As someone who just closed on his first home, I can tell you the mortgage process was among the most stressful I have ever encountered.
I was fortunate to come across an incredibly helpful lending professional about halfway through, after my original lender proved to be a poor communicator and more interested in getting me to sign on to a bad rate than helping me understand the process.
That brings me to my best advice for first-time home buyers: Find a real estate agent and a lending partner with whom you feel comfortable. Having an all-star realtor and switching to an all-star lending professional made the process much more bearable for me.
Applying for the home loan itself can be a daunting process, especially as you gather numerous documents to prove your good standing to an underwriter.
To help potential buyers, I reached out to that all-star lending professional I mentioned — Christina Wheeler-Wellman of Caliber Home Loans — to discuss what buyers need to have ready and how they can expedite the process.
Wheeler-Wellman has spent 23 years in the real estate and financial industry and now works as a sales manager and military lending professional.
Your Mortgage Loan Documents Checklist
Before you can officially receive a loan, your lending professional will send your information to underwriting.
This means you can be pre-approved for a set amount, but until you have satisfied all requirements and send your info to underwriting, nothing is set in stone.
Wheeler-Wellman told me the single most important thing a buyer can do to speed this process is send all the necessary documents to their lending professional after pre-approval, even before they have found a house.
Doing so allows the lending professional to act fast as soon as you make an offer on your dream home.
Lending institutions will require some or all of the following documents to verify income, assets and identity, according to Wheeler-Wellman:
Last two years of tax returns, W2s and 1099s (if self-employed)
30 days of paystubs
- Proof of additional sources of income, such as alimony or Social Security payments
Last 60 days of bank statements (all pages)
Retirement account statements
- Proof of other assets, such as a rental property
Copy of driver’s license
- Copy of Social Security card
Other Documents That May Be Required
When applying for my loan, I had to provide some additional documentation since I was moving out of state and because I had been divorced with a legal name change.
I asked Wheeler-Wellman what specific circumstances such as these may require additional documentation.
Relocating for a Job
Wheeler-Wellman explained that lenders will often require a letter from your employer if you are relocating due to your job.
The letter must indicate any salary/title changes. If you are going to work from home, the letter must indicate you are able to work from home in any state (or at least the state to which you are moving).
If you have been divorced, you will need to supply a copy of your divorce decree.
If you have had a legal name change (through marriage, divorce or other means), you will need to supply the marriage certificate or court documentation of that name change.
Veteran or Active Duty
If you are an active duty member of the U.S. military, you will need to provide a current statement of service signed by your commander, including your name, Social Security number, date of birth, entry date on active duty, duration of lost time and the name of the commander providing the information.
If you have been discharged, you may need to supply Member-4 of DD Form 214.
Bankruptcy or Foreclosure
“You may purchase a home as early as two years out of bankruptcy and three years out of a foreclosure,” Wheeler-Wellman explains. “There are special circumstances that may make someone eligible prior to that (e.g., health or death).”
If either applies to you, you will need to supply additional documentation:
Bankruptcy: You will need a letter explaining why you had to file and what has changed so it won’t happen again. If Chapter 7, you will need the full bankruptcy schedules and discharge; if Chapter 13 and you are still in repayment, you will need a court printout indicating a 12-month payment history and a letter from the courts stating they permit you to purchase a home.
- Foreclosure: You will need the county record showing when the property was transferred out of your name.
And Don’t Forget the Earnest Money
Earnest money, also referred to as good faith money, may come into play when you make an offer on a house.
A buyer may make a deposit to demonstrate their “good faith” to the seller in a transaction, Wheeler-Wellman explains. For example, as part of my contract with the seller, I offered $1,000 in earnest money.
When your application goes to underwriting, you may need proof that the check for the earnest money has cleared.
“A lender needs to verify where the earnest money came from in order for the buyer to get credited those funds back at closing,” explains Wheeler-Wellman.
To offer this proof, most lenders will require a copy of the check (front and back) and a bank statement that includes the date on which the earnest money cleared.
Tips for Getting Approved
Making sure you have all the right documentation is only half the battle in getting approved for a loan.
The other half is all about ensuring the data within those documents makes you attractive enough to a lender. If you aren’t sure about your credit history and current financial standing, you’ll want to consider if now is the right time to apply for a home loan.
Wheeler-Wellman told me that buyers are most attractive to lenders when they can prove at least two years of continuous employment, have good credit history (especially in the last 12 months) and have enough funds to reasonably afford the down payment.
If you are unable to meet those requirements, spend the next one to two years saving money, maintaining steady employment and using Codetic’s extensive advice on improving your credit score and saving money.
Timothy Moore is a brand new homeowner and probably in way over his head as he and his partner tackle renovations. If you see him looking stressed and holding a hammer upside-down, please offer him a beer.