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New Home Financing ChecklistSubmitted by Townsend Asset Management Corp. on March 7th, 2019
While to many owning a home is part of the American dream, not everyone is able to purchase a home when they desire. If you’re fresh out of school with a boatload of student debt, it’s probably best to wait until you’ve been working for at least a year before you start looking to buy. You’ll also want to make sure that your credit score is where it should be, since the higher your score, the lower your interest rate will be. It’s also important to pull a copy of your credit report prior to contacting any mortgage companies and examining it in detail to ensure that everything is correct. If you do find an error, dispute it with the credit bureau immediately and keep the documentation.
In addition, obtaining a pre-qualifying letter from your mortgage company will make it much easier to negotiate with sellers or builders when you do find the right home.
You will also have to think about a down payment. If you are a veteran, you may be eligible for a VA loan, which doesn’t have a down payment requirement. FHA loans only require a 3.5 percent down payment, but conventional mortgages typically ask for at least a 10 percent down payment. Don’t forget that even without a large down payment needed, you’ll still have to pay closing costs, which can vary widely.
If you’re ready to take the next step and apply for a mortgage, here are some of the things that you’ll need:
- A year of bank statements. While this is much easier today with the advent of electronic banking, you’ll still want to make sure that you can quickly and easily access a complete year of statements. If not, you’ll have to request them from your banking institution. If you’re still having statements mailed to you, this won’t be a problem.
- Up to a year of employment pay stubs. While most mortgage companies only require the last three months of pay stubs, there are some that require more, particularly if you have changed jobs recently. These will have to be updated as the closing date arrives, so if you’re having a home built, you’ll likely have to provide this information twice.
- A written explanation for any unusual items that are currently on your credit report. It can help you immensely to access a copy of your report ahead of time (as mentioned above) and prepare a written explanation for anything that is not straightforward, such as collection accounts, past bankruptcies, or any judgments that have been entered against you in the last seven years. You may also have to provide an explanation or documentation if there are several names listed on your credit report.
- Tax returns for the last two years.
- A balance sheet or other documentation if you own or operate your own small business.
Being prepared will go a long way to making the mortgage application process a smooth one.
This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2014-2019 Advisor Websites.