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Financing

Getting your ducks in a row makes all the difference,
but it's the step that puts many people into "freeze" mode

Time and time again I talk to folks who are thinking about buying a home, and the main thing stopping them is an assumption that they can't afford it. The second most common thing is a feeling of overwhelm about how to go about determining their budget. 

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Would you try to book a vacation or buy a car without knowing your account balance? I wouldn't suggest it! 

 

House shopping without knowing what you can afford is the same thing, and getting pre-qualified for a home loan (ie determining your budget) is a must.

Coffee and Laptop in Bed

Sources of Financing & Pre-Approvals

Apps & Websites

Apps/online pre-approval sources will give you a good idea of what you will be approved for, however will not service the loan themselves.  This type of pre-approval can often be done on the spot, requiring less gathering of documents and a faster turnaround than other options.  Due to the less in-depth discovery process, results will not be as detailed as a more thorough pre-approval.

Banks & Credit Unions

Traditional banks & credit unions will be able to tell you what you are pre-approved for based on documentation you provide them, or your history with the bank. Each bank has lending products they offer in-house. Some people prefer this option when they have a long-standing relationship with their bank or enjoy the convenience of doing everything in one place. You are not limited to any one institution though, and are free to meet with a variety of banks to compare rates. 

Mortgage Bankers & Brokers

Acting as a financial connector for you, Mortgage Brokers and Mortgage Bankers gather your information, speak to a variety of lenders and come back to you with a variety of loan sources with a variety of terms. They are paid by the lender, only when a loan is procured, so this service is done at no additional cost to you. These lenders can work within both conforming and non-conforming loan structures and offer the maximum amount of flexibility. 

Steps to Take

Step 2

Collect your documents

These are the items that your loan officer will likely ask you for. Depending on your scenario the requirements could be different, so discuss with your loan officer directly:

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  • Valid Photo ID(s)

  • Permission to pull a credit report

  • 2 most recent years filed federal tax returns

  • 2 most recent years W2s

  • 30 days most recent paystubs

  • If you receive bonus, commission, overtime, restricted stock units, etc – they will likely want to see your year-end paystubs from the 2 most recent years

  • If you are self-employed you could be required to send in:

    • Profit and loss statements for year-to-date, and prior year-end if taxes haven’t been filed

    • 2 most recent years filed federal business tax returns

    • 2 most recent years K-1s, when applicable

  • If you are retired, retirement income will need to be sourced with documents (Social Security award letters, Pension award letters, monthly statements for retirement income, 2 most recent years 1099s etc.)

  • 2 most recent month bank statements for any assets being used for down payment, closing costs, and reserves (if statements are quarterly, one quarterly statement should be acceptable).

  • If you own any other real estate they will require:

    • Most recent mortgage statement, and/or line of credit statement

    • Proof of insurance, including current annual premium

    • Most recent tax bill

    • Proof of HOA dues

  • If the property will be held in the name of a trust, they will request details from the trust agreement. Have that readily available.

Step 1

Choose your Source

You, your realtor and your loan officer/mortgage broker will collaborate and work as a team, so it's incredibly important that your lender and realtor connect early in the process, get acquainted, and discuss best practices & workflow in order to best serve you.

 

Building a great team can make the entire process go more smoothly, so connect your team early on!

 

If you're not sure where to start, most realtors can offer suggestions of reliable people they've worked with in the past, you're not alone!

Step 3

Start home shopping! 

How long does a pre-approval last? Typically, documents submitted are good for 90 -120 days, however it's usually a good idea to update your bank statements and paystubs right before submitting an offer. If the initial round of documents start to expire, you can update your file by sending in new documents to your loan officer. Your pre-approval can be kept active until you are in contract and close on a home, no matter how long this takes.

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