One of the most critical steps in the home buying process is securing financing. Rare are those who can pay in cash for real estate in Orange County, so for most people, this early step is finding a mortgage.
You’ll need to submit an application to a lender, so you know what amount, rates, and terms you qualify for. If you’ve never filled out a mortgage application before, these are some ways to prepare.
The Credit Check
Your credit will be a significant factor in determining what loans you qualify for. The higher your credit, the more preferable rates you’ll get, which can save money in the long run. If you have less-than-stellar credit, it may be in your best interest to work on improving your score before applying for a mortgage.
When you get preapproved for a mortgage, you have documentation to show any sellers that you can, in fact, pay for the property should you make an offer. This simple piece of paper can set you above other buyers who may even offer more than you did if they do not have a mortgage preapproval.
Prepare Personal Documents
You’ll need a fair amount of personal paperwork when you start your loan application, so have them ready from the start. Most lenders will ask for, at a minimum:
- Two forms of identification
- Your social security number
- Income verification, typically two years of W-2s or comparable if you are self-employed
- Proof of other income, such as alimony
- Two years of tax returns
- Bank statements
- Loan documentation for other debts you hold
- A “gift letter” if someone else will be gifting money for down payment help
Depending on the loan amount and the lender, some of these items may be more scrutinized than others. If you have a high debt-to-credit ratio, lenders may want to know more about how you plan to pay off all your debts before giving you a new one. If you’ve just started a new job, lenders may want to know more about that position and that employer. Inconsistent balances on your bank statements may get lenders to look at your other assets to see what is stable.