Paperwork makes up a large part of what you need to buy a house. For a smooth transaction from start to finish, it pays to be ready with all the pertinent documents you will need to submit and present at different stages of the home buying process.
Use this detailed guide to keep track of your documentary requirements when buying your next home:
One of the most important documents you should prepare at the beginning of the home buying process is your credit report. Even before you approach a lender to inquire about a mortgage, you can already request copies of your annual credit reports from federal credit bureaus Equifax, Experian, and TransUnion for free here.
Reviewing your credit score early gives you enough lead time to identify and report any discrepancies or errors that can lower your rating. It also gives you a head start on fixing your credit in time for your actual loan application.
Boost your credit rating by paying off outstanding debt and improving your regular payment obligations in the months leading to your home purchase. With a better credit score, you can secure a better home loan, whether in terms of a larger principal loan amount, lower interest rates, more favorable loan conditions, or any combination thereof.
Proof of income
To secure a mortgage, you must be able to prove that you have a steady source of income. There are several documents you can gather and submit for this purpose, including:
- Your last two pay stubs
- The previous two years’ W-2 forms (or Wage and Tax Statements) issued by your employer
- IRS 1099 Forms, for self-employed or independent contractors
- Direct deposit authorization forms for workers who receive payments and fees from other sources
These income records, along with the bank statements and tax returns described below, will come in handy early in the home buying process. These documents enable you to secure a mortgage pre-approval,an essential step to help you establish a realistic and reasonable price range for your home search.
Lenders also look at your bank accounts and other assets to assess your risk profile as a potential borrower. Official bank-issued statements of your various accounts as well as investment and insurance vehicles provide lenders with the necessary proof that you have money in reserve to cover your mortgage obligations in the event of an emergency.
Bank statements can also demonstrate that you have accumulated your down payment money over a long period of time. Large sums of money that appear seemingly out of nowhere can lead to suspicion about the validity and stability of your income sources.
Another way lenders get a clear idea of your financial situation is by reviewing your tax returns. If you have yet to file your tax return for the current year, the returns from the previous two years will do.
Tax returns provide information that verify the consistency of your reported annual earnings relative to your declared income. They also track whether there are any major fluctuations from one year to the next.
If you are unable to provide copies of your tax returns on your own, you can sign a Form 4506-T to authorize your lender to request these from the Internal Revenue Service (IRS) on your behalf.
Gift letters or deeds
In case you are receiving extra financial assistance from family or friends in the form of a direct gift, secure written confirmation confirming that the money was given as such, and not as a loan.
For transparency, the letter must indicate the exact amount given, as well as the nature of your relationship with the benefactor. It also helps to declare that the gift amount was given voluntarily.
If you have been renting, it will also help to provide your lender with proof of your ability to pay rent on time. Be prepared to facilitate communication between your lender and your former landlord to secure the necessary documentation.
Driver’s license or other photo ID
In addition to your financial records, always make sure to have proper identification ready. This typically means any ID card that feature your photo and signature.
In most cases, your driver’s license is the handiest form of valid identification you can provide. You can save time by preparing copies of this ID ahead of your meetings with your lender and other service providers you will be hiring.
Looking for more information to guide you through the home buying process? Read Windseeker Realty’s first time home buyer guide here. Better yet, contact our local experts to get relevant tips, market insights, and reliable professional advice. Call 715.779.5000 or email Agent(at)WindseekerRealty(dotted)com to learn more.
Buying a house involves a lot of processes and paperwork. In this complementary piece to our growing series of helpful buyer’s guide reference articles, Windseeker Realty goes into detail about the essential documents that every home buyer should prepare. From requesting and reviewing your credit report before you even begin shopping for the right lending partner, to breaking down a checklist of important income records and bank statements, we will cover all your concerns when it comes to making sense of the piles of paperwork you need to work with to buy your next home