Acquiring a loan is vital for most people purchasing a home. If you are a first-time home buyer, this process can be intimidating. When you apply for a loan, lenders essentially evaluate the risk they would incur by lending you money. With that said, lenders consider the following factors:
1: Income and Job History
Your lender needs to see that you have steady cash flow coming in each month to ensure you will be able to pay back your loan.
2: Credit Score
Your credit score shows lenders that you make your payments on time and that you don’t have a history of borrowing too much money. It’s important to keep in mind that a higher credit score can give you access to more lender options and lower interest rates.
3: Debt-to-income ratio (DTI)
Your debt-to-income ratio is calculated by taking the total of all your minimum monthly debt payments and dividing it by your gross monthly income. The types of debts that are considered for your DTI include things like student loans and car payments.
4: Assets
When lenders consider the risk in extending you a loan, they also want to know that if something happens, you have backup cash flow in the form of savings, retirement, and other taxable investments.
5: Property Type
If you are applying for a loan for a single-family home that will be your primary residence, you’ll likely get a better rate than if you are applying for a loan for something like an investment property. Lenders know your commitment to paying back your loan on the house you’ll be living in is strong!
With all of the above factors in mind, you’ll need to gather several pieces of paperwork and have them handy before applying for a loan. This is not a complete list because situations can vary widely from each borrower, but the following list is pretty standard for items a lender will request:
- Tax returns for the last 2 years
- Profit and loss statements or 1099 forms (if you own a business)
- Recent paycheck stubs
- Complete list of debts: credit cards, student loans, car loans, child support payments, etc., along with minimum monthly payments and balances
- List of assets, including bank statements, mutual fund statements, real estate and automobile titles, brokerage statements, and records of other investments or assets.
- Canceled checks for your rent or mortgage payments.
If you are ready to begin your home search and are in need of a lender, fill out our form below and we will contact you with some of our most-trusted Tulsa area lenders. Using a trustworthy lender with a reputable company is the first essential step in your home buying experience. It’s worth it to call a couple of lenders and see what they can do for you. Different lenders can negotiate different rates and have different kinds of loan structures to offer.
As always, if you need any help or have any questions along the way, we’re here for you!
