Sep 26, 2007 - Getting a mortgage home loan might seem like a tedious process, but if you do your part to look good on paper, you can increase your eligibility for the best interest rates. Financial institutions primarily consider three main areas in determining who is eligible for a mortgag: employment history, credit history, debt to income ratio (which is the percentage of income that goes to expenses). As proof of these, most financial institutions will ask for a selection of the following documents in considering your request for a mortgage loan.
Financial institutions typically use your past tax returns as verification of your employment and earnings.
Most financial institutions will ask to see your most recent pay stubs, usually covering the past month. Your pay stub must have your name, your social security number, your employer's address, and your year-to-date earnings. These help them to gauge whether you will be able to handle your monthly mortgage payments.
While your pay stubs provide your financial earnings, your employment history gives the financial institution an idea of the nature of your employment. Generally, a record of steady employment is going to work in your favor.
A credit report, including a list of your current creditors and the corresponding account information is useful to a financial institution because it allows them to see how you have dealt with your past loans. This list should include the details (i.e. minimum monthly payment and balances) of all student loans, auto loans, credit cards, and child support payments. By establishing a solid credit history, you can avoid having to pay higher interest rates that frequently accompany subprime mortgages.
In order to verify your banking assets, financial institutions will most likely want to see up to three months of your most recent bank statements.
Additional assets that should be reported upon applying for a mortgage loan should include mutual funds, retirement accounts, real estate titles, and stock certificates. These not only promotes your qualifications as a worthy risk for the financial institution, but they can also help you secure a lower interest rate.
If you are currently renting, canceled checks that were used to pay rent can be proof that you are punctual with your payments. Some financial institutions may ask for the name and address of your landlord instead of the canceled checks.
Providing the financial institution with a description of either the property you want to finance or at least a description of the property helps the financial institution decide if any of the loan programs would be right for you.
Having these documents gathered and ready to go when you are in the process of shopping for a new home will help your mortgage application process go smoothly.
Source: Informa Research Services