Many people make the mistake of assuming that the loan approval process for buying a home starts when they find a home they want to buy and then go an apply for the purchase loan, or mortgage from a lender. In fact, the process begins far ahead of filling out the actual application.
The first step is for a buyer to realistically look at his finances and determine if he has a practical ability to a buy a home. Has a sufficient down payment been saved up? In an ideal situation a buyer should have 20 percent of the purchase value of a home ready to apply to the deal, but at a minimum he should at least have 5 percent saved in cash.
Second, an applicant’s paperwork has to be in order and ready to go. The lender needs to see a variety of document to confirm an applicant’s income level, current assets, down payment amount, and debt payment history. While the credit report is provided by credit reporting agencies with a name and social security number, the rest of the material comes from the borrower. So recent paycheck stubs, bank statements, brokerage statements if assets are investments, a deposit check to hold a sale, and confirmation of employment should be collected, copied and ready to provide with an application.
For those who are self-employed the paperwork requirement can be difficult, especially when many lenders want to see earnings from a traditional employer. As a result, an applicant should have copies of tax returns from at least the last three tax years showing a consistent ability to earn a specific level of income from one’s work. It also helps to show business accounts and financial statements to confirm the solvency of one’s company or employment and its success ability going forward.
Finally, the actual loan application completely filled and provided to a lender with all required documentation should be finished, copied and submitted to a lender to initiate the loan review. In most cases there will be a meeting with a loan officer after the submission to review the file and obtain the additional documents discussed above. Borrowers with everything ready to go often do far better in the loan approval process than those missing documents and then making excuses. Nobody likes to be delayed, and missing documents make the situation awkward as well as raise concerns about a borrower’s seriousness. All of the problems are preventable with good paperwork preparation.
Again, the home loan approval process begins well before the formal application. So to receive the fastest loan approval review, early and complete preparation is a minimum requirement.