If you’re new to the home buying process, and even if it’s not your first time, it’s natural to have some questions. Instead of wondering and worrying about it, here are some of the most frequently asked questions along with the answers.
Is it possible to apply for a mortgage before locating a property to buy?
Yes, it is and more, it is recommended. When you apply for your mortgage before you find the property, you will be issued a prequalification letter. This letter can be used to reassure sellers, as well as real estate agents, that you are a serious and qualified buyer. It also helps you determine the price range you need to stay within. Yet another advantage of this is that when you find a property and make an offer, since you have already taken out your loan, this will add more weight to your offer.
How does a lender decide what is necessary to process a mortgage loan?
Most lenders will use an underwriting system that allows them to request various documents to support the information you provided on the loan application. At a minimum, you will need to provide tax forms from the last year as well as a pay stub to verify both the source of your income and your actual income. You may be required to provide bank statements or other documentation at the lender’s request.
Will bonuses, commissions or overtime be a factor when my application is evaluated?
If your bonus, commission, or overtime is going to be factored into the evaluation, then it must be something you have an established history of receiving, and it must also show that it will be ongoing. To verify this type of income, the lender will usually request copies of your tax forms from the last two years, as well as a current pay stub.
Is income from a second job considered?
If you can verify that you have had this second job for more than a year, then it can be considered.
What must be provided for income verification for people in Social Security or a retirement program?
If any of these situations apply to you, you’ll want to be prepared to provide copies of your most recent pension check stubs. You may even be asked to submit your bank statement if your income is direct deposited. Lenders sometimes ask for verification that this type of income will continue for a minimum of 3 years because some pension and retirement plans do not continue to provide beneficiaries with income throughout their lives. In cases like this, the award letter will suffice. If you did not retain your award letter, the lender can easily verify this by contacting the payer of this proceeds.
These are some of the most frequently asked questions about mortgages. Once you’ve answered your questions, you can make an informed decision and find the right home loan for you and be prepared to meet the lender’s needs.