If you’ve decided to buy a home, it’s good to know what you need for an efficient start. A mortgage lender requires specific paperwork to verify how much you can borrow. They peek into every aspect of your financial life, including your income, assets, debts and more.
Here is a basic checklist of documents you should gather before sitting down with a mortgage lender, along with some mortgage terms you should know.
- Recent paycheck stubs.
- Most recent federal tax return, and possibly tax returns from the prior two returns.
- W-2 forms from the previous two years.
- Profit and loss statements or 1099 forms, if you are self-employed.
- A complete list of your debts and your minimum monthly payments and balances.
- List of your assets, including bank statements, car titles, real estate titles, mutual fund statements, brokerage statements and records of any of your other investments or assets.
- Canceled checks, possibly up to a year for your rent or mortgage payments.
Your debt-to-income ratio is rather important. This means your total amount of debt, including credit cards, other mortgages, car and student loans and medical debt, per month divided by your total monthly income. A low debt-to-income ratio guarantees you are a safe bet for the lender. An ideal number is below 35 percent with 25 percent being a good goal. Obviously, 0 percent is perfect. However, that is unrealistic for most households. So if you make $4,000 a month and your debt is $1,300 a month, your debt-to-income ratio is about 33 percent.
Proof of Ability to Pay
The lender may ask for 12 months of canceled rent checks if you don’t own the home you live in or bank statements for your mortgage to show it was paid on time.
The lender will check your credit report so if there are any discrepancies or late payments you should call those companies and see if they will remove them or write a letter to your lender if you otherwise have paid on time. At this time, it’s best not to close any accounts as that can affect your credit report with the lender. Scour your credit report and get it as clean as possible before sitting down with a lender.
If you’ve recently received income that was a gift, you’ll need proof that the unexplained funds are not a loan. The lender will require a letter from the person or company that gifted or granted you the money. It is possible the lender may ask for bank statements if the gift was provided by a family member or friend.
If child support is included as income, you’ll need to bring proof of the child’s age and possibly a divorce decree if applicable.
It might seem daunting, but it’s a relatively simple exchange. If you have forgotten anything, the lender will request more documentation, in which case you should provide it to them promptly. Be prepared to provide updated documentation, such as recent pay stubs, as you move along the home-buying process. With all your paperwork in order, the faster you’ll be approved for a loan and get to move into your new home!
Moving long distance can be a difficult task, particularly if you’re moving for work and don’t have a lot of time to make plans. However, with a few simple tips, you can make it a much easier, and stress-free process. Let’s review them and get you started on your way.
The first thing you’ll need to do is research your new area. Through just the use of the web, you can look at available homes, find out more about the city, learn what the cost of living is, figure out commutes, and more. You can also find sites where you can email questions to the city government and businesses in the area to learn more about the local scene.
Know What Your Deal Breakers Are
Everyone has deal breakers when looking for a home; whether that’s a newer home with updated appliances, need great schools for your kids, or need to be close to work, some things must absolutely be present before you put a down payment on a home.
Make a list of what you need and then check out Walk Score, a site that’s built to give you information on the neighborhood you’ve chosen. It gives you information about transportation, crime statistics, and school district grades. It’s a great resource if you’re moving cross-country, or even to a neighboring state.
Use a Local Broker
National real estate agencies are great, but when moving long-distance, use a trusted and respected local broker. They’re in the best position to know what neighborhoods meet your criteria, can give you advice about places in the city you haven’t thought about, and more.
Try researching some agents online, then talk to them on the phone before you decide on who to use for your home search. You might also find a broker who is experienced with long-distance house hunting, which is a bonus when you aren’t close to the area to which you’re moving.
Spend a Few Days in the Area
If you can take a few days to visit the city you’re relocating to, take it. This trip will help you get a feel for the area and give you a chance to look at some homes and apartments that you’ve already found online. Most real estate publications will tell you that physically walking through a home will give you a better idea of any issues or problems that may arise and gives you the chance to speak with the homeowner or realtor about the area.
Double Check The Papers
Once you’ve found a home you like, double check the lease or deed before signing, preferably sending it to a lawyer before you add your name. Because you’re signing a lease before moving out, you’ll need to make sure your paperwork is to avoid any delays to moving in after you make the long-distance journey.
Find a Short-Term Sublet
If you’ve tried the above tips and you’re still not sure about what you’re looking for in your new home, or you haven’t found the perfect home, try searching for a short-term sublet. This will allow you to get settled in your new city while you continue your search. Many sublets are available for one to three months, giving you ample time to find your new home.
Getting Moved In
Even if you’ve found the perfect home, you may not be able to move in immediately. Often, it takes a month or longer to close on a house, but you may not be able to wait that long to move out of your current residence. During the downtime, explore options for hiring a national moving and storage company like Great Guys (greatguysmoving.com), Atlas Van Lines, or Gentle Giant. These companies have a great reputation when it comes to helping with the logistics of a tricky interstate move. Plus, all of them offer short-term storage solutions that make it convenient while you wait for move-in day.
Taking on the challenge of a long-distance move isn’t for everyone, but it is for you. Doing your research and double checking your choices is a great way to avoid problems later. Now get ready for your out of state move with the tips discussed above.
Buying property involves a lot more than finding the ideal house and making the payment. While most people will need a mortgage, the terminology will probably seem completely foreign to many. To help you master the most commonly used terms so that you’re confident as you start looking at homes or meet the lender, here’s a mortgage vocabulary cheat sheet.
Adjustable Rate Mortgage (ARM)
You’ll pay interest on the mortgage you get. For as long as it is active, the interest of an adjustable rate mortgage (ARM) will change based on market rates, with the period of adjustment depending on the type. While an ARM can sometimes save you money, it might not be the best choice if you intend to live in the property for a long time because you cannot predict whether the interest rate will rise or fall.
Fixed Rate Mortgage
This type of mortgage is the exact opposite of an ARM because the interest remains the same throughout. If your 30-year fixed rate mortgage has an interest rate of five percent, the rate will stay as is throughout the loan’s life.
Annual Percentage Rate (APR)
Aside from being a significant mortgage-related term to understand, APR involves much more than the interest rate. An annual percentage rate is the total cost of the mortgage, which includes the interest rate and any other payable fees. As such, you can compare different mortgage offers using the APR.
Also known as a settlement agent, this is the person who represents the buyer. Closing agents are responsible for handling the closing as well as the legal transfer of ownership and title from seller to buyer.
In simple terms, closing costs are the fees paid to get a mortgage and acquire the desired property. Closing costs usually include the loan’s origination fee, attorney fees, taxes, and title insurance. Though closing costs affect both the buyer and seller, you probably won’t know the exact figure until you finalize the loan. Even so, your lender is required to provide a good-faith estimate.
Good Faith Estimate
This is an estimate of the amount due when you finalize your mortgage. It is also a requirement of the Real Estate Settlement Procedures Act (RESPA). Your lender must give you this estimate less than three days after taking your loan application. Though the form is standardized to allow the comparison of costs, it’s is still an estimate and the actual amount might be different.
This is the process of paying off a debt in regular installments over a specified period, which would be the case if you were to pay your mortgage off with a fixed repayment schedule.
Your property will act as collateral if you take out a mortgage, giving your lender the right to claim the house if you stop making payments. Even so, collateral helps both sides. Because you risk losing the house if you fail to pay the mortgage, it encourages you to make the payments as required and gives the lender some sense of security.