We get MANY questions on this site, many of them start like this – “We want to buy a house, but honestly don’t know where to start.” We focus much of our time, and our business, on First Time Home Buyers. We believe that when you are buying a home for the first time, you really need someone who can answer your questions… as opposed to just answering questions from the Rocket Mortgage Computer. The Rocket Mortgage Computer model doesn’t allow you to talk to someone who can also ASK YOU the right questions!
For instance, if you are a school teacher, do you get paid on a 10 month contract or a 12 month contract? I know that seems pretty silly – but it makes a BIG difference when we are trying to help you buy a house for the first time! This is an exciting time, but it can also be kind of scary, because like every other FIRST thing you’ve done – you don’t know what you don’t know.
We know that Millennials are having some trouble in parts of the country getting their offer accepted. Our first time home buyers are not meeting the same problems – because in part, we take the time to educate folks. Let’s take a look at a few key steps that will help you prepare for the “scavenger hunt” for information we are going to ask for, as part of the mortgage process.
Square Up With The Government
The first place you’ll want to start is making sure that you are fully caught up on any income or other taxes. We need 2 years of tax returns for the Underwriters, and if you are behind on government payments it will be a significant red flag. You can obtain a copy of your transcripts from the IRS website. If you owe them money, set up a payment plan. After you’ve made 6 months of payments, we can get you approved, and we add that payment with the other ones to calculate your ratios.
Let Us Check Your Credit Scores
Please go ahead and let us check your credit We don’t charge you for the check, there’s no obligation. But your credit score for a mortgage is different from the score you will get from My FICO. And don’t buy into any Urban Myth that says disputing all of your credit will get you a better score – it won’t. Let us, as seasoned professionals, look at it – and give you a game plan! We work with people who have a year or more of work to do to be able to buy a house. We want to close loans next year just as much as we do this year, so let’s go ahead and see what needs to be done
Get Your Down Payment Saved Up
You’ll also want to have your down payment amount saved and ready for use. We need to know how much of your savings you’re contributing to the overall purchase price and closing costs. Because we focus on First Time Home Buyers, most of our clients are using one of the no down payment mortgage options, and mortgage no repayment loans) that we offer. READ: You DO NOT need 20% for a down payment when you are buying a home for the first time!
If you are receiving a gift for your down payment or closing costs, there are a few steps we need to document. If you receive the gift funds in October (for instance) and you are not purchasing the home until January – then the money will have “seasoned” in your account, and very little documentation is required… but let’s say that you are getting the money pretty close to the time of loan approval, then we have a TON of documentation to do.
Most mortgage programs require 2 months of bank statements these days. That means all pages of the bank statement, not just the first page showing the balance. If you receive the money now, in October, then your October statement will show the large deposit, and raise questions. Your November and December statements will start with the larger balance, and those funds will be assumed to be your own.
Regardless, the gift from your family should really be a gift in either case, and not a loan pretending to be a gift.
Figure Out Your Closing Costs
Depending on what Program you apply for, and whether you can get the Seller to pay part of your Closing Costs – you could need $1500 to buy a house, or your closing costs could be $5000 or more. For instance, if you are getting a FHA Loan with a Down Payment Assistance of 5%, then you will have 1.5% for Closing Costs left after your 3.5% down payment. If the Seller will pay $3000 in Closing Costs, you are likely to need $1500. If the Seller pays $1000 in closing costs, then you will need more like $4500…
This is one of the reasons we suggest talking to us early in the process when you are buying a home for the first time!
Have All Your Paperwork Ready
The more complete your documentation, the more prepared and organized you are – the quicker and easier the process! Recent W-2s and tax returns, pay stubs and financial asset information is a good place to start. If you’ve been divorced, had a bump in your financial position, or are paying student loans, there are additional documentation we will need.
If you buy a home that is going to be built, then we will need to get updated information from you again, about 30 days prior to closing. We are always gong to pull another credit check about 72 hours before closing, as well. So don’t buy a refrigerator, don’t quit your job, don’t transfer large sums of money from a 401k at the last-minute! All of these things need to match the documentation we presented to get your loan approved!
What Paperwork Will I Need?
Depending on the level of your motivation, I might ask for less paperwork if you are in the very beginning of the process and only curious about what you might need to save, or pay, to buy your dream home in the future.
The minimal documentation is actually about 90% of what is needed to get you an automated underwriting approval. An automated underwriting approval is what the seller of your dream home will want us to run, when you make your offer.
Minimum Documentation List – Quick and to the Point
- Last 30 days pay stubs for all borrowers
- Last 2 years w2 statement for all borrowers
- Last 2 years tax returns, all schedules
Additional Documentation – Verbal of balances ok to start
- Last 60 days bank statements covering funds to close
- 401k documentation if taking out loan against retirement
Complete Documentation List for Most – Will eventually be needed
- Current Driver’s License for all borrowers
- Social Security Card for all borrowers
Getting Pre-Approved When You are Buying a Home for the First Time
How do you know if you’re really pre-approved? What if the Loan Officer you are talking to makes a mistake? What if something changes by the time you find your dream home? These are important questions. These are great questions.
Getting approved to borrow hundreds of thousands of dollars it is not a quick, or automated, process if you want it to be accurate. Working directly with an experienced loan officer is the only way you can truly be confident that your loan pre-approval is accurate.
Let’s play devil’s advocate for a moment. How do you know if your “experienced” loan officer really knows what they are doing?
- Did you complete a loan application, or did your loan officer complete it with you over the phone?
- Did your loan officer review your credit report(s)?
- Did your loan officer review your pay stubs, bank statements, w2’s and/or tax returns?
If you answered “No” to any of these questions, then you may not be truly pre-approved. Getting pre-approved means that you complete a loan application, and have your credit, income and assets reviewed. Going back to the beginning – just answering some generic questions from Rocket Mortgage doesn’t mean it’s gong to work. I can’t tell you how many people contact us and say that they’ve been Pre-Approved from Rocket, but now they need a down payment.
Those 2 things go hand in hand. You can’t be pre-approved if you don’t have a down payment. That’s why we offer programs like USDA Home Loans where there is NO down payment required. We specialize in helping folks who are buying a home for the first time!
Any lender willing to send you out shopping for homes, and making offers without being fully pre-approved is putting your time and MONEY at risk!
We do not charge a processing fee for a pre-qualification, but some other lenders might. Be sure to ask.
How Long Will it Take?
A Loan Application is a relatively simple process. The Loan Application can be completed in 10-15 minutes if you are doing an online application. Plan probably on closer to an hour if you would like to do the application in person, or over the phone, so that you can ask all of the questions on your mind. Don’t be afraid to ask too many questions, there’s no such thing as too many questions!
Once all support documentation is submitted and credit permission is given, a pre-approval can be determined within 1-3 hours by a live person in perfect conditions, without prior appointments or distractions. IF you are calling us, PLEASE LEAVE A MESSAGE. Our Team gets more than 30 inquiries a day, so we are likely on the phone when you call. We WILL call you back!
Expect the process to be 48 hours for a PRE_Approval with an Underwriter (not just through the Automated System), following submission of all Support Documentation and completion of Loan Application. This is what we do for anyone who is self-employed, or had a financial hardship in the past, including bankruptcy, foreclosure, short sale, or deed in lieu of foreclosure. This way we KNOW it is going to work before you go out looking for your first home!
These are just a few of the tasks that you’ll complete on the path to securing your mortgage when you are buying a home for the first time. For more information on the mortgage process or to start your pre-approval, contact us today! Steve and Eleanor Thorne 919 649 5058. Connect with us on Facebook, or see our Reviews on Zillow!