Before purchasing a home, most buyers will need to qualify for a mortgage. In order to be approved, a buyer will need to prove to a lender that they are capable of paying the mortgage payments and household expenses as well as having a responsible financial history. Lenders do this by collecting documentation to support the borrower’s application information.
Supporting Your Employment and Income
A lender wants to know that you are steadily employed and have a steady stream of income to pay your monthly payments. The lender will want to see W-2s from the previous two years as well as pay stubs for previous months. A self-employed borrower is considered a higher risk and must submit K-1s and tax returns for the business for review.
Proof of Identity
In these days of fraud and identity theft, a lender will want to feel confident that you are who you say you are. They will ask for a state-issued identification such as a driver’s license, proof of residency if you are not a citizen and proof of military service if you are applying for a VA loan.
Other Financial Records
Your lender wants to understand how you conduct your financial affairs and will want to see bank statements. They may also ask for
- Rent payment history from your landlord if you have previously rented a house or apartment. This will prove to the lender that you pay your rent on time.
- Proof of cash reserves and savings. Having cash reserves is important to a lender. This ensures that you will be able to make your mortgage payment if your financial situation changes.
- Alimony and child support income. If you receive or pay any alimony or child support, your lender will want to see this documentation and see that you are making these payments in a responsible and timely way.
- Gift letter. If parents or family members are helping with money to purchase the home, the lender will want a gift letter stating who the money is from, what your relationship is, the amount of money given and the date it was given.
Current Debts and Credit Score
Your lender will want to see what current obligations you have and how well you have paid them in the past. Your lender wants to be as confident as possible that you will be able to pay not only your monthly housing payments but all your current debts. This is called your debt-to-income ratio.
Your credit score also tells the lender what kind of borrower you are and how responsibly you have paid your debts in the past. Lower ratios and a good credit score may be instrumental in allowing you to be approved for better loan products at lower interest rates.
Getting Prequalified
It’s advantageous to get prequalified for a mortgage in Columbus before you even go home shopping. A mortgage prequalification gives you a good picture of your financial health and lets you and potential sellers know what you can afford to buy. It also allows you time to make repairs to your credit and financial information before applying for a mortgage. At Liberty Capital, we offer a no-cost mortgage prequalification. Call us at (614) 505-0620 to speak to one of our professional mortgage brokers. We can help you find the right fit for a mortgage in Columbus or anywhere in Ohio.
