Before the Great Recession, buyers would easily qualify for a home mortgage. The regulations were not very strict, and lenders handed out loans to buyers without carefully vetting them. However, post-2008, several regulations were passed and required documentation to ensure that borrowers had the financial ability to repay the mortgage.

Documents Needed to Apply for A Home Loan

To qualify for a home mortgage, you need to provide the following list of documents.

How You Can Qualify for a Home Mortgage

Photo Identification:

A government-issued photo ID is essential when applying for a home loan as proof to confirm you are who you state you are.

Income Proof:

Lenders may check your debt-to-income ratio or DTI that compares your debt payment with your monthly income while approving your mortgage. The lenders follow this process to ensure that you have all the funds for bill and loan payments.

Several lenders also require that your housing costs should not exceed 28% of your pre-tax income. An income proof in the form of monthly pay stubs or W2 forms can help lenders evaluate your finances.

Tax Returns:

Sometimes paystubs may be insufficient to provide complete information about your financial situation. In such cases, the lender may want to check your past IRS tax returns and ask your permission to conduct this review.

Proof of Assets:

Lenders may also take your checking and savings balance and investments into account when reviewing your risk profile. This makes it important to have a good income as well as sufficient funds in your bank.

Credit Score and Credit Report:

Your ability to secure a loan also depends on your credit score. Your credit report is a complete breakdown of your borrowing history and provides information about your credit inquiries, collections, credit cards, and public records. Your credit score can be compiled based on the information present in your credit report. A good credit score can help you lock down a good mortgage rate.

Renters History:

First-time homeowners may additionally need to submit a renter’s history that includes details about their previous housing payments.

Gifts Documentation:

If your family or friends are supporting you in buying a new house and there is a sudden cash influx in your account, it could reflect as a loan to lenders and affect your ability to borrow a loan. Hence, if you are gifted money that you will use to purchase the house, try to obtain a gift letter from the door that clarifies no repayment expectations.

Apart from the documents listed above, most lenders require you to have a down payment amount ranging from 3.5% to 20% of the listed price.

Hiring a Good Mortgage Professional

If you are a new buyer or planning to purchase a second house, it is recommended to hire a mortgage professional like the ones at Rex Homes who can help you through the process.

A mortgage expert can help you evaluate your loan documents ahead of time and offer varied loan options at competitive rates. Besides, a good mortgage professional will answer all your queries and prepare you to buy your dream home.

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