Buying a home is often the largest purchase we might ever make, and we usually need to take out a mortgage to pay for it. Unless you are paying cash, the first step to homeownership is mortgage qualification. And, while mortgage qualification used to be a daunting task, today’s technology has simplified the process.
The mortgage qualification steps are the same, whether you are applying for a conventional, VA, or FHA mortgage.
Start Your Mortgage Qualification with a Phone Call
You can get a good idea of what you qualify for just by calling a lender and giving some preliminary figures, including monthly income, monthly debt payments, and assets. You can also read my article about how to estimate your mortgage qualification amount with the Rule of 43.
When you’re ready to write offers, you should complete a formal application with your lender. This includes submitting documentation and approving a credit check. You lender will send your mortgage qualification letter, to submit with your offer.
Email technology has made submitting documentation much easier than before. Some lenders can give you full mortgage pre-approval within 24 hours.
Don’t know whom to call? Read my article about Mortgage Lenders.
Get Your Paperwork (or PDFs) Together
Copying and faxing are no longer necessary. Going paperless is quick and usually free! To get started, the most time-consuming part is finding and scanning the paperwork. You may need to also find items online. To keep things organized, save them into a separate “Loan Application” folder.
After that, the rest is as quick as sending an e-mail.
For most people who do not own businesses and/or property, the list of documents is short. For example, you will need last two years of federal tax returns, the last two years of W-2s from your employer, the last two months of checking and savings account statements, and the most recent investment account statement.
Nick Richardson, senior loan officer at EZ Fundings in San Diego, provides the following comprehensive list:
If you are employed and paid hourly or have a salary, here’s a list of what to send:
- Past 2 years of Federal Tax Returns, with All Schedules
- Past 2 years of W-2s
- 2 Most Recent Paystubs
- 2 Most Recent Account Statements (Checking / Savings)
- Most Recent Account Statement (Investment / Retirement)
If you own more than 25% of a business, you will also need to provide 2 years of Corporate Tax Returns (1120s).
If you own any property, you will also need to provide the following:
- Current Mortgage Statement
- Property Tax Statement
- Homeowner’s Insurance Binder (one page summary with annual premium)
- HOA Statement
It’s a good idea to keep these documents saved to .pdf files in a separate “Loan Application” folder. It’s easy to send a collection of files to more than one lender, if you wish to shop around for rates and other terms.
Tips on Preparing to Qualify for Mortgage Qualification
- The most important strategy is to save money. You might think the best answer would be to pay off debt. On the other hand, paying off debt might use up needed funds. Your loan officer can determine if paying off debt is necessary. If it is, you can usually make payments during escrow.
- Also, make sure you do not have any late payments on your credit report.
- Finally, you might have a couple of months before you plan to buy your home. If so, be sure deposit any cash into your checking or savings account. The money will then be ‘seasoned,’ and therefore can be used toward your purchase.
Read my article about the different types of mortgage lenders out there.
In addition, to help budget your home purchase, read about the cost to buy a home and the cost to own a home.
Send me any questions or comments. Good luck with your home purchase!
I couldn’t have written this article without the expert advice of Nick Richardson:
Nick Richardson is a mortgage banker with EZ Fundings in San Diego, California, NMLS #966361. He can help you finance or refinance properties located in California. Nick can answer all of your questions about mortgage programs, with no hassle, no obligation. Contact him at 760-402-6962 or e-mail nick@ezfundings.com.
