Finding the home of your dreams is one of the most exciting time periods in a person’s life. However, getting approved for a mortgage can be frustrating and disappointing. There are some things that potential home buyers can do to prepare their financial life for the mortgage application process. One of these is ensuring that all of your assets are accurate and easy to document. Preparing these assets at least three or more months in advance of a mortgage application will greatly increase your odds of being approved.
Mortgage lenders want to ensure that you have the ability to continue paying on the home loan, not just qualify for it. For this reason, they typically ask for at least two months of your checking and savings account statements. Lenders are looking for regular, consistent deposits to these accounts, rather than a large deposit just prior to your loan application. Large deposits can mean that you were given the money from a friend or family member. For this reason, don’t change accounts that you deposit your regular paycheck into just prior to applying for a loan. Similarly, if you need to transfer a large down payment amount from another account, do so three months in advance or be prepared to explain the large deposit.
Your income is considered a type of asset since it is how you will be able to continue paying your loan. For this reason, lenders require income verification from your employer. Thus, mortgage applicants should avoid changing jobs just prior to applying for a mortgage. In fact, if you have worked with an employer for less than one year, lenders will typically ask for your previous employer’s contact information as well.
Those who are self-employed may have a harder time documenting their income, which is where tax returns come in. Be prepared to submit the last two to three years of tax returns showing your income. In addition, some lenders require that you present a letter from a CPA that verifies your income.
There are other assets that can be considered when applying for a mortgage. If you possess any of these, make sure that you have all of the titles or paperwork so that you can prove you own them. If you are using property, you must be the sole owner or be applying for a mortgage with the other owner, such as your spouse. Here are some of the assets that can be included on a mortgage application:
- Stocks, bonds and retirement accounts
- Life insurance policies
- Personal property such as vehicles, boats, antiques or jewelry
- Other real estate
While taking care of these financial issues prior to applying for a loan is important, it’s just as important after the application as well. Most lenders will re-evaluate your application just prior to closing. So don’t make any major transfers or change direct deposits until you close on the home and have the keys in your hand. If you need more help getting the right financing in place, contact the professionals at Luxury Mortgage.