Preparing for Requesting a Home Loan

By: Devora Witts

When you have decided to request a mortgage loan, refinance mortgage loan or home equity loan, you will do better if you get prepared for the application process by gathering all the information you will need to show to the lenders and by knowing what the lenders will be looking for in order to determine whether you are approved or not.

Loan Quotes And Pre-Approval

When you request a non obligation free loan quote from a lender you will have to provide them with your credit score, debt information and income level. With this information, the lenders will tailor some loan options that may suit your needs. This loan quotes do not create any obligation on either part. You do not have to request the loan nor does the lender have to approve it right away. If you decide to apply for the loan, there will be a more thorough investigation of your credit and debt situation.

Pre-Approval implies that you authorize the lender to pull your credit report, analyze your debt and income and make a more significant investigation on your financial situation in order to verify that the information you provided is true and that you are eligible for loan approval.

If you get pre-approved, chances are that the loan definite approval is just a matter of time. And the rest of the process will consist of only boring paperwork. Bear in mind though that you should only request a pre-approval process when you are certain you want to apply with that lender since too many credit report checks will affect your credit score negatively.

What The Lenders Are Looking For

Lenders will check that you have a steady income. If you are employed they will want to make sure that you have at least one year of stability with your current employer and that your salary is good enough to meet the minimum monthly payment possible. Usually the monthly payment cannot exceed 35% of your income since it is believed that the remaining percentage has to be available for other expenses including unexpected spending like medical bills, etc.

If you are not employed, you need to show proof of other steady income. Your tax and bank statements are usually the main sources of information in these cases. The statements have to show at least a minimum monthly steady income. This minimum will be taken into account when calculating the monthly payments you will be able to afford.

Lenders will also check your credit report, looking for stains in your credit history. The last years will be particularly important at this stage. There must be no late or missed payments of significant importance in the last two or three years. Past bankruptcies can be an obstacle unless occurred 8 years ago while your credit report shows impeccable performance in the following years.

As regards documentation and information you will basically need among others: sales contract, social security numbers, names, addresses, proof of income (tax statements, bank statements, wages documentation), all data on bank accounts (savings, checking, etc.), other investments statements. You can always contact the lender and ask whether any additional documentation is needed.

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