about how to buy property.