Do you remember getting your first bicycle? That would be the one with only two wheels. Probably some of your friends were already riding their two-wheelers and had an occasional crash, but they always picked themselves up and rode off again. This is a pretty good analogy for what purchasing a home is like for a first-time home buyer…it often involves the same kind of excitement and fear as riding your first two-wheeler bicycle.
It’s the rare individual who faces the prospect of applying for a loan to purchase their first home without some qualms about the process. The average individual doesn’t even know where to start and is often discouraged by concerns about their ability to qualify for the loan. The best way to alleviate concerns is to become familiar with the process before you reach the point of filling out and filing an application.
Any bank or mortgage loan officer that you decide to work with will most certainly want you to start gathering important and necessary income and asset documentation in order to proceed with the pre-approval process. Typically, those items may include your most recent two years of Federal tax returns, along with the pertinent W-2 forms or 1099s.
If you happen to be self employed and file business or partnership returns, those will need to be provided as well. Don’t forget to gather one full month of your most recent pay stubs or any other year-to-date information as well. They’ll also require copies of your most recent bank statements, including checking, savings, IRA, or 401K. If you are receiving a gift from a family member, you will need to provide a gift letter along with sourcing the funds from the donor’s account. Or if you happen to be selling your current home or another property for the down payment, the final HUD-1 from escrow will usually suffice. Another item to consider would be income from a pension, alimony, child support, or any other source; documentation will be required by underwriting to secure the approval.
As you provide the required information, the loan officer will proceed with obtaining a credit report.
Some applicants may balk at the amount of personal information the loan officer will require, but consider that the first-time home buyer loan runs between $150,000 and $625,500. If you were lending that money to a total stranger would you ask for less? During the loan process additional documentation will be required depending on the mortgage product. If you look at the big picture, the documentation that is being requested isn’t unreasonable.
So like riding your first bicycle, it is a bit scary to start. You may wobble at first but once you understand what is required and the rules of the game, you can turn that fear into excitement. When the loan officer asks for more paper or explanations you are prepared. He or she will be happy to explain why something is required and will make sure it all makes sense to you…that’s what you can expect when you work with an experienced, qualified loan officer. At the end of this journey, with the right guidance, you will get the keys to your first home.
If you would like to find out if 2013 really is the year when you purchase your first home, please call me at (808) 440-0916 or send me an email at Pamela@mannhawaii.com. Like riding a bike for the first time, you will never know whether you can do it unless you try.