Jim Sheridan | Burlington Real Estate, Billerica Real Estate, Reading Real Estate


Image by Precondo CA from Unsplash

Buying your first home can be stressful enough without worrying about whether or not your mortgage loan pre-approval is going to go through. You may not be prepared for the mountains of paperwork that you'll need to submit before a lender gives you the thumbs' up. That's why it's such a good idea to know the requirements before you narrow down your home search.

Here are the top items your mortgage broker or lender will need in order to pre-approve you for a loan.

1. Proof of Income

W2 employees will need paystubs, IRS 1040 forms, and copies of their W2 form for the last two years.

For self-employed individuals, and small business owners, the burden of proof is higher. In additon to 1099 MISC forms, you may need to submit a letter from your accountant stating that your business is still active and a profit and loss sheet. 

2. Asset Information

In addition to the regular taxable income you are bringing in, the lender will want to see proof of other assets, including savings, investment accounts, and written documentation of a family member's intent to gift you money.

These assets will let the lender know if you can afford a down payment, pay for the closing costs on the loan, and have enough cash reserves to afford the transition into homeownership.

3. Employment Verification

Lenders want to know not just that you are employed but also that you are stably employed. Thus, they request a letter from your employer to verify your employment status and the salary you're earning.

Self-employed individuals will need to submit at least two years of their complete 1040 forms in lieu of this verification process. 

4. Credit Information

Before they will pre-approve a loan, the lender makes a hard inquiry into your credit. You will need a credit score of at least 620 to qualify for a conventional mortgage loan or a Federal Housing Administration Loan with zero percent down. The government may approve borrowers for an FHA loan with a score between 580 and 620 if they are able to make a sizable down payment.

In order to qualify for the lowest interest rates available — typically the ones you see advertised — you must have a credit score of at least 760. In some cases, it is worthwhile to defer applying for pre-approval until you can raise your credit score. Why? A lower interest rate can save you tens of thousands of dollars over the life of the mortgage.

5. Personal Information

Finally, the lender will want to verify your identity by requesting copies of your driver's license, social security number, and signature.


Many people think of their first home as a “starter home.” This refers to a home that is fairly small and typically is for young people who are just starting out in a new phase of life. These types of homes are generally not thought of as “forever homes.” Many times, as families expand, they will move on from their starter homes to bigger and better homes. This includes living in desirable neighborhoods and adding extra comforts that the first home may not have had. Other times, people expand on their starter home in order to make more room for children and the needs of a growing family. These homes truly are jumping off points. Studies show that the idea of starter homes is disappearing. It could be that the requirements of first-time homebuyers are changing and therefore the types of homes that are being sought after are few and far between. The expectations of buyers have increased greatly. Buyers would like adequate space and hope that their first home is not only in a great location, but ready for them to move in without much work as well. Really, buyers are looking for everything anyone would want in their forever home in their starter homes. So, is it a smart idea to search for a starter home, only to move a few years later? The answer is multi-faceted. Starter homes are typically the homes that you can afford at the present time in your life. If you decide that you can save up longer and go for the house you really want, that may be a smarter financial decision for you. There’s always an option to wait for more homes to go on the market while you rent a place. If you do decide to go for a starter home, here’s some tips for you: Don’t Try To Get Everything You Want For A Low Price Buyers tend to have wish lists of the things they desire in a house. While that’s a great idea, don’t expect to get everything you want in your starter home. Manage your expectations along with the cost of the home. See Where You Can Expand Many homes have great potential, but buyers have what they see set in their minds and fail to see what can be done in the future. Look at homes with open eyes and picture the possibilities. Know There Will Be Work Involved Purchasing a starter home means that you’ll usually need to participate in home improvement projects. Don’t go for a home that needs major work done if you’re not up for the challenge. Typically, you’ll need to be able to get your hands dirty by doing things like changing out wallpaper, painting walls, or sanding cabinets. These are the little projects that make your house your own.

When you make the decision to buy your first home, you should be certain that you’re ready to make the leap into homeownership. There’s many different things that you should do as a buyer to get ready before you even set out on the search of a perfect home.


Choose An Agent


You may think that one real estate agent is the same as any real estate agent that you’ll find. This is far from the truth. Some agents have certain specialties. The knowledge that an agent will bring to your house hunt is often invaluable. You are making one of the biggest purchases that you’ll ever make in your lifetime. While many buyers think that they can simply do an online search themselves to find a home, your realtor will have many more resources to assist you in finding exactly what you’re looking for.


Figure Out The Financial Portion Of Buying A Home


While knowing how many bedrooms you need and where you hope to live is important, understanding your finances is even more important. You’ll need to talk to a lender to get the process started. After looking at your own personal budget, you should get pre-qualified. Getting pre-qualified allows you to see a general number of how much house you can afford. That can help you start the process, however, there’s still a few more steps. 


From here, you can do what needs to be done to get your entire financial picture ready to buy a home. This includes saving for a downpayment, improving your credit score, and continuing to keep up bill payments and consistent work history. 


Next, you’ll want to get pre-approved. This allows your lender to dig into your financial picture. Everything from your credit score to your income and employment history will be considered. Your lender will then give you a more definitive number of how much you’ll actually be able to get for a loan when you buy a home. To get pre-approved, be prepared with 1099 forms, pay stubs, tax returns, and bank statements. You’ll then have the concrete amount that you’re approved for along with the interest rate that you qualify for. 


Once You Have Applied For A Home Loan


Once you find the realtor to assist you and secure the home of your dreams, you’re not free to head out and buy all the furniture that you need to fill up your house. The home loan must go through the underwriting process and until that is complete, your finances are essentially on lockdown. If you start opening new credit cards, decide to buy a car, or fall behind on payments, you could end up in a lot of trouble. You want to keep your credit score stable throughout the process of buying a home for smooth sailing.


Are you ready to buy your first home? Although you may conduct plenty of research, know your budget and understand what you want to find in your first residence. Problems may arise along the way that could force you to rethink your homebuying plans. So what does it take to ensure your first home purchase will be a successful one? Here are three lessons that every first-time homebuyer needs to know: 1. Purchase a home only when you're comfortable with your decision. Let's face it – buying a home can be stressful, regardless of whether you're a first-time homebuyer or have purchased multiple residences in the past. As a result, stress can be problematic, and it ultimately may lead you to buy a home before you're ready to do so. In a stressful homebuying situation, be sure to take a step back and explore all of the options at your disposal. By doing so, you can minimize the risk of committing to buy a home in the heat of the moment. When in doubt, don't be afraid to consult with family members, friends and, of course, your real estate agent. A strong support system can make a world of difference for a first-time homebuyer, and it might even help you eliminate stress throughout the homebuying process. 2. Put aside money for home improvements. Budgeting for a home can be tricky. Ideally, you'll want to be able to put at least a few thousand dollars down on your purchase. You'll also want to ensure that you're in great shape financially to handle your mortgage payments. At the same time, you should try to put money aside for potential home improvements. Although you've conducted an extensive home inspection, there are no guarantees that your home will maintain its quality for an extended period of time. As such, having a "rainy day fund" will ensure you're ready to handle numerous home improvement projects down the line. Adding money to your rainy day fund each month can deliver long-lasting benefits. This will allow you to be ready for any home improvement issues that may arise, along with avoiding the anxiety commonly associated with finding the finances to afford home repairs. 3. Understand the ups and downs of the real estate market. What you pay for your home today may not be what it's worth tomorrow. In fact, the real estate market fluctuates frequently, so you'll want to understand that your house's value will change in the years following your purchase. In many cases, the value of your home will rise over the years. But in some situations, it may fall. Remember, buying a home is a major decision and is not without risk. Even though you might expect your home's value to skyrocket, you'll still need to take care of your house. Maintaining your residence will boost your chances of increasing its value, regardless of the real estate market. However, you need to be aware that a buyer's market can change into a seller's one at a moment's notice, so there is always a chance that your house's value will go up and down periodically. Be a prepared homebuyer, and you can minimize problems as you explore the real estate market for your first residence. Thus, you'll be better equipped to find a house that fulfills your needs and will serve you well for years to come.



Loading