Create a checklist to keep you organized when you buy your first home.
If you are shopping for a new home, you will probably need to get a mortgage loan. If you do, the seller will most likely need a "pre-approval letter" from you before accepting an offer. They want to make sure they don't take their house off the market for a buyer who cannot qualify for a loan.
You will need to get some basic paperwork together. It is a good idea to put this together now, so that you're prepared. That way the pre-approval process can be fast.
Here are some of the documents, but not all, you will probably need:
• 12 months of canceled checks (if you've been renting with a private landlord).
• Three months of bank statements.
• Two years of W2 statements and your most recent pay stub (or tax returns if self-employed).
It is very important that you pay your rent by check each month and that you pay it on time. Lenders will look at this as an indicator of how you will handle your mortgage with them. If you're habitually late with your rent check, they can predict that you won't pay them on time either.
For example, a renter might have worked out an agreement with their landlord where they would skip their rent payment for two months and they would repair the faulty air conditioner. Although it makes sense on paper (it is an even trade) it will make getting a mortgage loan for this renter impossible.
Lenders will not accept explanations like this as anyone can make up any story to explain a late payment. You need to have 12 months of canceled checks, showing you have made your payments on time. Do not pay with cash, cashier's check, or any other form other than a personal check. Do not work out deals with the landlord to pay less one month in exchange for problems with the property.
Next you will need to provide three months of complete bank statements for your loan officer. If you don't have these, order them from your bank. It can take a couple weeks to arrive.
Lenders need these so that they can verify your assets. Different lenders have different requirements, but most want to see that you have had the down payment in your bank account for at least two months. They also will need for you to have additional funds for reserves.
If you have money in various accounts, you will need to provide three months of bank statements for each account. The loan officer will need to make copies of each page, front and back.
To prove your income, you will need two years of W2 statements and a month of pay stubs (if you get paid twice a month, you'd need the last two pay stubs). If you are self-employed, you will need two years of tax returns.
In addition be prepared to present one or two forms of valid photo ID. Your driver's license will probably be sufficient.
If you are prepared and can gather these documents ahead of time, you can save time in the pre-approval process. Fortunately the paperwork needed is pretty uniform from lender to lender so you can start putting it together now.
Begin rounding up the documents you'll need to get pre-approved. By Laura Sherman