Sadly, not everyone qualifies for a home mortgage loan. Whether it be from poor or no credit, lack of W-2 income, or for any multitude of reasons. Sometimes it could be because of a full credit check from trying to get a loan from different banks.
The good news is that purchasing a property on terms from a private owner could get you around some of the red tape the big banks have. This does not mean that everyone will qualify, but sometimes the details paint a picture that tells a different story of a borrowers credit worthiness.
Listed below is a list of all the qualifiers needed for a mortgage loan.
1. Personal Identification
The lender will want to make sure they’re lending to the right person – and not someone pretending to be you – so a valid form of identification will be required. It must be government-issued and have a photo. Acceptable forms of ID include a state-issued driver’s license or ID card, passport or U.S. alien registration card.
2. Social Security Card
Your Social Security card is another form of identification that may be requested by your lender. It adds another verification of your identity and helps match your Social Security number with your picture ID to further confirm it’s you who’s getting the loan. You’ll also need to supply your Social Security number to run a credit check.
3. Pay Stubs
Your most recent pay stubs help verify your monthly income and show proof of employment, that you have a stable job. If you’re paid with a physical check, you should have the actual stub, which can be copied and sent to the lender. If you’re paid through direct deposit, your company should have electronic copies of your stubs. You may also be able to request electronic copies from your bank.
4. Bank Statements
Bank statements are required for obtaining preapproval because they help verify your income and show that you can afford your down payment. These statements may also uncover any red flags, like bounced checks, insufficient funds, unstable income, payments to another account and large deposits from unknown sources.
You’ll likely be asked for checking and saving account statements for each bank you use for the last 2 – 3 months.
5. Tax Documents
Certain tax documents, including your two most recent W-2 forms, are also among the documents needed for mortgage preapproval. These documents are another way to verify your income and show how much was taken out for tax purposes. You’ll likely be asked to provide W-2s for the last 2 years from current and past employers within that time frame.
Most lenders will look at the consistency of work history. 18 months with one company always looks better than 3 months at six different companies.
While you should keep a copy of your tax returns and W-2s, if you don’t have a copy, you may be able to request tax transcripts and copies of your tax returns from the IRS. If you used a tax preparer or tax software to file your taxes, they may also have copies.
6. Investment Account Statements
Savings and checking accounts aren’t the only places people keep their money – and your job may not be your only source of income. Lenders want to see all of your income and assets and, therefore, will also need to review your investment account statements.
These types of accounts include your 401(k), 403(b), IRAs, stocks, bonds and mutual funds.
7. List Of Monthly Debts
Your debt-to-income ratio (DTI) helps lenders decide whether or not you’re able to take on more debt. It shows how much money you have going out versus what you have coming in. There are maximum DTIs for mortgage approval. If your DTI is above that maximum, you may not be able to qualify.
Your lender will ask for a list of your fixed debts, which are those that are regular, recurring and have a minimum required payment. These debts may include:
Rent or mortgage
Homeowners association fees (HOAs)
Monthly, variable expenses aren’t included in your DTI (Debt to Income). These may include expenses that change monthly, like utilities, groceries, entertainment and transportation expenses.
When providing your list of debts, include your creditor’s name and contact information, your total balance due and the required minimum monthly payment.
8. Rental Information And Landlord Reference
Lenders want to be assured you’ll make your monthly mortgage payments on time. If you’re a renter, you’ll likely be required to show that you’ve made on-time rent payments in the past. You may also be required to include the names and contact information for the landlords you’ve had in the past. This will help the lender verify that you’ve upheld your financial responsibilities as a tenant.
How far back you’ll need to show payments or landlord information may depend on your lender.
9. Gift Letters
If a loved one gifts you with money to use as a down payment, a gift letter will be required to prove the money is not a personal loan that needs to be paid back. If it was a personal loan, it would add to your DTI and possibly make it more difficult for you to pay back your loan.
Certain loans have rules on who you can receive gift money from. For example, conventional loans only allow gifts from family members. FHA loans also allow gifts from employers, labor unions and first-time home buyer programs, in addition to gifts from most family members.
A typical gift letter will include:
The donor’s name, contact information and relation to the recipient
The recipient’s name and contact information
The gift amount and date the gift was or will be received
How the recipient will use the gift money
Confirmation that the gift doesn’t need to be repaid
Signatures of the donor and recipient.
To find out if you could qualify, click the download link below to get our Prequalification form. Fill it out and send it to William@bohemianpropertiesllc.com and once reviewed, we will schedule a 1 on 1 with you to discuss options.
Bohemian Properties LLC will never pull a full credit check without consent and will never share any of the information obtained to anyone outside of our company.