Home Buying Steps
Buying a home can often be a stressful or daunting experience unless conducted with a professional knowledgeable of the industry, process, area, and necessary steps. We have broken down the process into eight necessary steps, which are outlined below.
Deciding to Buy a Home
So you are tired of renting or you simply want to move into a different home. Maybe you need more space. Perhaps you want to upgrade into nicer finishes. Maybe you are relocating. O maybe you simply want to downsize now that the kids have moved out. Regardless of the reason, there are several factors that should be taken into consideration. Are you going to be in the area for several years? Will your income support a mortgage payment? Have you saved enough for a down payment? What tax implication may you face by selling the first house? This step may be determined on your own or in conjunction with various professionals including a real estate agent.
Lender Requested Documents
You are now under contract to purchase a beautiful home. Now it is time to solidify those financing terms. Importantly, interest rates will move around with market changes until you lock in your rate. Depending upon the market volatility, you can wait to lock in your interest rate closer to closing. This is when the lender actually wants to see all of the details you may have verbally told them upfront to generate a pre-approval letter. Now, they actually need the supportive data to confirm those details. Ultimately, your loan may be bundled with other loans and sold as a pool to investors. As a result, your lender will require specific debt-to-income ratios, credit scores, leverage metrics, and adequate physical condition.
You will be asked to sign a formal application and provide a number of detailed documents. While every transaction may be different given the borrower’s financial position and income-generating activities, the below standard list of financial documents is required by most lenders. Depending upon your lender and whether the loan purpose shall be for a refinance or acquisition, requested documents may include, but shall not be limited to the following:
- 1. Two most recent years of personal tax returns including all schedules
- 2. Two most recent years of business tax returns including all K1s, if applicable
- 3. Last two years of W2s
- 4. Most recent paystubs covering 60 days of pay
- 5. Two most recent bank, investment, and retirement statements (all pages regardless of content)
- 6. A copy of your driver’s license
- 7. A copy of the executed purchase contract (when you find the right home)
- 8. Certificate of Homeowners Association, if applicable
- 9. Evidence of Homeowners Insurance
- 10. Most recent mortgage statement and payoff letter (if refinance)