Before you begin shopping for a home (or a mortgage), it’s vital to evaluate your personal financial situation, how much debt you carry, how much money you make, how much you spend, and how much you pay out in living and lifestyle expenses each month. To do a complete evaluation:
- Analyze your personal financial situation.
- Determine your maximum mortgage amount.
- Review your credit score.
- Gather and organize the information lenders will require.
Previously, we analyzed our finances, determined our maximum mortgage amount, and reviewed our credit score but today, we will focus on the fourth part of a typical mortgage lender’s evaluation:
Assemble and organize information for your lender
When you’re ready to get a mortgage, most of the time it doesn’t pay to wait around. Rates could rise or the home you’re eyeing could be taken off the market. To expedite the process of applying for a mortgage, have the following documentation and information on hand for your lender.
- Your current address and two prior addresses.
- If you’re renting, names and addresses and phone numbers of your current and previous landlords.
- Names and addresses of your current and previous employers going back 10 years.
- W–2s or 1099 forms and your federal tax returns for the previous two years.
- Unless you’re self-employed, two most recent pay stubs and contact information for your employer’s personnel or human resources department.
- Checking and savings account numbers, as well as contact information for your bank.
- Investment account statements from the past 2–3 months.
- Account information and statements for all major assets you own, such as the title to any cars, appraisals on real estate, businesses you may own, etc.
- If a friend or family member will be paying for a portion of your down payment, a signed gift letter in which the giver acknowledges the purpose of the gift.
- Written explanations for late payments or any other credit-related problems, such as previous legal judgments against you, liens, foreclosures, or bankruptcies.
- Your monthly budget worksheet (complete yours at http://www.thewisdomjournal.com/Blog/go/Budget_Worksheet.xls)
Not all lenders have the same documentation requirements so you may not need all these documents, but it pays to be prepared anyway.
So, are you ready for a mortgage?
Only you can answer that question … you and your lender. Taking on a mortgage is a serious responsibility, one that has a myriad of emotions connected to it. Make certain you know the positives and negatives of homeownership so you and your family can make the best informed decision for your future. And make sure to read 10 First Time Homebuyer Mistakes and then don’t make them!