What’s the First Step When Buying a House
The first step you should take when looking to buy a house is to determine how much house you can afford.
There’s nothing worse than starting to look at houses online, falling in love with a few of them, then finding out that they are outside your budget. It may be a highly disheartening position to be in..
How do you determine how much you can afford?
You have to apply for a mortgage and go through the motgage pre-qualification process, Once the pre-qual is completed and you are happy with the results, you will move forward with a pre-approval.
The best time to get pre-approved is before you start loooking at houses.
Why is pre-approval so crucial?
There are two primary reasons for this:
- It gives you an accurate idea of how much house you can afford
2. It puts you in a better position to make an offer when you find the right home. Some real estate agents won’t accept an offer from you without a copy of your pre-approval letter.
The pre-approval process can be stressful and intimidating. But you must get it done as soon as possible.
Common Documents Needed for a Pre-Approval
Unlike an auto loan, a mortgage requires lots of documents to verify your financial health. The process is super simple.
First, you’ll need to fill out the mortgage application. Once that is completed, you’ll provide the loan officer with the following paperwork:
- W-2 forms from the past two years
- Pay stubs from the past 30 days
- Two most recent bank statements
- Personal tax returns from the past 2 years
- Business tax returns for the past 2 years, if you are self-employed.
- IDs to verify who you are. Acceptable forms of ID are Driver’s license, Social Security card, passport, or state/federal issued ID card.
Depending on your situation, you may be required to provide additional information:
Rent history: If you have a low credit score, you’ll need to show rent payments from the past 12 months, VA loans require rent payments for the past 24 months. Not everyone needs to provide this, just borrowers who have low credit profiles.
Divorce decree or child support: If you are using alimony or child support payments to qualify for a loan, you’ll need to provide a copy of your divorce decree and/or court order for the child support.
Bankruptcy and foreclosure: If you have a bankruptcy or a foreclosure on your record, you’ll need to provide a copy of your bankruptcy documentation and for a foreclosure, the property address that was foreclosed on will be needed.
Large deposits: If your bank statements show that you have deposits other than payroll, you’ll need to explain where the deposits came from and copies of the checks that were deposited.
Lenders need to verify that random deposits into your bank account are legal, and not a loan or other debt obligation that can have an effect on your debt ratio.
This is not a complete list. Each applicant has a different situation so the documents you need to provide could vary. Once an application is completed, you’ll be notified of whats needed by your loan officer.
How long does it take to get pre-approved?
It can take anywhere from 48hrs to 72hrs to get pre-approved for a mortgage loan.
The process is generally quicker if you have all of your financial documentation in order and readily available.
Your assigned loan officer will also be able to give you a more accurate timeline once they have all of your information.
Note: Each lender is different and has different requirerments. With Coole Home it only takes 48-72 hrs to get pre-approved. Other lenders may take longer.
What credit score do I need to buy a house?
The credit score requirements vary by lender.
Here are our requirements:
Conventional loans have a minimum credit score of 620.
Whats the last step when buying a house? Closing on a house!
More info that may interest you:
- How to buy a home for the first time
- What is an FHA loan?
- What are the down payment requirements for a Conventional Loan?
- Are property taxes included in the mortgage?
- Property Taxes
- What are the 4 c’s of credit?
- What is an appraisal contingency?
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- The Real Reason Underwriters Deny Loans – What You Need to Know
- Stretch Your Home Buying Budget with a 40-Year Mortgage
- Save Money on Your Mortgage with a No Closing Cost Option
- Co-Borrowers on a Mortgage: Everything You Need to Know
- Maximize Your Home Buying Budget: Lender Credits 101