Getting a house at such a young age is a huge accomplishment for most people. Unfortunately, not everyone qualifies to apply for a loan.
Although you might feel like you’re ready to become a homeowner, there are so many things that you need to think about before you can qualify for a mortgage. That’s because lending companies need a guarantee that they’ll get paid for the debt that you’ll owe before they can approve your application.
Knowing the steps in advance when it comes to a mortgage application is crucial so that you can start preparing your finances for such a huge responsibility that you’re about to take. But where do you start?
Preparing for mortgage application
By the time that you’re about to apply for a home loan, you should have already submitted the required documents for a home loan preapproval. At this point, experts say that you’ll be filling out a Uniform Residential Loan Application, which will contain your information, the property that you’re planning to purchase, your work history, as well as your financial health.
The mortgage preapproval application is an introduction about yourself and your capacity to pay the loan. Applying for one will increase the likelihood of getting approved. It will also dictate the mortgage rate that you’ll get in Tempe.
Verifying your income
When lending companies ask for your income, they’re trying to gauge your financial stability and capacity to pay on time.
The mortgage company will probably ask for your W-2 forms from your previous and current employers. If you don’t have copies on file, you can either ask the IRS for a duplicate or see if your employer still has it.
Another document that they’ll be requesting from you is your pay stubs. It will show them your most recent earnings for the past 30 days to assess your financial health. You can either download it and send it through email or print it. You can then submit it with other documents.
Lending companies will also ask for your ITRs for the past two to three years, too. You’ll need to provide a signed Form 4506-T so that the lending company will have the authority to get your tax transcript from the IRS.
Your debts and assets matter
Aside from your financial health, lenders will check your debts, too. This information is crucial so that they can compute your DTI ratio (debt-to-income ratio). Doing ensures that you have enough assets to be able to pay the down payment as well as the closing costs of the loan.
They’ll need to have your bank statements and your investment and retirement accounts if you have any. A few loan programs will let you use gift funds to pay the down payment, too.
These are only a few of the things that you need to prepare when applying for a loan. It’s best to get these things ready beforehand so that your loan application will be processed immediately. It will make the process much smoother. You will get a higher chance of approval, too.