• Ben Stiller
• Dec 22, 2021
• Home Buyer
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Being a first-time homebuyer is an exciting but also daunting prospect. For many first-time homebuyers, the financial and documentation prerequisites that come before making the final decision can be a significant undertaking. If you’re a homebuyer, It’s understandable to have a flurry of questions, such as, “What do I need to buy a house?” “What documentation do I need to apply for a mortgage?” “Where can I safely store all my documentation?”

As demanding as it may seem at first, there is a method to the madness, and you can save yourself lots of heartaches as long as you’re prepared and organized when buying your first home. Here’s a rundown of the basic components you will need to have arranged to buy a home.

The Down Payment

Currently, the real estate market in the United States is red hot. Home prices are surging, and bids are increasingly competitive, with many homes selling for over asking price. Saving for the downpayment is typically the biggest obstacle for first-time homebuyers.

As of now, most loan programs require a minimum downpayment of 3.5% of the purchase price, but the industry norm is usually closer to 20% for a downpayment. Banks are trying to reduce the risk of borrowers defaulting, meaning it’s highly unlikely that you’ll be able to purchase a home without a downpayment - banks are warry of not repeating the circumstances that caused the 2008 housing marketing collapse. It’s best to evaluate your financial situation and decide if purchasing a home is wise under your current circumstances before moving forward.

What Do I Need to Buy a House? - A Sufficient Credit Score

Your credit score could make or break your ability to purchase a home. Unfortunately, a negative or nonexistent credit score will keep you from qualifying for a mortgage. In general, it’s best to aim for a credit score of at least 640, but this can change with the lender. A generous lender may offer you a loan with a credit score of 500, but you shouldn’t rely on that number.

What Do I Need to Buy a House? An Accurate Debt-to-Income Ratio

Calculate your debt-to-income (DTI) ratio to determine what you can afford before buying a home. There are free and paid resources used to help you determine your DTI, and almost all lenders use your DTI to help determine if you can afford the mortgage or not. Some lenders used to make risky and ill-advised mortgage agreements, but this has been mostly phased out in recent years, but it’s important to honestly evaluate your DTI before taking before closing on a home.

What Do I Need to Buy a House? - Organized Financial Documents

Having all the required documentation organized, safe, and accessible is paramount when buying a home; saying it can make the process faster and simpler is a huge understatement!

Each lender will have their own list of required and optional documentation they need/would appreciate. Still, the core documentation will be the same for all lenders, and you won’t be able to move forward with anything else until that’s completed.

Be sure to have all the following documents available to lenders for review:

• Income and Employment Verification

   This documentation is one of the cornerstones of the mortgage lending process. Lenders will ask for income verification in the form of W-2s, pay stubs, income tax returns, and bank statements.

• Credit History

   Lenders will do a hard credit check with your permission. Lenders look for good credit scores (this influences your interest rate) and history from the three primary credit bureaus. You can run these credit reports free at least once a year, so it can make sense to run these checks yourself and have up-to-date documentation available for the lender to access.

• Debts and Assets

   Lenders will ask to see bank statements, retirement account information, investment documentation, and any other information regarding debt in your name or collateral in your name. All of this information helps the lender better calculate your DTI.

• Additional Documentation Depending on Your Situation

   No two loan applications are the same, and each applicant will have unique challenges and circumstances. Lenders may ask for other documents to confirm your story to try and create a well-rounded story of your situation. This type of documentation could include rental payment history, alimony payments, divorce decree, citizenship documentation, and even a signed purchase contract.

Keep It All Together and Accessible

Throughout the entire mortgage application process, it’s critical to keep all the documentation safe and accessible to you and potential lenders. With almost the entirety of the mortgage loan process handled online, would-be homeowners need safe, secure, and easily accessible platforms to house their documentation. proborrower exists for this reason. It is a one-stop online platform to manage all your mortgage documentation and share it with lenders and brokers of your choosing.