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Buying A Home? Prepare For This Paperwork
While buying a home is a significant achievement, the mountain of paperwork required by lenders is enough to make you think twice. If you're ready to take that first step and become a new homeowner, our real estate agents have important tips to make your journey easier and less stressful.
Starting the Process
In the early stages, while you're looking at South Bend homes for sale, take time to get 4 important documents: your credit report, your credit score, a pre-approval letter, and a loan estimate. Each one of these documents has a significant impact on buying a home.
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Credit Report – Your credit report contains important information on your finances, including your payment history on loans and credit cards, your outstanding debts, and debts that are in collections. Request a copy of your credit report and review it carefully.
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Credit Score – Credit bureaus use the information on your credit report to generate your credit score. Generally, a minimum credit score of 620 is required to qualify for a mortgage loan, and a higher credit score means a lower mortgage interest rate on your home loan.
- Loan Estimate – When you complete a loan application with a lender, the law requires that you receive an overview of your loan terms within three business days. It includes the monthly mortgage payment and interest rate, estimated closing costs, insurance, taxes, and prepayment penalties.
- Pre-Approval Letter – A pre-approval letter issued by a mortgage lender carries a lot of weight with sellers. It verifies that the lender has qualified you for a home loan up to a certain dollar amount based on your employment history, income, and income-to-debt ratio.
Pre-Approval Documents
A mortgage pre-approval letter puts you in good favor with the seller and a step ahead of other buyers, but you'll need to provide certain documentation to the mortgage lender for each borrower on the loan:
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Proof of Identity – A driver's license, passport, or Social Security card, and a list of all residential addresses over the past three years.
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Proof of Employment – Pay stubs for a minimum of the past 30 days, W-2 or self-employment tax returns for the past 2 years, and a list of employers over the past 2-3 years.
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Proof of Income – Bank statements (checking, savings, etc.) for the last 60-90 days, self-employment income, and documentation supporting other types of income.
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Assets and Debts – Assets include financial accounts, retirement, investments, trusts, real estate, and vehicles. Debts include auto loans, personal and/or student loans, and credit cards for the past 60-90 days.
Making an Offer
Once you've found the right home and you're ready to make an offer, you need documented proof of earnest money (an upfront payment or deposit) demonstrating your intent to purchase the home. This is paid when the purchase agreement (real estate sales contract) is signed by the buyer and the seller and held in escrow until closing. Required earnest money is usually 1 percent of the purchase price, so if you purchase the home for $450,000, you need to have $4,500 set aside in cash.
Closing Documents
Closing the loan requires both financial and legal documents, including a copy of the loan application, purchase contract, closing disclosure, and proof of homeowner's insurance. Once closing paperwork is signed, documents include a deed of trust, property deed and note, initial escrow statement, title insurance policy, and transfer tax declaration. These are usually furnished by your real estate agent or attorney.
Considering a move to South Bend? Contact us for information and pricing on available homes that fit your family's lifestyle.
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