So you’ve already found your dream home. You’re now excited to make your purchase. Before that, you need to find a lender that can provide you a mortgage loan. This process may be complex and overwhelming, but you can control how complicated the process is going to be for you. If you prepare thoroughly and have a basic idea of how it’s going to go, you’ll have a more seamless and quick transaction. Here’s what you need to apply for a home loan.
The most important factor that mortgage lenders look for in an applicant is a good credit standing. That means minimal or no outstanding debt and report blemishes. Blemishes are the negative items that might show up in your credit history. More often than not, potential lenders would need a written statement explaining these blemishes.
Looking at your credit report will enable the lender to see how capable you are to pay your future obligations to them. So before even thinking about applying for a home loan, you’ll want to boost your credit score first.
Lenders want to make sure you have enough to cover outstanding balances. Hence, they will want to look at your bank statements. You’ll want to have a few months’ worth of income in your bank account to make a good impression.
But be wary about putting huge amounts in at one transaction. Instead, deposit them in arrears over several months. This will prove to the lender that you have a stable source of income and regularly put money into your savings.
Proof of income
Mortgage loans are payable for a specified period. Some are payable within a few years, while others can last for decades. Hence, the lender will want to see that you have financial stability. Your proof of income, such as pay stubs, will help them gauge how much you’re earning monthly and whether it’s enough to sustain your lifestyle plus the mortgage loan.
To get more insights into your financial situation, lenders will typically ask to see your previous tax returns. Usually, they will go as far as two years ‘worth of documents, so make sure you have that ready and accessible.
If it’s your first time buying a home and you’ve spent the last years renting, a lender would ask for your renting history. Through this, they will see your credibility and ability to make payments on time. They’ll inspect previous checks that your landlord has cashed in or simply contact your former landlord and speak to them about your renting history.
To make sure you are who you say you are, lenders would need proof of identity. Generally, they would ask for two valid government-issued IDs, such as a passport or driver’s license.
It seems that applying for a mortgage loan will expose a lot of things about your past. But this background check is necessary for the lender to protect their interests as well. After all, they’re going to shell out money to pay for your home while you repay them in arrears. So it’s only natural for them to make sure that you won’t run away from your obligation.
As you can see, the mortgage loan process is extensive and requires a lot of documentation. If you want to make the process quicker and smoother for you, be ready with the required documents beforehand.