What You Need To Have Before Starting Your Home Search

When I first meet with buyers, here is an issue that comes up every time.  Almost all the buyers, except investors that buy multiple properties, are not aware of what is needed BEFORE you start your home search.     Even if you are not a first-time buyer, this is a nice reminder! 

So, when I meet with buyers for the first time, this is a list I let them know of what is needed. 

Documents Needed Before You Start Your Home Search

• Latest 2 months bank statements
  You will need to have some sort of bank account from a U.S. financial institution.  This can be a checking, savings, money market, or other investment account.  The bank statement will need to be submitted to your mortgage lender for their review.  They will evaluate your financial activity to help determine the type of mortgage you can qualify for.    They need to make sure that you have enough money for downpayment and closing costs.  They also need to see that you can make your monthly mortgage payments.   You can submit hard copies or electronic copies. 
  
  
• Latest 2 pay stubs
  Your latest 2 pay stubs will need to be submitted to your mortgage lender for their review and evaluation.  They will review and evaluate to determine the best type of mortgage you will qualify for.   They want to make sure you can make the mortgage payments based on your income.  You can submit hard copies or electronic copies. 
  
  
• Last 2 years income tax returns
  Most mortgage lenders will request the last 2 years of tax returns to verify your income and to make sure you are financially stable.  The tax returns will verify your annual income.   Your annual income will determine your debt-to-income ratio and will help them determine how much of a mortgage you can qualify for.    Lenders use a formula for your total monthly debt payments divided by your income which will determine the maximum payment you can make on your mortgage.  Typically, tax returns are not submitted right away, and the mortgage lenders can send the preapproval letter without them.  However, they will eventually need them to complete the final mortgage application once you find a home you want to buy.  The sooner the tax returns are submitted the quicker your mortgage can be formally approved.   Tax returns can be submitted electronically or by hard copies.  Also, by the buyer completing IRS (Internal Revenue Service) form 4506, the lender can obtain the tax returns directly from the IRS. 

Information Needed Before You Start Your Home Search

• Your Credit Score
  Lenders will need to “pull your credit”.  That means that they will use a system to obtain your score from credit reporting agencies.   The higher the score, the better loan terms you can have.  Better loan terms include lower interest rates and more favorable loan conditions.  This is because a higher credit score means lower risk for you as a borrower.   Also, a credit score is used to determine eligibility for different types of mortgages.  If you are getting a conventional loan, the minimum credit score is 620.  If you are getting an FHA loan (Federal Housing Administration government backed mortgage) the minimum credit score can be as low as 500, depending on the mortgage company.    It is good to know what your credit score is now, so you can check it out here:  Annual Credit Report (click here).    Keep in mind that improving your credit score before applying for a mortgage can increase your chances of qualifying for a loan and getting better terms.  Also, if your credit score is not so great, it will give you time to work on improving it so when it comes to buying a home, you will be ready! 

Well, there you have it.  Those are the basic things you will need to have before starting your home search.  Once this information is received, it will be reviewed and the preapproval letter will be generated, which will be needed to make sure you see homes you qualify for and to submit offers.  Now, depending on your situation, each buyer is different, there may be additional documents that may be required.   We will cross that bridge when we get to it. 

In the meantime, you now have the basic info needed to get started!    Once you are ready, email me at ccr@ccrsellsrealestate.com or click on the link below to schedule a quick chat.  😊