You’ve been renting for years and you’ve finally decided it’s time to buy a home. Before you begin looking at houses, take a moment to get organized. Some real estate agents won’t even show you properties until you’ve been preapproved for a loan, so the first thing you’ll need to know is how to apply for a mortgage.
Before You Apply
You’ll want a good idea of where you stand before you approach mortgage lenders, so take a look at your credit reports and make sure all the information in them is accurate. You may want to avoid changing jobs right now because lenders look for a solid history with the same employer — usually two years or more. It’s okay if you’ve taken a second job and you’ve only been with the company for a few months as long as your primary employment is of longer standing.
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You’ll need cash for the down payment, and you’ll also have to pay closing costs, so it’s in your best interests to strategize a reliable savings plan. Pay down as much of your debt as possible (particularly credit cards) so you show a good debt-to-income ratio.
After you’ve taken these steps, you may be ready to approach a lender — or, preferably, several lenders. They won’t all offer you identical deals, and you’ll want to get the best one.
Ways to Apply
You have a variety of options when it comes to completing and submitting your application for a home loan. If you have a lot of questions or you’re in a somewhat unique circumstance (such as being self-employed), you might want to meet face-to-face with a mortgage representative.
Most major banks and lending institutions are set up so you can apply online with them as well. Some even offer mobile apps so you can take care of it all on the fly. Smaller banks don’t usually have their own apps, but some contract with third-party providers to give you the convenience of applying from your smartphone.
Gather the Necessary Documents
Your potential lender is going to want proof of the information you’ve included in your application. Make copies of important documents or take pictures of them on your phone so you can forward them through a mobile app or online.
At a minimum, you’ll need to provide a few years’ tax returns and several months' bank statements. If those statements show any unusually large deposits, the lender may want you to substantiate where the money came from. You’ll most likely be asked to furnish your W-2s and pay stubs, but it’s a good idea to be prepared with evidence to confirm everything you’ve stated in your application.
When you have a qualification or preapproval letter from a lender in your pocket, it's time to call a real estate agent.