As the father of eight children, I cannot tell you how many times I have walked into the kitchen…or living room…or family room to find one of them in tears over their homework. And nine times out of ten—or seven out of eight, in my own family—the tears flowed most heavily when it came to one thing: math. Particularly calculus. Every one of them would wail the same thing “I just don’t understand.” The steps to apply for a loan can be very similar.
It was my job to explain to every last one of them that every math problem is really just a series of steps. You can’t do the second step before you’ve completed the first and expect it to turn out right. You have to start at the beginning and go, step by step, until you get the right answer you need. All those late nights and tear-stained notebooks later, my advice has appeared to work—all 8 of them have made it to and through college.
Oftentimes, I’ve seen that same “I just don’t understand” look on the faces of people who are looking to buy their first property. And I’ve found myself telling them the same thing I told my kids: take it step by step.
So what are the steps to apply for a loan?
1. Get your documents together. You’re going to need to start collecting information and putting it in order. In order to pre-quality for and eventually close your loan, you will likely need:
- W-2’s for the last two years for yourself and anyone who will be qualifying for the loan with you. Depending on the type of work you do, you may also be required to bring in your complete tax returns for the last two years.
- 30 days worth of pay stubs for yourself and, again, anyone who will be qualifying for the loan with you.
- Bank statements showing that you have the funds needed for any down payment required.
2. Know all about your credit before a loan officer pulls it. You can request a three-bureau credit report from Experian.com without having any negative impact on your credit score. Order it, then go through it line by line.
- If you see an account listed on your credit report that you do not believe is yours, do some research. This may occur frequently—especially if you have a common name.
- If you see an account that is yours, but you disagree with any negative rating it may contain, check your records to see if you have documentation that will support your claim. It can then be submitted to the credit bureau as well as to the underwriter ultimately assigned to your loan.
- If you have had problems with your credit in the past, be aware that this may affect your ability to get a loan. Most mortgage banks expect a minimum credit score of 620, with no late payments in the past two years. But don’t give up hope; time takes care of virtually everything—including late payment reports.
3. Step three to apply for a home loan is to find a good loan officer. Ask for recommendations, and interview several before you finally decide the on the person you want to work with. Make sure that you feel comfortable around them, that they talk with you as opposed to at you and that they don’t make promises they don’t keep. Once you’ve found that loan officer, they will work with you to pre-qualify you for a loan so you know how much you can borrow, then work with you step-by-step as you find your home, lock your rate and close and fund your mortgage loan.
Just like those calculus problems I worked through with my kids, the steps to apply for a home loan can seem overwhelming at first, but I promise that taking them one at a time will make it easier. And the graduation gift is awesome—a home that you’ll be sure to love.