Applying for a mortgage can seem a bit intimidating. You may not want to apply for a loan because; What if my credit is too bad? What if I don't have money for a down payment? When if I get my hopes up, and then I found out I can't buy a house right now after all?
All of these are legitimate fears. But, there are some reassuring answers to all of these questions... and after it is all said and done you will find out that applying for a mortgage really isn't that bad after all!
Regarding your credit, you never know where you stand unless you bite the bullet and have someone pull and analyze your credit report. Most mortgage companies have online portals where you can apply without having to speak to anyone in person or over the phone. That in itself takes a little of the pressure off. Maybe you are worried you didn't pay a bill and it will come back to haunt you. Maybe that debt isn't even reporting, but if the worst is actually true, lenders can offer tips to get negative information off of your credit report. If you are afraid you don't have the funds it takes for your down payment, explore than many first time buyer programs that can offer you the downpayment you need. And, then finally if your worst fears come true and you aren't able to qualify at the present time for a loan, the lender can give you a solid game plans and specific action steps to take so you can be ready to buy in the near future. Mortgage lenders want to make you a loan just as much as you'd like to own a home, so they will definitely do whatever they can do in their power to make it happen for you. HERE IS A HUGE TIP: Ask around for the best local mortgage lender versus going to a large national lender. The local lenders will be likely to work with you on more personal level, and coach you until you are ready.
Okay. So I've talked you into it, and you want to apply. Here are some ITEMS YOU WILL NEED WHEN APPLYING FOR A MORTGAGE:
>W2 forms for the last two years
> Pay stubs covering a 30 days period
> Federal tax returns (1040s) for the last two years if you are self employed, or earn more than 25% of your income from commissions or bonuses. (If you are self-employed their may be additional profit and loss statements needed)
> Proof an any additional income you claim such as pension. social security or child support.
> Bank Statements for previous two months (must have all pages)
> Statements for any retirement accounts such as 401k or other retirement assets
> Statements for any stocks, bonds or mutual funds
> Explanations for any large deposits and source of those funds
> Gift letter- if any closing funds are coming from a family member. Your lender will give more details on gift funds
> Landlord's name, address and phone number for verification of rental history
> Explanation for any negative items that may appear on your credit report to include: Late payments, credit inquiries, charge-offs, collections, judgements, liens, or bankruptcy
> If you are divorced, you will need a copy of your divorce decree.
Here is what the lenders are looking for in a loan application, i.e. the 3 C's of lending:
Character: Do you have the credit history to prove you be be trusted to make the payment? Do you pay your bills on time, specifically your current rent?
Capital: Do you have assets than can help pay your loan if income is unavailable? Do you have money in reserves?
Capacity: Do you have a steady job with steady income? What are your current debts compared to your current income?
Lenders simply want to know that you have the ability to repay the loan based on your overall current status. Lenders might ask you for items that you think are not necessary. Trust me, they are not trying to 'get all up in your business'. They are just asking for information that will help to complete your financial picture to prove you worthy of lending a large sum of money. Unfortunately in the past there have been some borrowers who have tried to fraud their way in to a mortgage loan, so the lenders have to make cross all of their t's and dot their i's before they can sign off of your approval.
After it's all said and done, you will be so happy that you made the decision to buy! Not only is buying less expensive than renting (a whole lot less!), a recent survey by Bank of America showed 93% of participants said that owning a home makes them happier than renting. The survey also showed that over 80% of respondents said they would not rent again. 88% said that buying a house was the "best decision they ever made" and 79% said that owning a house positively changed their lives.
If you are ready to become a home home owner, trust our friends at Cornerstone Home Lending. The professionals at Cornerstone will make sure that you have a positive home-buying experience and will take all the fear and frustration out of the home-buying experience. Remember, you don't know if you can buy if you don't try!