I’m Ready to get PRE-APPROVED for a Home Loan, now what?
Now you interview lenders.
What is important in a lender?
Accessibility: If you have an issue or a question, can you just pick up the phone and call your local lender’s number or cell number? With many other out of town lenders, or internet lenders you have to call an 800 number and wait for the next representative that can help you? Personally, I want to work with someone who knows the area, knows the specific laws in my state and I can walk into their office if need be to discuss any issues that may arise during the loan process.
Knowledge: Did the loan officer answer all my questions in a way that I could understand? Did they know the answers or did they have to find out and get back to me? If they did have to get clarification, did they get back to me in a timely manner?
Product: What type of loan does this company offer that meets my financial Criteria? How does the “out of pocket” costs compare to that which another company I interview have to offer?
What is important to remember during the interview process is that you DO NOT allow your credit to be run until you determine exactly who you will be working with based upon the questions that are important to you. Now that you have interviewed and decided on a lender, it is their turn to “interview” you! The most commonly requested items are noted below:
Social Security Number for all borrowers listed on the mortgage loan. This information can be verified through a Social Security Card, tax documents or anything else you may have that has your social security number on it. The lender needs this to verify your identity, to request tax returns from the IRS, and also to pull your credit reports. Remember, only provide your social security number and allow your credit report to be pulled by the Lender you decide to work with.
Proof of Employment. Expect to provide a list of employers over the last two years (at a minimum). You will need to provide the employer’s name, mailing address and phone number. They will want to verify your employment history because it relates to your ability to repay the loan.
Proof of Income. This is needed to validate your income for pre-approval final loan approval and underwriting. The most common types of proof of income documents are two most recent pay stubs, or the electronic equivalent that shows your year to date earnings. Its your average annual income the lender wants to determine. The lender may also use tax records to verify your earnings.
Tax Documents. This is a standard document for mortgage pre-approval. Expect to provide your W-2 Statements and tax returns for the last two years. These documents show how much money you have earned in previous years. The lender may request tax return transcripts directly from the IRS.
Place of Residence. For pre-approval for final loan approval and underwriting purposes, the lender wants to know where you have lived for the last couple of years or longer.
Bank Account Information. At the time you apply for the mortgage, the lender is going to want to know the amount of your available cash in the bank. They need to ensure you have sufficient funds at that time for your closing costs, down payment and cash reserves (if applicable). They will probably ask you for account statements for all your accounts, including checking, savings, and or money market accounts. This is standard, nearly every lender will require this.
Credit Information. This will include any and all outstanding loans such as car loans, student loans, credit cards, etc. You may need to provide documents related to these accounts. This information will be used to measure your “debt to income” ratio, among other things.
Gift Letters. If you have a parent or family member that is going to help you to cover the down payment and/or closing costs, you will need to provide a “gift letter” to the lender. The lender will need to verify and prove that this is truly a gift, and that your relative does not expect any form of repayment.
Monthly Expenses. Lenders may ask for an itemized list of your monthly payments. This would include rent, credit card payments, student loans, etc. This will help them to evaluate your “debt-to-income” ratio and your ability to repay the debt.
Self- Employment Documents. If you own your own business, you may have to provide some additional documents during the pre-approval process. This might include balance sheets, Profit & Loss Statement, or Federal Tax statements for at least two years.
The items noted above are a generic list of documents that a lender may request for the pre-approval process. Depending on your situation or the type of loan you will be using, you may be asked to provide additional documentation that is not on this list. When you first meet with the lender, they will provide you a list of documents they require and this list may vary from one mortgage company to the next.