How Do I Get a Home Loan Quote?
Getting a Home Loan Quote
You’ve been saving money for awhile and working on your credit, and you’re pretty sure you’re ready to buy a house. But how do you get the ball rolling? Don’t you need a home loan quote or something?
Although getting started with a mortgage is both stressful and filled with paperwork you never knew you’d need, it’s not impossible. Let’s walk through what’s required for a home loan quote, otherwise known as a mortgage pre-qualification.
Pre-Qualification Versus Pre-Approval
These two terms are thrown around a lot, and often confused. A pre-qualification is an initial estimate of what size of mortgage you can probably qualify for, assuming the information you provide is accurate. There is usually a soft credit pull performed in order for the lender to get an idea of your credit rating. The pre-qualification is like a tentative commitment, assuming your info checks out for the lender. It will give you an idea of what you can afford, but it’s only an estimate, so don’t get too married to that number.
A mortgage pre-approval is what you get when you formally apply for a loan. You’ll have to bring a lot of paperwork as proof of the information you’re claiming on the application form. When your pre-approval is complete, you’ll know exactly how much the bank will loan you and what it will cost, Having a pre-approval before you go house hunting can put you in a much better position to compete with other buyers in a multi-offer situation, but it also means you’re kind of stuck with the lender that you’re going to go through the process with.
Gather the Necessary Documents
Ultimately, you’ll need some papers as you move through your home-buying process. For most buyers, the most necessary paperwork includes:
Proof of Income
Your lender wants to see that you’re employed or at least have some form of steady income that you can rely on more or less indefinitely. That means that if you’re a wage employee, you should bring your two most recent pay stubs along with your W-2s for the last two years. Anyone paid on a 1099 should bring two years of those along with a profit and loss statement for the last year to their meeting with the bank. Both should bring two years of federal income tax forms.
Borrowers with other types of income need to bring documentation of that income, but you may need specific guidance on what paperwork will work best, depending on what type of income it is.
Proof of Assets
It’s helpful to have savings and investment accounts when you’re applying for a mortgage, but you’ll need to document them before they can do you any good. Provide 60 days of bank statements for all of your accounts (unless you’re applying through the same bank that holds those accounts, they can often pull those statements for you). Don’t forget two months worth of statements from your retirement accounts, investments, and CDs. Your 401(k) statement should show your vested interest in dollars.
List of Debts
Often, lenders will pull a list of debts from your credit file, with your permission. However, if you’re trying to establish credit by using non-traditional credit sources like utility bills, you’ll need to provide your lender with contact information or letters of credit. Technically, you should tell them about the $5k you borrowed from your friend Kevin to take care of that thing in Mexico, but if there’s no paper trail or regular payment due, it’s very hard to prove that loan was ever made.
Other Vital Records
There are a couple of miscellaneous bits of paper certain classes of buyers will need to bring along. If you’re divorced, bring a divorce decree that shows the final division of assets and debts, along with any child support or alimony that you pay or receive.
Renters will want to provide contact information for landlords for the last two years, plus proof of payments for the last 12 months. If you’re getting a downpayment gift, a gift letter signed by a close family member is required.
Getting a home loan can be stressful, it’ll make you get resourceful when it comes to creating paper trails for every nickel that goes into or comes out of your accounts and will probably turn your hair a little gray, but you’ll also be free to purchase the home of your dreams. Just remember that these requirements can change between lenders or programs, so be prepared for a call in the middle of the day asking for more documents or a DNA swab at random.