Get prepared to apply for a mortgage

You're looking for your perfect home. But before you get more serious with your search, experts say the first step is to get approved for a mortgage. By doing so, you'll get a clearer picture of your actual budget, knowing what amount you've been approved for, and be able to move quickly once you do find that perfect house.

Start by filling out a mortgage application and use our checklist to gather the documentation typically needed by a lender to process it. This includes pay stubs, income tax returns and residency history, says Andy Hedges, Area Manager for MTH Mortgage, the preferred affiliated lender of Meritage Homes.

“Because it can take time to gather what you need, it’s best to begin collecting those documents sooner than later to help speed up the approval and homebuying process,” says Hedges. He divides those necessary items to have ready into five categories. 

Personal

Lenders will look for personal information, so be prepared to have:

Identification
The last two years of your residency history 

If you own a property, you will likely need to provide documentation of the current, outstanding liability for any mortgage associated with the property, which is typically a mortgage statement. If you’re renting, have your landlord’s contact information available so the lender can verify questions about your residency. “A lender wants to look back at least two years to get a picture of what you’ve been doing in that time period,” says Hedges. “There’s a stability aspect to it, including whether your mortgage or rent was paid on time.”

Employment and Income

Because employment is a major factor in qualifying for a home loan, lenders pay close attention to how long someone has been employed. Specifically, they look at the duration of employment, as this indicates financial stability. It’s also important to note that some lenders may call your previous place of employment to verify the information you provided. They’ll typically review:

Employers’ addresses and contact information
W-2 forms from the past two years
Pay stubs from the last 30 days
Income tax returns from the last two to three years
Documentation for any child support or alimony you receive
Statements for your retirement and Social Security income (if applicable)
Year-to-date profit and loss statement (if self-employed)

If you’re self-employed, you will be asked to provide the last two years of your tax returns, both personal and business, with all of your schedules to determine the qualifying income that’s going to be used on the application. “Seeing your employment gives the lender a more comfortable feeling that you’ll have income in the future to pay your mortgage,” says Hedges.

Credit Liability

Your credit report gets accessed by lenders, and most liabilities will be listed on that report such as credit card debt and auto loans. Some items may not show up on the report, so it’s still important to have documentation handy just in case.

Collect all your student loan statements because typically those payments don’t show up on your credit report
Have any outstanding mortgage statements ready as well as documents and information on property tax and homeowner’s insurance 
If you’re paying child support or alimony, you may need to verify it with the divorce decree

Assets

When it comes to paying your down payment, lenders will want to know where the money will be coming from. That’s why you’ll need to provide:

60 days’ worth of your checking and savings account information 
Any money you have in reserves, such as a 401(k) or IRA
A signed gift letter if you’re receiving money from a family member or friend to close on the house. You may have to provide a bank statement to verify that those funds are available as well. 

“These statements help show that you’ll have money left over after closing, which gives the lender more confidence in their ability to lend and strengthens your loan application,” says Hedges. 


Declarations

On your mortgage application, you’ll have to answer a series of questions called declarations. This includes the confirmation of your citizenship: Are you a U.S. citizen, a permanent resident or a non-permanent resident? In addition to these questions, you may have to provide some residency documentation to prove your status as well as your Social Security card (if applicable). 

Are you wondering where to start when it comes to gathering your documents? “Don’t feel overwhelmed,” says Hedges. “Today in the digital world, all that information is out there already. We have a very robust digital system where we can pull a lot of the details we need to verify things like your income or employment.” However, collecting all your documents before you even begin the mortgage process will help avoid any confusion or surprises.

"MTH Mortgage has made things a lot simpler for you, especially if you're a first-time homebuyer, including an application process with tools built to simplify the process," says Hedges. These tools allow you to pull important information, such as your credit score. Still, it is best to have all of your documents gathered ahead of time because the more organized you are, the better chance you have of being approved for the home you want. Once you've filled out your application, you should also check with your lender to determine what additional documents, if any, may be needed. 

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