First Time Home Buyer’s Guide To Getting Approved For A Mortgage
UPDATED On November 25th, 2018
Jumping into the Home Loan Process:
Before doing anything else it’s best to contact a licensed mortgage loan officer to get pre approved.
- Tell your mortgage consultant if you are ready to buy now or if you need time to get your affairs in order
- We will review 2 big things when you contact us
- First we evaluate your FICO score and historical payment data on each of your accounts
- Credit cards and retail store cards
- Auto loans
- Student loans
- Medical bills and collections
- FICO score is an important aspect of your approval
- We will help increase your credit score if it is too low
- We will help you with a plan to pay off high-balance accounts if your debt is too large
- We will advise you of any waiting periods relating to recent Foreclosure, Short Sale, or Bankruptcy
- After reviewing your credit profile and payment history we will review your income
- The Home Purchase and Mortgage Approval Process looks at the following income sources:
- W2 wages
- 1099 contractor earnings
- Tax return gross income
- Social security and disability income
- VA military income
- Pension earnings and investment income
- And more
What Kind Of Employment And Income Do You Need For A Mortgage
Having full-time salaried wages is the quickest way to get qualified but there are other types of income and employment that also qualify.
- If you are a W2 wage earner we can rely on your current base pay and ignore previous earnings if you’ve been on your current job for at least 30 days
- If you are a 1099 contractor or self-employed business owner then we need to use your average income over the previous 2 tax filing years
- When filling out an application you will be required to document a 2-year employment history.
- College, trade school, and other education may count toward this
- If you are not employed but you do have income then we can consider child support, social security, military benefits, and pension benefits as qualifying income.
Certified And Eligible Closing Funds For Home Purchase Process
It is very important to make sure you have legitimate closing funds that are properly sourced and documented.
- Avoid taking out personal loans and depositing them into your checking or savings account
- Don’t deposit cash or “mattress money” before you close
- If you need assistance ask a blood family member to write you a gift check and provide a gift letter with it
- You may be allowed to withdraw from your 401k without penalty if you are a first time home buyer
- You may need funds to cover your down payment, closing costs, and payment reserves
- The average amount of closing costs ranges from $5,000 to $8,000
- It is important to work with an experienced realtor who can help you negotiate seller concessions which will cover some or all of your closing costs
- Don’t buy furniture or spend your money until after you close on the home and complete the home purchase and mortgage process
Get Pre-Approved And Start The Home Mortgage Loan And Purchase Process
Give us a call to get an official pre approval letter so you can begin shopping for homes with your real estate agent.
- While you are shopping for homes, make sure you send us your personal documents before you get under contract so we can verify your pre approval. The underwriter will need to review documents like:
- Pay stubs
- Checking and savings account statements
- Driver’s license
- Copy of social security card
- We may need to request an employment verification sheet from your employer if your compensation is based on commission, bonuses, block pay or other less common compensation methods.
- We will officially start moving ahead with the home purchase and mortgage process as soon as we have all of your personal documents and a signed purchase agreement for the home you’re buying
- You’ll need to sign disclosure documents and pay for an appraisal deposit so we can order the appraisal report to determine the new home’s value
- We will also order a title insurance report to make sure there are no liens, defects, or debts tied to the new house you are buying.
- The underwriter will review all of your income and asset documents along with the appraisal report and title commitment to determine a loan decision
- After the initial underwriting review you will need to provide a new home owner’s insurance policy and you may need to provide a few additional documents
- We will then submit the file back to underwriting for final approval. If the underwriter is satisfied with the file then we will be granted a Clear to Close
How Long Does Mortgage Approval Take?
90% of our purchase loan files close in 30 days or less. However, more difficult files and non-QM files like Bank Statement Mortgage Loans for Self Employed Business Owners may take 45 days to get approved.
- Employment verification issues may cause a delay
- Verifying and documenting assets for Cash to Close may delay the process
- Resolving a title issue could also cause a delay in the closing of your home mortgage loan
- Getting more comparable properties may be needed to support the home’s value and this can take some time
- If any repairs are needed per the appraisal report then additional delay could happen