Mortgage Preparation: What to do
Preparation is key, and it can begin well before a formal application. Document collection is a major pain point for borrowers, but organizing ahead of time can save weeks of back-and-forth with loan officers. Here’s how to get ahead of the process:
1. Checklist of documents to prepare
Initial PDFs to gather
Proof of Income: Recent pay stubs (last 2-3 months). Self-employed? Provide tax returns for the past two years. Non-traditional earners may face stricter approval—consider working with a niche broker.
Proof of Employment: Employer contact information or offer letters.
Tax Returns: Copies of the last 2 years’ tax returns.
Bank Statements: Statements from the last 2-3 months for all accounts.
Credit Information: Authorization to check your credit report and score.
Identification: Government-issued photo ID and Social Security number.
For Final Loan Approval
Asset Documentation: Proof of assets such as retirement accounts, brokerage accounts, and savings.
Debt Information: Details of all current debts (e.g., car loans, credit cards, student loans).
Proof of Down Payment Funds: Bank statements showing the funds available for the down payment.
Gift Letters: If part of your down payment is a gift, provide a letter from the donor.
Property Details: Purchase agreement, details on the property being purchased, and homeowners insurance quotes.
2. Considerations to go over with your Loan Officer / Lender
About Fees and Costs
What are all the fees associated with this loan?
Are there any application fees, origination fees, or underwriting fees?
Will I need to pay for private mortgage insurance (PMI)? If so, how much?
About Loan Terms and Flexibility
Verify your specific loan term and type. Is the interest rate fixed? Does this loan have a resetting rate?
Are there prepayment penalties if I pay off the loan early or refinance? If so, what are they?
Can I lock in my interest rate, and how long is the lock-in period?
Is there a cost to lock-in? Are there penalties for not following through with the locked rate?
Can I receive a lower rate without penalty if interest rates drop?
About Monthly Payments
What does my monthly payment cover—principal, interest, taxes, insurance? Escrow?
Can I make extra payments toward the principal without penalties?
Is my credit score (or that of my spouse) impacting our rate? Would improving my credit score to a certain level trigger a rate improvement?
Would opening an account or making a deposit with the lender improve my rate? If so, how long must the funds remain?
About Closing Costs
What are the estimated closing costs?
Are any of these fees negotiable or avoidable?
What funds will I need to bring to closing?
About Long-Term Considerations
How will my credit score impact the final rate?
Are there loan options that include assistance for first-time homebuyers?
What happens if my financial situation changes during the loan process?
3. Additional categories to consider
Understanding Loan Types
Fixed-rate vs. adjustable-rate mortgages: When is each a good fit?
FHA, VA, and USDA loans: Who qualifies and what are the benefits?
Jumbo loans: What to know if buying a high-value property.
Budgeting for All Homeownership Costs: Try calculator.incomp.app.
The Importance of putting lenders incomp (in competition)
Compare at least three lenders (although you may see rate improvements by asking more) to ensure you’re getting competitive rates and terms.
Follow incomp.app on social media for announcements of our mortgage comparison platform.
Preparing for Potential Roadblocks
Credit Issues: Check your credit report in advance and address errors.
Employment Changes: Avoid switching jobs during the application process.
Debt-to-Income Ratio: Pay down existing debts to improve your eligibility.
Self-Employed & Freelancers: Lenders assess income stability carefully. Have at least two years of tax returns (Schedule C or SE), bank statements, and a steady income history. If approval is difficult, seek a broker specializing in self-employed borrowers.
Prior preparation prevents poor performance
Preparation streamlines the mortgage process and helps you secure the best deal. Use this guide to get ahead, ask smart questions, and compare your options confidently.