Like most people, you will probably wait to submit a home purchase contract before applying for a mortgage. By then, you will not only know the specific property you want, but also how much you need to borrow. At that point, the lender will ask you to complete a loan application and disclose specific information about your current and past financial situation.
The following checklist is a good place to start gathering the information you will need:
Original purchase contract (the loan officer will make a copy and return the original to you)
Copy of the canceled guarantee check (deposit)
Employment history details
W-2 forms for the past two years
Income tax returns for the last two years
Paycheck stubs for the last 30 days
Verification of secondary income (for example, investment accounts, bonuses, a part-time job, child support, or social security income)
Assets: account numbers, balances, and branch addresses
Verification
Savings
Stocks / bonds (current market values)
Debts: account numbers and addresses
Car loan (s)
Boat loan (s)
Student loans)
Credit card
Other
Explanation of any credit problems (for example, previously declared bankruptcy, excessive credit card debt)
Divorce or separation documents (if you receive or pay alimony or child support)
Landlord’s name and phone number (if renting)
Disposition of current home (if you already have a home, do you plan to sell or rent it?)
Person who will give the lender access to the lender’s appraiser (name and phone number)
Your check for appraisal fees, credit report and / or loan application (your lender will provide you with cost information)
Prequalification vs. Pre-approval If possible, it is best to start the loan approval process before finding your dream home. Otherwise, you may run into a roadblock when you apply for a mortgage and the application is denied. If the seller has other buyers waiting, or needs to sell quickly, they may lose the opportunity to acquire that particular property.
There are two ways to help avoid this scenario:
1.) Become Prequalified for a Loan: All you need to do is speak with a lender, who, based on asking you a few questions about your finances, will offer you an opinion on the loan amount you can borrow. The lender does not request any supporting paperwork to confirm what you say and may change your mind when you return to apply for a loan. There is no charge for prequalification.
2.) Get pre-approved for a loan – This process is more complex and sometimes involves a fee. The lender will want information about your employment, income, and debt to show that you are a good risk.
Obviously, a pre-approval letter from a lender carries more weight to a seller than a pre-qualification letter because it is proof of your purchasing power on paper. Having pre-approval gives you an edge when you are among multiple buyers looking for a property.
Pay off other loans.
If possible, consider paying off any high-interest loans before applying for a mortgage. The more debt, such as auto loans or credit card balances, that appear on your mortgage application, the lower the loan amount the lender will be willing to offer.
Don’t pull on a Pinocchio!
Never inflate your income or lie about dates of employment. Not only is it illegal to falsify documents, it is also a federal crime! And lenders can usually catch people who are lying or grossly exaggerating the information on their applications. If you lie, you most likely get what you were trying to avoid all along, a denial of your loan.