When preparing to buy a home, there are a few items to tackle before you start shopping around such as getting pre-qualified with a lender. You can prepare a file of the following documents to aid in the pre-qualifying process.
- Pay stubs from the last 30 days for each applicant
- Bank account statement including savings for the last three to six months
- W2’s from current and former employers
- Tax return documents for the past two years
- Gift letter if using gift funds for a down payment
- Proof of any and all additional income
Lenders typically use this information and documents to verify your income. They are ensuring that you can financially afford the purchase.
Investment and asset information
- 401K statements
- Profit and loss statements
- Life insurance documents
- Mutual account information
Lenders request information on assets and investments to get a better idea of your financial security. They are wanting to see that your finances will still be stable even after a large home purchase.
- Credit card balances and total monthly payments
- Auto loan balances and monthly payments
- Other loan balances and monthly payment amounts including personal, secured, unsecured and student loans
- Bankruptcy paperwork if needed
- Divorce decree if applicable
Along with your income, your debt information is used to calculate your debt-to-income ratio. Lenders use this number to determine how much you can afford. Most lenders like to see a 40 percent DTI ration.
- Credit information
- Credit report
- Credit score
We also recommend checking your credit report and score. This single score will have an impact on the type of property you can purchase and what price you can afford. Although, the lender doesn’t require you to produce your own copy of your credit report, they will research and check your credit ratings from the three credit reporting agencies (Equifax, Experian and Trans Union). We would be happy to recommend knowledgeable and experienced lenders to help you with your purchasing needs.