If you’re a first-time home buyer, applying for a mortgage can be a little daunting. After all, taking on a home loan worth hundreds of thousands of dollars isn’t a decision to be made lightly. But with all the necessary paperwork at hand, you can breeze through the process. Our handy mortgage checklist will tell you exactly what you need to apply!
Using a digital service like REX Home Loans means you can take advantage of our online mortgage application service and get your home loan approved in a timely manner.
1. Proof of identity
A broker or lender will ask you to provide a valid government issued photo ID, such as a passport, state issued ID card or state issued driver’s license. This proves who you say you are and provides evidence of your nationality or residence. Your social security number will also be requested as a further proof of identity and is necessary to pull your credit report.
- Photo ID for proof of identity
- Social security number
2. Proof of income
Lenders need to gauge your overall financial health, so they’ll want proof of income, including copies of W-2 forms and your most recent payroll stubs. If you haven’t been at your job very long, you work part-time, are self-employed, or receive commission-based income, you may need to provide more information.
- W-2 wage earners – copies of most recent two years W-2 forms for all jobs worked and your two most recent payroll stubs.
- Self-employed, freelancers, contractors – year-to-date profit and loss statement and two years of records including the Form 1099s you used to report income and file taxes.
3. Proof of assets
You will need to provide documentation, such as bank statements, to show lenders you have the funds to pay for your down payment, earnest money deposit, and other closing costs. As well as being able to cover these costs, a first-time home buyer may also need to show they have a couple of months of mortgage payments in reserve so they’re not living close to the edge.
As well as using your savings to assess your risk profile, lenders will be checking that your down payment has accumulated over a period of time, not just transferred the day before. You may have to explain any large deposits and recurring debits that aren’t utilities.
- Provide at least two months’ worth of most recent bank statements for every account whose assets you’re using to qualify for the mortgage. Include even blank pages of the statements.
- Letter of explanation for large deposits and proof that the funds did not come from a prohibited source (like the home seller, lender, real estate agent, or an undisclosed loan).
4. Proof of credit history
As well as all the above documentation, you’ll also need to disclose your credit score. This is one of the biggest factors that a lender uses to assess your credit risk. Usually a broker or lender will give you a form to sign to give them permission to pull your credit report from the three main credit bureaus: Experian, TransUnion, and Equifax.
It can be well worth it to improve your credit score if you’re a first-time home buyer in the months leading up to your mortgage application. With a very good credit score (740-799), you’re more likely to get approved for a home loan and be offered a lower interest rate. You can get a free copy of your credit report at any time and check it for errors before you apply for a mortgage.
If you do have a negative item that isn’t an error, then it can help to provide a written statement if it was a one-time unavoidable circumstance. Lenders are more worried about customers who are habitually late with payments or default on loans.
- Apply for your credit report from all 3 bureaus through AnnualCreditReport.com and check for inaccuracies and errors.
- Write a statement that explains any negative items on your credit report.
- Provide utility bills or other records or other regular payments if you have no credit history.
5. Proof of gifts
An extra monetary boost from friends or family is a huge help for a first-time home buyer struggling to save a down payment. The main thing to know is that you can use gifted funds but you need to provide written confirmation to prove it’s a gift and not a loan that needs to be paid back.
This confirmation usually is provided by the donor in the form of a letter stating the amount of money gifted, that it’s not expected to be paid back, their relationship to the borrower, plus their bank and account number.
- A signed and dated down payment gift letter, see an example template here.
6. Proof of renting history
For a first-time home buyer who doesn’t already own a house, be prepared to provide proof of your renting history to show that you can pay your mortgage on time. This is especially important if you don’t have an extensive credit history.
- Provide proof of timely rent payments for the past 12 months, such as bank statements, 12 months of canceled checks; or if you pay by cash, you’ll need a letter from your property management company stating you’ve paid your rent on time.
REX Home Loans’ advisors are ready and waiting to help guide you through the mortgage application process. We’re a digital mortgage brokerage so you can enjoy our quick, seamless online experience designed to make it easier for first-home buyers to secure a home loan.