Getting approved for a mortgage can be a stressful experience especially if you are a first time home buyer, but I have laid out some tips to follow that will hopefully make it quick and painless. Below are the MOST important factors when trying to get approved for a mortgage loan in Charleston SC or anywhere in the United States. Remember MOST agents will not show homes to you, pull up data, and research for you until you have applied for a mortgage (if you need one) to prove you can actually close the purchase.
I have over 13 years in the mortgage industry so I know what I am talking about. in 2002 I founded Mortgage Professionals, LLC, a wholesale mortgage company. My firm was comprised of 13 associate team members, assistants and processors alike. I had two offices, one in Mount Pleasant and one as the preferred lender as the in-house mortgage company for Exit Realty of Summerville. Our company, although no longer doing business closed almost $85 Million in loans in both purchases, refinances, and home equity lines.
1.) Your Credit History
Your credit score is one of the most essential elements of the home mortgage approval procedure. By ascertaining the credit category you are in, the bank will be able to estimate the risk associated with lending to you. By having a great credit history you will be approved faster and smoother than those with intermediate to mediocre credit scores. So I strongly encourage you to take action and clean up your credit if you want to make certain to get your loan agreement. Those buyers with negative credit scores are often denied, or are asked to get a co-signer to obtain the loan. Still confused about credit? CLICK HERE
2.) Your Job and Earnings Stability
You may wonder what your job has to do with getting approved for a home mortgage to buy your dream home. Your mortgage payments depend on the income so banks can calculate a debt to income ratio which will be affected by your job. Unstable job may lead to the loan being denied – as the bank will often
be unable to attest that the repayments will be made on a monthly basis. Those buyers that have been at their place of employment for an long time period and that have career security will often have home mortgage approval based on this information put together with their credit score. If you are self employed or commission based you have to have been at the career for a minimum of 2 years NO exceptions. You will want to avoid changing jobs in the middle of the loan approval process because it will likely result in a declined loan when the lender verifies your job. More or less if a lender thinks you are one to jump from job to job then you will be perceived as a larger risk than someone who remains at the same place of employment longer periods.
3.) Your First Deposit
You will need to have something to show not only the seller you are serious, but also the lender. Most sellers will require some sort of earnest money deposit, but you will also need to put a down payment on the home as well at closing. For example, with an FHA loan you are required to put down a minimum of 3.5% of the purchase price. Do you have sufficient funds to pay the amount required for the first deposit on the home? Depending on the bank, there are stipulations which can guarantee home mortgage approval if at least 50% of the first deposit is applied toward the purchase of the home. In all probabilities, you will be asked to provide information on where this first deposit comes from, and how long the funds have been in that account. Whether that money comes from savings accounts, IRA, equity from selling another home, or from family members (known as gift funds) or be ready to give exact information about it. You may be required to provide a quarter history for these accounts to make certain that this money is indeed legitimate. There are two types of loans that don’t require much if any money down: 1 – VA Loans for qualifying veterans, and USDA loans if you meet the criteria for them.
4.) Your Net Worth
Those customers with a higher net worth (net financial position) are generally easier approved for a home mortgage than those with a poor net worth. Thus, the steps taken to get a home mortgage, are greatly facilitated when the applicant demonstrates a higher net worth. The more money you can show in liquidity the better. Fannie Mae and Freddie Mac approvals require you retain at least 2 months reserves after you have closed.
Never forget that from a higher net worth to the amount of your first deposit, the points are carefully studied when you ask for such a large amount of money. Therefore; it is important that you make certain to do your homework and put together the needed information that will lead to the home mortgage approval from the lender. So SAVE, SAVE, SAVE.
Paperwork Needed To Get a Mortgage Loan:
- Two most recent 30 days paystubs – Copies of pay check
- Two MOST recent bank statements, IRAs, basically any and ALL liquid assets. EVERY page!
- Proof of where the down payment is coming from IF not from an account listed above in #2 . Verification of Deposit (VOD)
- Proof of insurance and who your agent/carrier is and their contact
- Contact information of your employer, human resources dept., boss etc to provide a verification of employment (VOE)
- Last 2 years W2s or 1040 returns, for each person on the loan documents.
If you’d like expert advice from a real estate agent that can help you understand all the aspects of home financing please feel free to contact me.