First-time home buyers often start by going to open houses or looking online for a place that will accommodate the size of their family, location appropriate, or other issues. Actually, the first place to start is with a mortgage application.
Pre-qualification: Unlocking Your Buying Power and Streamlining the Home-Buying Process
Becoming pre-qualified means you know how much you can afford to spend on this new place. It is also a valuable tool when you find a house you want to make your home. The seller knows that if you are pre-approved, much of the paperwork has already been completed, and you will be able to buy. It can reduce the amount of time, and sellers are often willing to negotiate prices or terms because the final deal will be expedited by your preliminary work.
When you begin speaking with a lender, you should be able to offer the basic information they will ask for. Sometimes they ask for supplemental or additional documentation, but here are the basics.
- Income – They want to be sure you are gainfully employed. That means you will need to produce pay stubs, W-2 statements and tax returns for probably the previous two years. If you have any additional sources of income like bonuses, alimony, or passive income, you will need to provide that information as well.
- Assets – This will include savings accounts and investment information. This is to assure the lender that you will have enough money for the down payment, closing costs, and incidentals that come with buying property as well as ongoing expenses like homeowner’s insurance, utilities, and standard living expenses.
- Credit – Lenders will look at your credit scores and reports. The better your numbers, the lower your interest rate. Good credit scores indicate that you are responsible with money matters and pay debts promptly.
- Employment – Okay. You already provided pay stubs, but the lender will go one more step and call your employer to confirm. For those individuals who are self employed, they will need to come up with additional paperwork to show the stability of the business and projected assignments.
- Personal Information – This will include a copy of your driver’s license and social security number so that the lending company can access your credit statements. You will also be required to sign releases and authorizations so that the company can verify that they need this information.
When all of this is complete, the company will either pre-approve, pre-approve with conditions, or deny. A reputable lender will work with the applicants providing suggestions about reducing current debt to meet requirements or helping to clear up errors in credit reports. A pre-approved loan will provide the amount a lender is willing to risk on your investment. It will also indicate the maximum amount they will offer and all the details about interest rates, payments, property taxes, etc.
Empowering Your House Hunting Journey
This will give you the bare bones information you need to start house hunting. Each situation will be a bit different and it is a good idea to discuss your intentions with a good mortgage broker like easyhouseloan.ca. They have professionals on hand who can answer your questions and help you with the process. It is well worth your time to contact them.