Getting Your Finances in Order
A crucial step in starting your search for a new home is having a
clear idea of your financial situation. By getting a handle on your income,
expenses and debts, you'll have a much better idea of what you can afford and
how much you'll need to borrow.
For lenders to verify this information, though, they're going to
need to look at your financial records. It is also important to remember that
you should include records for each person who will be an owner of the house.
So before you even visit the bank, make sure you'll be able to provide copies
of these important documents:
- Paycheck Stubs
Remember that lenders are most interested in your average income. Not only
will they want to see this month's paycheck, but also how much you've been
making for the past two years. Steady employment is also more attractive
to lenders, so if you've been hopping from job to job, be prepared to
discuss the reasons why.
- Bank Statements
In order to qualify you for a loan, most lenders will also ask you for
copies of your bank statements. Ideally, they'd like to see a steady
history of savings--or at the very least, that you're not bouncing checks
- Tax Records
It's always a good idea to save copies of your tax returns, especially if
you're self-employed. If you own your own business, it's important to note
that lenders generally consider your income as the amount you paid taxes
on--not the gross income of the business.
Lenders will usually consider long-term investment dividends, as well as
your investment portfolio, when evaluating your income.
If you receive steady payments as part of a divorce settlement or for
child support, you can also include this as part of your gross income.
Just remember that lenders will want to see a copy of your divorce/court
settlement verifying the amount of the payments.
- Credit Report
Virtually every lender will want to see a copy of your credit report as
part of the loan application process. The report lists all of your
long-term debts, as well as your payment history. In general, they will
require you to pay for the credit report (approximately $50), but if you
have a recent copy, they may accept that instead.