There are many ways to prepare to buy a home, but a major one is to ensure your finances are completely sound. A lender is going to request many financial documents, one of which will be your bank statements. While it might seem like an insignificant request compared to your taxes or paystubs, your bank statements are vital to get your loan approved. So, what do mortgage lenders review on bank statements?
The simple explanation is that a mortgage lender needs to ensure you have sufficient funds to cover the down payment, closing costs, and some might even want to see if you have enough reserves to cover the first few mortgage payments. It is paramount these funds belong to you and they have been in your account for a while. Underwriters are thoroughly trained to pinpoint all unacceptable sources of funds, hidden debts and other red flags by analyzing your bank statements. Before you begin the homebuying process, it is best to ensure you don’t have anything questionable on your statements that will raise a red flag.
Here are 3 of the most common red flags:
Applying for a loan is not something to take lightly. Your lender is going to inspect your finances to ensure you have the money you say you do, and that the money is really yours. It is best to analyze your finances from the perspective of a lender a few months before applying for a loan to ensure you reduce the risk of having any red flags. This will also give you time to gather the documentation or explanations you might need in case you think something will catch the lender’s eye. Keep it simple both before and during the application process by not adding or taking out any unnecessary funds, and to help ensure you have a smooth experience.
If you have any questions about the home buying process or documentation requirements, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!
Recently, we talked about the third step in the home purchase process: finding your home. Once you have found a home you want to buy, the next step is to apply for your home loan. This is the time to assemble and submit all of your financial information and documentation to your lender for evaluation. Your Mortgage Loan Originator will help you figure out what documentation you need to provide, and ask you questions about your financing, so that you can submit the best possible loan application.
Ensuring a Successful Loan Application
Once it’s time to apply for your loan, your Mortgage Loan Originator will request the following from you:
Jennifer Cook, an NFM Lending Branch Manager in Louisiana, says that the most important thing to remember when applying for a mortgage loan is to be completely honest with your Mortgage Loan Originator.
“Things like child support, side business income or loss, etc., that are not disclosed upfront can create issues down the road. It is critical to provide all requested documentation in a timely fashion at application.”
Navigating the Loan Application Process
The process of applying for a loan may seem complex and even overwhelming. According to Jennifer, one of the keys to a successful loan application is to work with reliable professionals that you trust.
“Make sure you are working with a lender and a real estate agent who you know and trust. Many people are seduced by super low rates advertised online, but when it comes down to it, a loan originator who gets all their leads via the internet or an 800 # doesn’t really care if you settle or not. They have no relationship with you personally or your agent.”
Working with knowledgeable real estate and mortgage professionals will help you greatly during the home purchase process. Your Mortgage Loan Originator can help you navigate what may seem like a confusing process, and help you make sure your loan has the best possible chance of being approved.
If you have any questions about applying for a mortgage loan, contact one of our licensed Mortgage Loan Originators. If you are ready to apply for a mortgage loan, click here to get started!
When you submit an application for a home loan, one factor a lender will take into consideration is your employment history. A recent job change, a gap in work history, or a change in pay structure can all affect the home loan you qualify for. Lee Killen, a Branch Manager at NFM Lending, answered some questions about how your job history can affect your ability to qualify for a loan.
How can a recent job change impact a borrower’s eligibility for a home loan?
A recent job switch or position change at one’s current company can impact a Borrower’s eligibility for a home loan either positively or negatively, depending on the pay rate and type of pay being received (hourly, salary, or commission). The easiest transition is moving from a job in the same field with an increase in salary. The most detrimental transition when trying to purchase a house is moving from a salaried position, to a position with a large portion of your pay coming from commission. You will need to document two years’ history of commission or bonus income before it can be used to qualify for a home loan.
In what other ways do job history and pay structure affect mortgage eligibility?
A lender’s main responsibility when lending money is making sure the Borrower has the ability to repay. A large part of this process is verifying job and income stability. Your lender will verify a minimum of two years’ work and income history through tax returns, W2s, and pay stubs, along with a verification of employment from each employer over the last two years. Self-employed income and unreimbursed business expenses will also be reviewed, and can negatively affect your ability to qualify for a mortgage. Make sure your mortgage professional has received and reviewed this documentation prior to entering into a purchase transaction. Please note that a major change in pay structure can also affect your ability to qualify. Changing from a salaried position to a commission-based pay structure could disqualify you for a loan if the change took place within the last two years. Commission or bonus income also requires a full two-year history.
What advice do you have for someone who has switched jobs recently, or is thinking of doing so, and also wants to apply for a mortgage?
If you are thinking of switching jobs and want to qualify for a home mortgage in the near future, it is recommended that you consult with a mortgage professional who can advise you as to whether a job move will negatively affect your ability to qualify for a mortgage. If you have already changed jobs, make sure you explain the reason for the change to your mortgage professional. This will need to be addressed in the financing process. Position and income changes are the key things lenders will look at. If you are staying in the same line of work and your income is increasing, this is typically not a problem.
When you are ready to purchase a home, be sure to talk to your lender and find out how any income or job changes will affect your loan eligibility. By staying prepared and working with a reputable lender, you can avoid stress and take the steps necessary to get qualified for a mortgage. For more information, or to get started with the pre-qualification process, click here to contact Lee Killen or one of our licensed Mortgage Loan Originators!
Fixed-rate mortgages are the most common type of mortgage selected by homeowners today. You are able to lock into a set interest rate which results in monthly mortgage payments that remain the same for the entire life of the loan. According to Warren Buffet, “the smart way to own a home has three elements: a fixed mortgage, affordable payments, and long-term hold.”
A fixed-rate mortgage (FRM) is a type of mortgage with a specific rate term. A fixed-rate mortgage has a fixed interest rate for the entire length of the mortgage term. These mortgages are typically available in 5 year increments between 10 and 30 year terms. The 30-year fixed rate mortgage is the most common type of mortgage people take out.
Is this right for you?:
A fixed-rate mortgage may be a good option for you if:
If you have any questions regarding what a fixed-rate mortgage is and how it can benefit you, please click here to contact a licensed Mortgaged Loan Originator.