"What information do I need for a home loan?" is a common question that is asked at the beginning of the home purchase cycle. The first home I purchased, I made the mistake of looking for properties in my area without figuring out what I could afford. The first step I should have taken is figuring out my financial situation. I had to determine what loan amount I would qualify for and how that would play into my monthly payments.
You can approach any qualified lender in your area or online to apply for a loan pre-qualification, or loan pre-approval. Your potential lender will supply you with a list of information that is needed for a home loan. I collected the following information, although it was not all relevant for a pre-qualification. I knew I would need it down the line, so I figured I would only collect the information once.
The following documents were:
- 2 most recent tax returns
- 2 most recent pay stubs (an employee)
- 2 most recent bank statements (include all accounts)
- CPA letter and/or business license if self-employed stating 2 plus years employment
- 401k, IRA statements
- Stock account statement
- Other liquid assets
- Other sources of income that do not come from W2s
Other additional information you will need:
- A divorce decree
- Spousal support documentation
- Bankruptcy documents
A pre-qualification is subject to review of your final documentation, i.e. tax returns, verifiable income, and expenses. The pre-approval process actually gets your loan underwritten by your lender after they review the necessary financial records. It may seem like a lot of information at first, but your loan officer will help you throughout this process. A Pre-approved lender letter is a great negotiating tool for you. This will prove to the seller that you are fully qualified to purchase their home.
The items above are the same information you need for a home loan if you decide to go with an online banking company. Just remember that if you deal with a bank that is outside the area you plan to purchase in, you will be dealing with a lot of non-face time. This would include faxing, PDFing, emailing, and talking over the phone. If that does not sway your decision, you might find some good rates online.
There are other online tools that can assist your decision to purchase a home. These tools range from mortgage choosers, borrow calculators and my favorite a basic repayment calculator. Simply type in your search engine "mortgage tools."