What Factors Are Looked At When Applying For A Mortgage?
Before you shop for your new home, prepare to qualify for a mortgage loan. Preparing will help eliminate confusion while ensuring that the process goes as smoothly as possible.
These are six factors reviewed during mortgage approval process.
1. Residence History
Documentation for the past two years of residency should include your landlord’s or current mortgage company's name, address, and phone number. You may also be asked to provide twelve months of canceled rent checks if the landlord is a private individual.
2. Employment History
The past two years of employment history should include the employer's name, address, phone number, and the dates of employment. Any notable unemployment periods during those two years may have an adverse effect on your approval.
Show proof of income by providing the most recent pay stubs for the past 30 days as well as your W-2's from the previous two years. Overtime and bonuses may not be considered as part of your income if your employer does not guarantee this income.
Also, if you have any business expenses listed on your tax returns, they will likely be deducted from your income.
4. Bank Accounts
Be prepared to show bank statements for the past two months and explain any large deposits into your bank account. Retirement accounts are also important in the application decision since the reserves or assets in the account can influence your mortgage approval.
5. Credit History
Review your credit report before applying for a home loan to verify the information on it. The areas to look over on your credit report include:
- Authorized user accounts
- Cosigned loans
- Any inaccuracies
You'll also want to check that your credit score is adequate for the loan type you are applying for
6. Tax Returns
Have on hand your tax return for the previous two years. Your tax returns will be reviewed for any deductions that may affect your qualification including deductions for part-time employment, self-employment, rental income or loss, annuity income, or any consistent income.
There may be different guidelines for loan approval regarding past bankruptcies, foreclosures, and short sales depending on which loan program you're applying for.
Car repossessions, judgments, liens, collections, late payments, and credit inquiries can also have an impact on qualifying for a mortgage --as do auto loans, student loans, installment loans, credit cards, child support, and alimony.
Gather all the documentation needed before applying for a loan as missing documents can cause delays.
Let's review the basic documents you'll need:
- Most recent 30 days’ pay stubs
- Most recent two months' bank statements
- Previous two years of federal tax returns and W-2s
- Past two years of residence history
- Past two years employment history or any periods of unemployment
- Separation, divorce, and child support paperwork
- Bankruptcy (if occurred in the past seven years)
- For the self-employed, you may need your last two years of business returns
- Depending on the loan you're applying for, other documents may be required
Having these essential documents reduces frustration and delays, as does a trusted mortgage professional.
Call our office today, and we'll show you how efficient and stress-free securing a mortgage can be.