What to Do Before You Start Your Home Search

The process of buying a home can be nerve-wracking for some who have not been through it before, but with a little bit of preparation, you can help minimize some surprises along the way.

One important thing you can do as soon as you start thinking about buying a home is checking your credit report. Ideally, this should be done at least six months before purchasing a home in order to give yourself time to dispute information, if needed. It is important to know how your payment history is being reported by your creditors. And if you see any unfamiliar information, it’s important to know how to take action.

Consumers are entitled to a free copy of their credit report, from each of the nationwide consumer reporting agencies, once a year by visiting annualcreditreport.com.

What should you look for? Any information that might be inaccurate or incomplete. In the personal information section of your credit report, is your name (and any former names, such as a maiden name) listed accurately? Is your address up to date? Are there any addresses you don’t recognize? In the account information portion of your credit report, are all of the accounts listed complete and accurate? Are there any accounts that you don’t recognize? Do the balances appear accurate?

If you find information that appears inaccurate or incomplete, contact the lender or creditor associated with the account. You can also contact the nationwide consumer reporting agency that issued the credit report. If necessary, take steps to change some of your credit-based behaviors.

Here are some other items to include on your checklist as you prepare to buy a home:

— Gather any required documents you may need to apply for a mortgage. Tax returns, pay stubs and bank statements are among the ones you’ll need.

— Figure out how much home you can afford. There are a number of online mortgage calculators that can help. Remember a home’s purchase price is only part of the picture; you may also be responsible for a down payment, closing costs, taxes, insurance and other expenses. Learn your debt-to-income ratio and familiarize yourself with the requirements for loan qualification.

Buying a home is one of the most important – and largest – financial decisions you may make, and you owe it to yourself to prepare for it thoroughly and thoughtfully and hopefully smooth out any bumps in the road to home ownership.

This Simple Trick Can Keep Mortgage Paperwork From Becoming a Huge Hassle

Securing a mortgage requires a laundry list of paperwork. But there’s a way to simplify it.

Every year for your tax returns, you gather together paperwork such as receipts, explanations, paystubs and W-2s. Seventy percent of this information contains the same things you’ll need for getting a mortgage loan. If you do your taxes on time in April and save your documents in a secure, easily accessible location, you can use it to to support your application for a home loan later in the year.

In an encrypted thumb drive, round up all your “mortgage documentation.” (Just remember the password for the thumb drive and, of course, where you ultimately choose to store it.) Within the drive, make subfolders that have the following titles:

  • Tax returns: You can include all pages and schedules of personal returns and corporate returns. Mortgage tip: Make a PDF of this information for future use and store safely.
  • W-2s: same concept, but you’ll need the most recent two years.
  • Pay stubs: every time you get paid, download the pay-stub in PDF format onto the thumb drive and drag and drop it into the folder. It shouldn’t take too long and can save you a ton of time in the future.
  • Bank statements: every month when you pay bills simply download your bank statements in PDF format and similarly add them into the appropriately titled folder.

Be sure to delete any sensitive information that is not properly protected on your computer to minimize your risk should you accidentally download malware onto your computer or otherwise get hacked.

Doing the above things does create a bit more work on an ongoing basis, but it insures you are prepared. These documents can also help your applications for other types of credit in the future, including:

  • car loans
  • student loans
  • personal loans
  • home equity lines of credit
  • credit cards
  • any credit offers

Documentation planning will make the process of obtaining credit less of a scramble, keeping supporting documentation literally at your thumb tips. Save yourself from the need to go “digging.” If applicable, also have this information handy:

  • Your divorce decree: have the divorce decree including all pages, all schedules and the schedule of creditors in a saved folder.
  • Prior foreclosure documents: have the trustee’s sale date deed.
  • Short sale documents: have the final settlement statement from that transaction.
  • Alimony or child support paperwork: have the agreement paperwork.
  • Information on tax debt: have state and/or federal payment plan on file.

Requests for the documentation referenced in this article are consistent with today’s mortgage lending world. Be smart, be prepared and make sure you have the documentation ready before the lender asks for it to minimize hitting any snags.

Remember, too, your credit score will also play into your ability to qualify for an affordable mortgage. You can keep track of how your credit by viewing your free credit report summary, along with two free credit scores, updated every 14 days, on Credit.com.

Image: monkeybusinessimages

The post This Simple Trick Can Keep Mortgage Paperwork From Becoming a Huge Hassle appeared first on Credit.com.

How Not to Screw Up Your Mortgage Application

mortgage-application

Although it might appear as though getting a mortgage is easier than it was a few years ago, thanks to technology, the process is still dicey. Industry insiders know the majority of loans do not close on time. But there are a few ways to smooth the process if you’re applying for one. Here’s what you need to know if you’re going to be getting a mortgage in the near future.

You might recall the mortgage meltdown? After the housing crisis, the mortgage industry went through a total overhaul, making the ability to obtain a fixed-rate mortgage a pile of paperwork and a series of processes. Your lender should convey to you that the mortgage process is very, very difficult and they don’t control many of the things in the loan process, but they can help you navigate through the process to get to the finish line.

Your Paperwork Checklist

Consumers who find the mortgage process to be very easy are the people who have their financial house and documents in order. This means providing the following things to the lender:

  • Two years of federal income tax returns complete with all pages and all schedules
  • Two years of partnership returns (if applicable)
  • W-2s for the past two years
  • Pay stubs for the last 30 days
  • Complete bank statements with all pages for the past 60 days. These should include all assets for the past two quarters.
  • If divorced, a full copy of the divorce decree including all pages and all schedules including the marital settlement agreement.
  • If paying child support, alimony, or tax debt, provide the complete payment agreement with all of its pages.
  • If a previous bankruptcy exists, all of its papers are needed, including the schedule of creditors.
  • If a foreclosure exists on your credit report (within the last 7 years), provide the actual date the house was sold in the trustee sale, supported with a trustee’s sale deed.
  • If a short sale exists in your past, provide a copy of the settlement statement from the transaction.
  • Insurance contact information

Do you notice a recurring theme? Every tiny piece of documentation associated with the above items becomes critical to the timely structuring and successful funding of your mortgage application. Put simply, if there is anything missing —even if a page is blank — it will cause a delay in your file.

The examination process lenders must perform for each and every borrower is very thorough. Your credit report and any outstanding loans are closely examined, and it’s best to have as high of a credit score as possible in order to score a better (lower) interest rate. (You can view two of your credit scores, updated each month, for free on Credit.com.) The underwriting (vetting of the mortgage application and support documentation) is designed to make sure the loan being originated has little risk when the loan is sold to Fannie Mae or Freddie Mac.

If you’re looking to get mortgage loan today, be on top of your game with your financial paperwork and provide every single financial piece of documentation your lender needs. Be a smart mortgage borrower and recognize the mortgage process is not easy, and the right lender should be upfront about the process you’re about to start.

Image: Minerva Studio

The post How Not to Screw Up Your Mortgage Application appeared first on Credit.com.

7 Times You’ll Need Extra Paperwork to Get a Mortgage

unexpected-homeowner-costs-002

When you apply for a mortgage the first time, or if you’re a little rusty on the process, it’s reasonable to expect some shell shock when you’re told what documentation you need to gather, as there’s often quite a bit of it. If you plan to buy a home in the near future, a good best practice is to save all paperwork just in case it’s something you end up needing.

Some of the initial information lenders may ask for includes:

  • Tax returns for the past two years
  • W-2s for the past two years
  • Pay stubs from the past 30 days
  • Asset reports for the past 60 days

These are the basic essentials, although you may be asked for other items, such as:

  • A financial paper trail
  • Specific dates on previous derogatory credit events
  • A marital settlement agreement (MSA) from a previous divorce
  • Any missing pages of bank statements
  • Any missing pages of tax returns
  • Details outlining anything that appears inconsistent

It is a good idea to provide the financial documentation to a lender as quickly as possible. Any delays in submitting these documents may postpone your interest rate lock as well as your ability to perform on your real estate contract. (Remember, a good credit score can help you qualify for the best terms and conditions on a mortgage and even help you afford a bigger mortgage. You can see where you currently stand by viewing your two free credit scores, updated each month, on Credit.com.)

To help you establish what other information you might need, consider the following.

1. You Have Undocumented Money

If you have additional deposits in your bank account, other than your income, you will need to paper trail and source them, whether you plan to use that money for the loan or not. Lenders cannot ignore money in your bank account that cannot be documented.

2. You’re Divorced

If you were divorced, even as long as 10 years ago, a lender may ask for a copy of the full divorce decree with all pages and schedules, including the marital settlement agreement. Even if you mark the “single” box on the mortgage application, lenders run a background check and will see any previous marital statuses, addresses, or names. If you didn’t provide a divorce decree upfront, lenders will likely ask for one after the background check.

3. You’re Not a U.S. Citizen

Two instances when you’ll be required to provide your birth certificate are if you are unable to provide picture identification or if you note on the application that you are not a U.S. citizen. In these instances, an underwriter will generally sign off on your loan without the supporting document. One way to prevent unnecessary holdups related to your birth certificate is to go over all raw data on the loan application and make sure you answered all of your declarations questions correctly.

4. You’ve Been Through a Short Sale

The final settlement statement from the transaction is critical. Many mortgage loan programs have a waiting time to be eligible for new financing.

5. You’ve Been Through a Foreclosure

You’ll want the date of the trustee sale. This is usually accomplished by obtaining a copy of the trustee’s sale date deed from your local recorder’s office.

6. You’ve Filed for Bankruptcy

If you filed for Chapter 7 or even Chapter 13 bankruptcy, you’ll need all the pages and schedules, including the schedule of creditors specifically identifying everything associated with the discharge. The discharge date is the date at which the waiting time starts to secure new mortgage loan financing. Even if you’re already past the date, but you don’t have all the Chapter 7 paperwork, your new loan process for buying a home can be put on hold until you have all of the appropriate documentation.

7. You’ve Had a Loan Modification

You will need the full loan modification agreement you signed with your original loan servicer when you apply for a new mortgage.

Lenders do not intentionally try to make you provide more paperwork when buying a home. Based on your financial picture it might be necessary in order to meet federal compliance regulations all lenders must abide by. If anything identified above exists in your past or your financial picture is unique, make sure to have supporting documentation and a seasoned loan professional (full disclosure: I am one) working in your best interests.

More on Mortgages & Homebuying:

Image: iStock

The post 7 Times You’ll Need Extra Paperwork to Get a Mortgage appeared first on Credit.com.

7 Times You’ll Need Extra Paperwork to Get a Mortgage

unexpected-homeowner-costs-002

When you apply for a mortgage the first time, or if you’re a little rusty on the process, it’s reasonable to expect some shell shock when you’re told what documentation you need to gather, as there’s often quite a bit of it. If you plan to buy a home in the near future, a good best practice is to save all paperwork just in case it’s something you end up needing.

Some of the initial information lenders may ask for includes:

  • Tax returns for the past two years
  • W-2s for the past two years
  • Pay stubs from the past 30 days
  • Asset reports for the past 60 days

These are the basic essentials, although you may be asked for other items, such as:

  • A financial paper trail
  • Specific dates on previous derogatory credit events
  • A marital settlement agreement (MSA) from a previous divorce
  • Any missing pages of bank statements
  • Any missing pages of tax returns
  • Details outlining anything that appears inconsistent

It is a good idea to provide the financial documentation to a lender as quickly as possible. Any delays in submitting these documents may postpone your interest rate lock as well as your ability to perform on your real estate contract. (Remember, a good credit score can help you qualify for the best terms and conditions on a mortgage and even help you afford a bigger mortgage. You can see where you currently stand by viewing your two free credit scores, updated each month, on Credit.com.)

To help you establish what other information you might need, consider the following.

1. You Have Undocumented Money

If you have additional deposits in your bank account, other than your income, you will need to paper trail and source them, whether you plan to use that money for the loan or not. Lenders cannot ignore money in your bank account that cannot be documented.

2. You’re Divorced

If you were divorced, even as long as 10 years ago, a lender may ask for a copy of the full divorce decree with all pages and schedules, including the marital settlement agreement. Even if you mark the “single” box on the mortgage application, lenders run a background check and will see any previous marital statuses, addresses, or names. If you didn’t provide a divorce decree upfront, lenders will likely ask for one after the background check.

3. You’re Not a U.S. Citizen

Two instances when you’ll be required to provide your birth certificate are if you are unable to provide picture identification or if you note on the application that you are not a U.S. citizen. In these instances, an underwriter will generally sign off on your loan without the supporting document. One way to prevent unnecessary holdups related to your birth certificate is to go over all raw data on the loan application and make sure you answered all of your declarations questions correctly.

4. You’ve Been Through a Short Sale

The final settlement statement from the transaction is critical. Many mortgage loan programs have a waiting time to be eligible for new financing.

5. You’ve Been Through a Foreclosure

You’ll want the date of the trustee sale. This is usually accomplished by obtaining a copy of the trustee’s sale date deed from your local recorder’s office.

6. You’ve Filed for Bankruptcy

If you filed for Chapter 7 or even Chapter 13 bankruptcy, you’ll need all the pages and schedules, including the schedule of creditors specifically identifying everything associated with the discharge. The discharge date is the date at which the waiting time starts to secure new mortgage loan financing. Even if you’re already past the date, but you don’t have all the Chapter 7 paperwork, your new loan process for buying a home can be put on hold until you have all of the appropriate documentation.

7. You’ve Had a Loan Modification

You will need the full loan modification agreement you signed with your original loan servicer when you apply for a new mortgage.

Lenders do not intentionally try to make you provide more paperwork when buying a home. Based on your financial picture it might be necessary in order to meet federal compliance regulations all lenders must abide by. If anything identified above exists in your past or your financial picture is unique, make sure to have supporting documentation and a seasoned loan professional (full disclosure: I am one) working in your best interests.

More on Mortgages & Homebuying:

Image: iStock

The post 7 Times You’ll Need Extra Paperwork to Get a Mortgage appeared first on Credit.com.