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You’re excited to buy your first home! You begin frantically checking Zillow, Utah Real Estate, and other online resources every day until you find the perfect home!!! This is what you have been waiting for, and now you assume you are ready to buy!
Stop right there. While many new home buyers believe finding the right home might be the perfect “first step” to buying their dream home, in reality it is about 3rd on the list (:
Before you find that home, you will want to have first a competent and licensed realtor as your advocate in the home buying process, and second you need to get connected with a licensed and qualified lender. A lender will tell you how much home you can actually fall in love with to purchase. They hold the purse strings to your future purchase.
A lender looks at buyers like a 3-Legged Stool. They want to make sure you are a solid borrower by verifying three key components of your financial history and financial tendencies.
Credit History and Pay History (Past)
Job stability / employment (Future)
How much money down (equity position) (Present)
Below is a list of common questions a buyer might ask …
What is the difference between a pre-approval and a pre-qualification?
A pre-qualification includes a lender getting your name, social security number and they will qualify you for a purchase based on what you tell the lender your income, debt, and credit averages are at.
A pre-approval is much more robust than a pre-qualification. It includes the lender actually pulling documentation that validates income and debt, running a credit report, and providing the buyer and real estate agent with a desktop underwriting approval. This is huge to have when working to go under contract on a home. A seller can know more confidently that the buyer is capable to complete the purchase of their home.
What is the difference between using a mortgage broker and a bank?
Bank lends out of their own funds
Examples of banks: Washington Federal, Wells Fargo, US Bank
Really good at lot loans, equity lines of credit, construction loans
Broker mediates that risk, sells loan off
Examples of brokers: Primary Residential, Veritas, Academy
Easier to deal with and the experts at financing traditional home purchases
What does a lender need to see for my employment history?
For commission jobs they need to see 2 full years of tax returns.
A lender will want to see that you have steady employment. They want to know you have been at the same job for 2 years, or a pay stub if you have made job changes in the same career.
You need to make at least $18,000 (this is the minimum amount required to file and report taxes)
List of things to take in (give) to your lender
A lender can pre-qualify you within minutes if you have the correct documentation. To help you streamline the process, here are the docs a lender will need for your application.
Loan application
Borrower Signature
Employment/Source of Income
W-2s for past 2-yrs
One month of pay stubs
4. Self-Employed Borrower
Balance sheet and year-to-date profit and loss
Two years of signed tax returns with all attachments (individual, corporate and partnership)
5. Source of Funds
Last two months bank statements for all checking and savings accounts