Published by Kartik Subramaniam
As a first-time home buyer, one of the aspects of the process that people may not be prepared for has to do with the sheer volume of documents that will be required to get qualified for a loan. Of course, it's in their best interest to get these items ready as early on as possible as most sellers expect you to have a pre-approval letter for a mortgage. Having this ready not only shows that they're serious about the process, but it also makes sure that everything goes through without delay.
Not only that, but getting pre-qualified for a mortgage can also act as a useful estimate of how much someone can actually afford to spend on a home - thus making sure that they (and you as their real estate agent) are not focusing their attention on the wrong areas. Thankfully, gathering all of these documents together won't be nearly as difficult as you may be assuming. You just need to keep a few key things in mind along the way.
By far, the most important document that will be needed to qualify someone for a loan involves some type of proof of income. This will usually require that the buyer produce their W-2 wage statement from the past two years, but recent pay stubs and proof of any additional income (like bonuses) may also be needed. Likewise, buyer's will probably have to produce their most recent two years worth of tax returns.
At that point, buyers will have to produce their proof of assets - which will typically involve bank statements and investment account statements to prove that they have the money necessary for any down payments or closing costs.
Typically speaking, buyers will also have to have good credit in order to qualify for a loan - which means that they'll need to produce what is necessary to run a credit check. For a conventional loan, this means having a FICO score of at least 620 if not higher. If the buyer will be getting a Federal Housing Administration loan, they can usually get by with a score of at least 580.
Next, buyers will have to provide some type of employment verification as lenders usually only deal with people who have stable employment. In addition to providing pay stubs, a lender will likely call the buyer's employer to verify that they actually work there.
Finally, buyers will have to produce a copy of their driver's license and their Social Security number. In addition to being necessary for running a credit score, this will help make sure that the lender has everything they need to confirm that someone is capable of paying back the type of mortgage they are requesting.
Once the buyer has all of these documents prepared, their lender will have everything they need to approve a specific loan amount and that will be valid for somewhere between 60 and 90 days. Loan officers will use these documents, along with their own internal systems, to qualify the buyer based on what they've provided and underwriters will be a big part of this process, too.
As a real estate agent, you should always ask buyers if they are pre-qualified for a loan BEFORE putting a lot of work in to help them find a home. If nothing else, this will be a useful indicator of what types of potential homes you should be steering them towards. It will also instantly help you separate the more serious home buyers from people who may just be casually looking, thus freeing up as much of your own time as possible to focus on those matters that really need you.
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