What You Need to Buy a Home

Becoming a homeowner is a big life change that can be overwhelming without research and preparation. Luckily, we've got you covered! If you're considering buying a home, you'll need the right paperwork, a down payment, and most importantly, an approval letter. Let's break it down together.

Item One: A Thought-Out Plan

Before you even consider going house hunting, it's important to make a financial plan and ask yourself:

• Can I afford a down payment?
• Can I afford the additional costs of moving (closing costs, furnishing, movers)?
• Will I need to move within the next 5-8 years?
• Do I plan on needing additional space for children or aging family members?
• Is now the right time to buy in my area?

After that, take note of anything that could hinder your home buying process. If you feel confident in moving forward in your journey to homeownership, it's time to speak to a Mortgage Advisor.

An MA will evaluate your finances and approve you for a home loan. You'll read more about the role of a lender further down.

Item Two: Enough for a Down Payment

Different loan types require different sizes of down payments. For example, an FHA loan is recommended for homebuyers with limited savings or low to moderate-income. This type of loan will offer a low down payment and flexible income, debt, and credit requirements.

FHA home loan programs typically help first-time homebuyers, seniors or others with limits on what they can afford. FHA home loans offer:

• A low 3.5% down payment
• Flexible income and credit requirements
• Low closing costs

It's recommended that homebuyers have enough saved to put down at least 20% of the home's value for the mortgage to avoid Mortgage Insurance. However, this is not a requirement. VA and USDA* loans do not require any down payment at all. (Additional fees may apply.)

Item Three: The Correct Paperwork

Once you have a solid financial plan in place and the funds to make it happen, you'll find a trusted lender in your area to evaluate your finances and give you an approval letter for a home loan. This letter will increase your buying power when it comes time to make an offer.

Depending on the complexity of your financial situation and the type of loan you need, you may need to provide additional paperwork. However, in most cases, the borrower will be asked to provide:

Tax Returns. Generally, your lender will want to see at least two years' worth of tax returns to make sure your annual income is consistent with your reported earnings. If you're self-employed, your bank statements may be evaluated instead.

Pay Stubs or W-2s. Your tax returns will give your lender a good idea of what your overall financial standing looks like. In addition, your pay stubs will help them evaluate your current earning. You will most likely need to bring at least one months' worth of stubs.

Credit History. As a borrower, your lender will need to assess your credit history to make sure you're reliable and not a risk. The minimum credit score required to be approved for a home loan will vary. For example:

Bank Statements. Your lender may request bank statements to verify you have the correct funds for a down payment and that you have the ability to pay off your mortgage for a few months strictly out of your reserves.

Identification. You will need to provide proof that you say who you are. A driver's license will suffice. You may be asked to provide additional proof of identification if you are applying for a Foreign Nationals Loan.

For a full list of paperwork needed, click here.

Item Four: Your Approval Letter + a Trusted Realtor

If everything goes well with your lender, you will receive an approval letter, as we mentioned above. In conclusion, this letter means it's time to start working with a Realtor to find your dream home!

Do you have questions about this process? Our Mortgage Advisors are here to help. Fill out the contact form below to learn more.

*Some state and county maximum loan amount restrictions may apply.