Whether you have already found a home you would like to buy or you have just started the process of searching for a home, a preapproval from a mortgage company is key. Unless you are able to purchase the home in cash, a lender will use basic calculations and a process that involves multiple steps to determine your eligibility. Before you begin the preapproval process, you should be prepared. Here are a few things to remember when starting the preapproval process.
Lenders will not approve you for a mortgage without showing that you have the financial means to make the monthly mortgage payments. Therefore, you need to show your lender proof of your income.
Your lender will most likely ask for income statements, such as paystubs to get started. These statements should show all paid earnings including salary, tips, commission, and overtime, if any of these apply.
If you are self-employed, the lender will want to see 1099 statements and your tax returns in most cases to prove your income. Contracts from clients that show your working relationship and pay may be used, as well.
While surprising to learn, copies of a few years' worth of tax returns will be required whether you are self-employed or a traditional employee, so have these ready before your preapproval, too.
You will also need to show the lender you have some assets before you are approved for a mortgage.
Copies of your bank statements, which include all accounts, such as checking and savings, will be required. If you have retirement accounts, such as traditional 401ks or IRAs, you should provide statements to your lender, as well.
Deeds and titles to real estate or vehicles and other property can also be shown to your lender to verify you have assets.
Not only will the lender want to see you have income and assets to back up your mortgage, but they will also want to see how much debt could potentially stand in the way of you making your mortgage payments.
Copies of loan statements for student loans, auto loans, and other types of financing may be required. Also, if you have credit card debt, you should show your lender statements of these bills.
Knowing what to expect before the preapproval will reduce stress and confusion during the actual process. This guide will ensure you are prepared to work on the preapproval of your mortgage.Share