MORTGAGE MATTERS

4 min read

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May 2018

Checklists You NEED When Planning to Buy

When you’re just getting started with the home buying process, it’s easy to feel overwhelmed and maybe not quite sure where to begin. That’s normal, so don’t fret! If you’ve never purchased a home before, or if it’s been a while, it’s hard to know exactly what to expect. Fortunately, here you’ll find key information to keep you on track from the very beginning of your home buying journey all the way to the closing table.

The mortgage application checklist

The best way to begin your home buying adventure is by working with a lender to become pre-qualified. It’s a good idea to gain pre-qualification before you begin looking at houses, so you‘ll know how much home you can afford from the start. After all, you don’t want to fall in love with a home, only to find out it’s not within your budget once you begin the mortgage process. Here’s just some of the essential information you’ll need to provide on your mortgage application. Your lender will let you know exactly what you need.

Income sources

Your lender will need to see how you plan to pay for your mortgage, which can be done by sharing your recent pay stubs and two years of W-2 forms along with any additional income sources, such as pensions, child support, or social security. If you’re self-employed, you’ll also need to share the past two years of tax returns showing your total income. Have rental properties? You’ll have to provide a Schedule E (Form 1040), as well.

Assets

How do you intend to fund your down payment? Your lender will need to know and will need proof of funds, so you’ll be required to provide bank statements, stocks and investments, the sale of assets, or a settlement statement if you’re using funds from a property sale.

Most mortgage programs allow you to use gifted funds for your down payment, so long as you follow the guidelines provided by your lender.

Payment history

A significant part of the mortgage approval process is proving you’re a credit-worthy borrower. Much of this will be revealed on your credit report, but if it’s not shown, you’ll need to provide documentation to your lender to help paint a picture of your payment history for things like your rent or mortgage, or past collections/judgments that have been paid off. The mortgage application is meant to paint a pristine picture of your financial situation in order to determine if you meet the requirements to take out a home loan.

Home wish list

The next step in the home buying process is determining what you’re looking for in a new house. It’s so important to carefully think through your ‘must-haves’ and things that may be nice to have – but not necessary – in order to live in the home.

Critical things, like location, home size and budget may not be up for negotiation. On the other hand, things like an in-ground pool, new appliances in the kitchen, or a finished basement might be considered ‘nice-to-haves’ and won’t make or break your decision to purchase a home. It’s also a good idea to look several years into the future. Do you foresee yourself moving for a new job? Expanding your family? Thinking about these things can help you choose a home that will meet your immediate needs as well as those down the road.

You’ll want to determine the qualities you’re looking for in a house before you begin looking at homes for sale.

Complete this new home wish list and share it with your real estate agent, who can use your criteria to help you find available homes in the area that may be a good fit.

The mortgage process

Now, for the most important piece of the puzzle – understanding the ins and outs of the mortgage process. Once you’ve submitted your mortgage application, what happens next?

  • Underwriting – This is the process in which your loan application is reviewed carefully by an underwriter to verify that you meet the loan criteria.

  • Processing – While your file is in the underwriting process, your lender will also verify your information for accuracy – things like employment, credit history, etc. This is also the time when third-party services like title search/insurance and an appraisal are ordered. Your lender will also let you know that you’re responsible for obtaining homeowner’s insurance.

  • Closing – This is the fun part! Once you’ve met all of the qualifications, your lender approves your mortgage application and begins preparing for closing day. At closing, buyer and seller will transfer funds and the title. Then, you get the keys to your new home!

Buying a house is one of the largest financial transactions you’ll make in your life, but it doesn’t have to be scary. Taking the time to prepare and become educated on the home buying process will provide you with a smooth and positive experience. Your mortgage banker is a great resource throughout your home buying journey, so don’t hesitate to reach out when you have a question (or ten!).