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What documents and steps are required for a mortgage?
Deciding to buy your first home is a big decision. There's a lot of moving parts to a home purchase, and since I believe that knowledge is power, this article is going to walk you through the process step-by-step. I promise you that if you follow these steps as presented below, you'll have a quick and stress-free transaction start to finish!
Step One: Documentation
Before you even begin your home searching you need to find out if you qualify, and for how much. The only way to do this is to contact a local mortgage professional for a consultation. In your meeting, whether it be via phone or in person, you'll discuss your goals, the payment you're comfortable with, your down payment plans, your general credit profile and, your work history. After learning about what you're striving for, your loan officer will then need to pull your credit report to review not only your score but your payment history as well. If everything looks good, you'll then need to submit to your loan officer documents to support your loan. The documentation varies from person to person slightly, but, here are the most typical items needed:
- Thirty days worth of paystubs
- Two most recent years W2's
- Most recent award letter for Social Security, pension or another retirement
- Two years most recent 1099's for all retirement income
- Two months most recent bank statements, all pages, for the account your down payment is coming from
- Three months most recent bank statements, all pages, from your accounts such as IRA's that are disbursing monthly income to you.
- Documentation regarding a past short sale, bankruptcy or foreclosure
- Divorce decree, child support agreements whether you pay or receive monthly
Upon reviewing the items above additional documentation may be necessary. But, in general, these documents will help your loan officer determine not only if you qualify, but for how much. After reviewing all documents, your loan officer will issue an Approval Letter which you can provide to a realtor.
On a side note: if you are working with a lender, and, they have not completed the steps detailed above; then you are NOT pre-approved. A lot of lenders provide pre-approval letters before reviewing your documents, so this is important to note. To be clear, you are NOT approved unless a loan officer has analyzed your credit AND your financials. Don't go onto step two without completing step one in its entirety.
Step Two: Choose A Realtor
There are two crucial things you need to know when it comes to realtors. The first one is; it's a lot of work to find your dream home, the one that meets all of your needs. Realtors work super hard for their clients, and it's for that reason you should NEVER contact a realtor until you've completed Step One above. If you don't even know if you're approved, you should not be asking a realtor to spend time carting you around town showing you houses. It's plain rude, so don't do it.
The second thing you need to know is this; you only need ONE realtor. Any realtor you choose can show you any house you'd like to see. Please do not ride around on a Sunday afternoon, write down ten phone numbers from ten real estate signs and then call all ten realtors. If you do that you'll have ten realtors, all thinking you are their client and they are all working for you. This is just as rude as the previous example. You need to pick only one realtor and then they can help you with everything you need, for any house you'd like to see. So, you're now pre-approved, you have one excellent realtor, and you've found a house. Cool! Now what?!
Step Three: Connect the Dots The next step to this process is once you find a home with your realtor you'll need to contact your mortgage professional BEFORE you sign a contract. It needs to be determined if the pre-approval provided to you covers the home you wish to buy. There are a lot of factors to consider such as:
- You want a condo, but does the loan program allow for condos?
- Your approval is for 140k, but the home is 145k
- Your approved monthly payment is $1500, but, taxes on the home you like are high; will your approval hold?
Consider and discuss these factors with your mortgage professional before you sign the sales contract. Completing this step is just as important as the other two. And don't forget a sales contract is legally binding, so you don't want to sign it unless you know everything lines up. There are a lot of articles out there that detail the best way to go about getting a mortgage. I have yet to see one that is accurate. The ONLY way to ensure your loan transaction goes off without a hitch is to follow these three steps above. I've been active and closing loans for 15 years, and it never fails; when someone doesn't abide by these steps, in this order, the transaction goes sideways immediately. Don't let that happen! If applying for a home loan is in your plans, contact a mortgage professional now for a review of your overall credit profile. Doing so, and making a plan together will guarantee that you'll have a smooth and stress-free loan process from start to finish!
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