What is mortgage? Let’s put it into terms that we can fully understand. Mortgage is basically a loan/debt where you borrow a certain amount of money and give your property as collateral. You, as the borrower, are given a certain amount of time to pay back what you owe and if you don’t, your property will be taken as payment.
You may want to research on different banks when thinking of taking out a mortgage, because different banks have different interest rates. It may depend on how long you have to pay or how much you want your loan to be or how much your assets are worth. More often than not, rates increase when your loan amount is higher.
There are several factors to qualify for a mortgage, here are the top factors:
This is a process you can do on your own to at least get a head start before you go to any bank. You just need to know your yearly income and monthly expenses or credits (ex. shopping, gas, food, car, credit card expenses). This process can help you know if you can afford to pay your desired loan or not. Some banks can do this for you if you can’t find time for it. There are also some websites you can search for that can do this for you online.
This is a list of where you’ve lived for the past 2 years. They would want to know how you are in a more personal level as to determine if you skipped any rent or if you were a good tenant. Your personality as a tenant may have a direct effect to your personality as a loaner. They will be asking past landlords or neighbors about how you are as a person because this determines how you are in terms of communication. If you were a neighbor who was easy to communicate with, then that would mean that the bank will have a smooth transaction with you.
This is a list of where you’ve been working for the past, with your paycheck stubs and W-2 or I-9 taxation forms. The banks want to know how much you earn on a monthly and yearly basis and if you pay your taxes right. Not paying your taxes is definitely a BIG NO-NO. Not only is it against the law but you also, won’t have a chance at a mortgage. Lenders would also be looking at how stable you are when it comes to holding a job.
This would be copies of your personal bank account statements from the past. A history of your savings (deposits and withdrawals and how often) would be shown on your statements. This would show the lender how you handle your finances, if you have any savings at all, how much you are usually spending, etc. They would to determine whether you are able to afford a mortgage and whether you seem likely to pay your mortgage.
Do you have properties other than your home? Write them down with their respective addresses and current market value. This is a plus factor because having more assets makes you a more likable candidate. Having your own business can also be good since it means that you are making your own money and can afford to pay your mortgage.
Have a list of your bonds, stocks, IRA’s ready if you have any. If you intend to use these for down payment, better have proof to these securities. These assets show that your money is not in just one nest, and that shows better chances of making more money.
You might want to consider listing down current loans or debts such as credit cards, car loans, student loans, etc. The bank will assess your income as well as your expenses to know if you have enough to pay them. Knowing the state of your finances will definitely place you ahead.
Remember, it is always good to be ready. If you think you have all these in check, then you can go to your preferred bank and get started with the process.