Step 5 in the home buying process is maybe the most important step in the whole process – loan approval and commitment. But first, the mortgage lender will want to fully approve your credit, debt and income history.
Whether you are buying a home or refinancing an existing home loan, you will find out that lenders today can be pretty demanding during the process of a loan approval. Even well-qualified borrowers have to jump through hoops to qualify for loan financing.
The following conditions are what the mortgage lender will be looking at:
- Your ability to pay the interest and principal due on the loan along with the expenses of home owners insurance and property taxes.
- Your track record of paying debts, which includes your credit score and credit history.
- Your down payment and what percentage that is of your current home’s value.
- And, the appraised value -vs- the agreed upon purchase price, along with the safety and soundness of the home as determined by a pest inspection and/or a home inspection.
What mortgage lenders like to see is strength and stability in all four of the above mentioned conditions. Of course providing the supporting documents for these condition means a pile of paperwork that support the borrower’s financial position which may include (but not limited to):
- One month of paycheck stubs
- 2 years of w-2 forms
- 3 months of bank statements
- 2 years of income tax returns
- If you filed for bankruptcy within the last 7 years, you will need your bankruptcy papers
- If you have deferred repayment of student loans, you should bring your deferral agreement as well.
In addition to your credit approval, the bank will want to make certain that the property appraises at no less than the contract price, and approve the property’s preliminary title report to make sure there are no liens recorded against the property that might affect its value.
Mortgage lenders may take up to 30 days to complete this review, but the review has been completed to the bank’s satisfaction, you are guaranteed a loan and you are one step closing to home ownership.
If you are in the market to buy (or sell) a vacation home in Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.