Picking a Lender and What You’ll need to get started
Getting ready to buy your first home? Wondering if you’re financially ready to buy a house? This post will help get you started on picking a lender and what information your lender will need from you.
How to pick a lender?
There are three main types of lenders you can go through: Mortgage broker, local credit union, or a bank/big lender. I was taught that it is always good to get quotes from 3 people when in need of a service and the same goes with real estate! You don’t necessarily need to get one of each type, but at least 3 would be ideal to compare interest rates, lender costs, down payment, estimated closing costs, and your max loan amount. One important thing to remember is when getting pre-approved for a loan the lender will need to run a credit report. When you run a credit report you will lose anywhere from 2-5 points from your credit score. While that can feel frustrating, there is a 45-day window that you can have your credit report pulled as many times are you want without losing any more points. If you’re going to lose the points running it once, you might as well shop around and have it run a few more times!
As a first-time home buyer, I think it’s important to pick a lender who feels open and happy to answer any questions. One of my favorite quotes is, “You don’t know what you don’t know.” That couldn’t have been more true when buying my first house! Even as a real estate agent, I learned so much and was thankful I had a lender who was happy to answer all my questions.
What information does your lender need for your pre-approval?
In order to complete your pre-approval, your lender will need a few documents from whoever is going to be listed on the loan. You’ll need:
30 days paystubs
2 years of W-2s or 1099s
2 years of tax returns
2 months bank statements
Drivers license
What will the lender look at?
The lender is looking for a complete picture of your financial world. They will look at your FICO credit score. This comes from your credit report being pulled. This score will likely differ from your credit score on Credit Karma. Next, they will need to look at your debt-to-income ratio. This compares how much you earn each month to how much you owe each month. The lender will also be looking at your proof of income. This will come from you W-2s/1099s, paystubs, and tax returns. Finally, the lender will look at your proof of assets. It will include both liquid and non-liquid assets. Your liquid assets is the amount of money you have in your bank account, which comes from your two months of bank statements. The non-liquid assets can include items like cars, jewelry, etc. For any non-liquid assets, you’ll likely need to provide proof of ownership.
Want to have an idea of which rates are being offered most often in your state before going to a lender? Go to CFPB (Consumer Financial Protection Bureau) rate checker and input your credit score, state, estimated purchase price, and estimated down payment.
