When you decide to purchase a home (or condo) for the first time there are a few aspects of your situation to which you should pay close attention. These are the areas that a lender will judge you on and ask for documentation. The more prepared you are to provide it the smoother the loan process will be. The four basic areas are credit, housing history, employment and assets. Let's look at what might be asked of you and what you can gather beforehand.
Is your credit history in good standing?
First the lender will look at your credit. Anytime you are looking into financing the lender will want to look at your overall credit report. It is recommended that you request a copy of your own report so you know what the lender will see. This also gives you an opportunity to dispute any wrong reporting on your credit. The lender will not only evaluate you on the credit score that is reported but they will also review your open accounts and the payment history associated with those accounts. So it is in your best interest to pay any and all monthly debt obligations on time.
Your housing history
Next the lender will want you to verify your rental (housing history) typically for 12 months. You will be asked to provide 12 months canceled rent checks or obtain a verification of rent from the management company that you rent from. The lender is looking for a solid 12 months of on time payments. It is important to note that if you rent from an individual make sure you pay the rent with a check. This way you have a record of it. Cash payments are very hard to verify.
Employment and income
Thirdly they will look at your current employment and income figures. First they will ask you to provide a current pay stub and past 2 years of W-2s (2 years tax returns for self employed borrowers). From this they will verify your income and capacity to repay the loan. Then they will contact your current employer to verify you are still employed and ask for your start date. Every lender wants at least 2 years of consecutive verifiable employment in the same line of work. If you have had more than one job in the same field over the past 2 years you will need to supply both employers contact information. One exception lenders will make is for recent college graduates. If you were in school prior to your current job they will ask for a copy of your degree.
Do you have any financial assets?
Finally the lender will ask to verify your assets. They are looking for 2 types, funds to close and adequate reserves. Funds to close are exactly that money available to pay for the closing costs associated with the purchase transaction. Second the lender typically wants to verify that you have at least 2 months of your total monthly mortgage payments (principal, interest, tax and insurance or PITI) readily available. The lender will ask for this money to be sourced and seasoned for a minimum of 60 days, which means they will want to know that this is your money and you have had it for more than 2 months. One thing to pay attention to here is if you are given a gift from a family member you need to complete a gift letter, show the funds being deposited into your account and source the funds from the gift givers account.
Get ready to buy your new home
All of these areas could require a lot of work and documentation. But the earlier you know about what is need the better you can prepare. Remember that you are applying for a very large debt and the lender will want to verify all aspects of your financial situation prior to lending you the money. We recommend you talk to one of our trusted online lenders in order to find the best loan for your purchase.
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When you decide to purchase a home (or condo) for the first time there are a few aspects of your situation to which you should pay close attention. These are the areas that a lender will judge you on and ask for documentation. The more prepared you are to provide it the smoother the loan process will be. The four basic areas are credit, housing history, employment and assets. Let's look at what might be asked of you and what you can gather beforehand.
Is your credit history in good standing?
First the lender will look at your credit. Anytime you are looking into financing the lender will want to look at your overall credit report. It is recommended that you request a copy of your own report so you know what the lender will see. This also gives you an opportunity to dispute any wrong reporting on your credit. The lender will not only evaluate you on the credit score that is reported but they will also review your open accounts and the payment history associated with those accounts. So it is in your best interest to pay any and all monthly debt obligations on time.
Your housing history
Next the lender will want you to verify your rental (housing history) typically for 12 months. You will be asked to provide 12 months canceled rent checks or obtain a verification of rent from the management company that you rent from. The lender is looking for a solid 12 months of on time payments. It is important to note that if you rent from an individual make sure you pay the rent with a check. This way you have a record of it. Cash payments are very hard to verify.
Employment and income
Thirdly they will look at your current employment and income figures. First they will ask you to provide a current pay stub and past 2 years of W-2s (2 years tax returns for self employed borrowers). From this they will verify your income and capacity to repay the loan. Then they will contact your current employer to verify you are still employed and ask for your start date. Every lender wants at least 2 years of consecutive verifiable employment in the same line of work. If you have had more than one job in the same field over the past 2 years you will need to supply both employers contact information. One exception lenders will make is for recent college graduates. If you were in school prior to your current job they will ask for a copy of your degree.
Do you have any financial assets?
Finally the lender will ask to verify your assets. They are looking for 2 types, funds to close and adequate reserves. Funds to close are exactly that money available to pay for the closing costs associated with the purchase transaction. Second the lender typically wants to verify that you have at least 2 months of your total monthly mortgage payments (principal, interest, tax and insurance or PITI) readily available. The lender will ask for this money to be sourced and seasoned for a minimum of 60 days, which means they will want to know that this is your money and you have had it for more than 2 months. One thing to pay attention to here is if you are given a gift from a family member you need to complete a gift letter, show the funds being deposited into your account and source the funds from the gift givers account.
Get ready to buy your new home
All of these areas could require a lot of work and documentation. But the earlier you know about what is need the better you can prepare. Remember that you are applying for a very large debt and the lender will want to verify all aspects of your financial situation prior to lending you the money. We recommend you talk to one of our trusted online lenders in order to find the best loan for your purchase.