Whether you are purchasing your first home, refinancing a current home loan or buying your tenth investment property, a loan officer is certainly going to task you with collecting what seems like a mountain of paperwork that will go along with your loan application. If you know what these things are in advance, it can make applying for a home loan easier, so today I’d like to share with you five things you are certain to be asked when applying for a home loan.
Have You Ever Owned a Home Before?
This question is frequently asked. There are plenty of loan options particularly targeted to first time home buyers, so a loan officer will definitely want to know if they can help you get one of these loans. So-called ‘first time buyer’ programs are designed not just to get people into homes as easy as possible but to jump start the local real estate market.
If it turns out this is not your first home loan, this will also queue your loan officer into the fact that “this isn’t your first rodeo”, so they can stage the loan process around the idea that you are familiar with the financing process to help the process run a little bit faster for you without having to cover things you are already aware of.
What Is Your Employment Situation?
While it is obviously important that you have employment to fund the payments for the loan you are asking for, Loan officers will also ask this question to determine whether or not you are self-employed. While someone that is an employee at a company can simply pull together W2’s to show their income, self-employed individuals will have to provide other information which verifies their income. Some of these things include year to date profit and loss statements, bank statements and the last two years of business tax filings. If you are self-employed, your income is averaged over the past two years.
What Is Your Credit Score?
It probably goes without saying, but your credit score is important as it determines if you qualify for a loan, what your interest rate for the loan will be, and other factors. One thing you may not take into account though is your view of your credit score is likely different than how your loan officer views it.
Sometimes borrowers who have had a recent late payment on a credit card mistakenly assume their credit has been damaged. However, one or two late payments over the past couple of years won’t matter. In addition, late payments on a credit report are only reported if the payment was received more than 30 days past the due date. Someone who gets a bill on the 1st of the month and pays it on the 15th might consider that as a late payment when it’s not. At least in the lender’s eyes.
How Much Money Do You Have To Put Down?
Just because you may have a lot of money in your savings doesn’t mean that can all be used for a home purchase. You undoubtedly have money set aside for other responsibilities, your nest egg, ongoing monthly expenses, etc.
The amount of money you have available for a downpayment guides the loan officer toward your ideal loan options. If you are a first time home buyer, it’s important to remember there will be funds needed for your down payment but there will also be closing costs to consider. In addition, the lender wants to make sure you won’t be completely ‘tapped out’ and have some cash left over after closing. These funds are referred to as “cash reserves”.
When Would You Like To Close?
As it probably goes without saying, with all this paperwork, credit checks, applications, etc., closing a loan takes time. It’s important that your Loan Officer knows your situation, so they are guaranteed to ask you when you need to close. This gives the loan officer the window needed to make sure you meet the contract date without fail. Most escrow periods are for 30 days but other transactions can take longer.