The majority of home buyers know the basics of mortgage loans. Few of them, though, know everything they need to know to maximize their chances of getting approved and to get the mortgage that best meets their needs. It pays to know what lenders look at and what documents you’ll need when you apply. So read this before you apply for a mortgage in Miami.
What Mortgage Lenders Consider
You’ll be far better off when you apply for a mortgage in Miami if you know what lenders are looking for – that is, the factors that go into determining whether you’ll get the mortgage. Basically, what they look at is captured in the acronym “IPAC”: income, property type, assets, and credit.
Although there is no set amount you have to make annually, you do have to prove that you can afford the home, that you can make the monthly mortgage payments. Lenders are in business to make money, so they want to hedge their bets and make sure you can pay back the loan – with interest.
Mortgage lenders, then, will consider your total monthly income and how much or how little risk that presents for them. They will look at your employment history and your regular monthly household income, as well as additional/supplemental income such as child support or part-time side hustles.
When you apply for a mortgage a lender will want to what type of property you’re buying. This can affect the kind of loan and rates you can get because different types of properties present different levels of lender risk.
If, for example, you want to buy a single-family home for your primary residence, you may get better terms. But if you want to buy, say, an investment property, you’ll likely need a higher credit score and would have to come up with a larger down payment. For investment properties are typically riskier for lenders.
Basically, this means the cash reserves you have on hand. When you apply for a mortgage, lenders want to be assured that you have the extra money in the bank so that you’ll be able to make payments if you hit a financial rough spot. Such assets usually include anything you can convert into cash, such as savings, retirement, and investments.
And, of course, lenders will be highly interested in your credit history and credit score. A good credit score tells them that you make payments on time and that you don’t over-borrow – that is, you are a better risk. A higher credit score will give you access to more options and lower interest rates.
You do have options, though, if your credit score is on the lower end, options such as government-backed mortgage loans. You can contact a Miami agent at 305.771.1710 to find out more about this.
What Documents You’ll Need
If you want to make the process as smooth as possible, you’ll also need to have all the requisite documents in hand when you go in to apply for a mortgage in Miami. Typically, you’ll need to have . . .
PROOF OF INCOME
You will need to provide documents and paperwork to verify your income:
- A minimum of the two most recent years of income tax returns
- W-2s and/or pay stubs for the past two years (1099s or similar documents if you’re self-employed)
- If applicable, legal documents concerning divorce decrees, child support, alimony, and the like
DOCUMENTATION OF CREDIT
Typically, lenders will request written or verbal permission to pull and view your credit report. They will be looking for negatively impacting factors such as bankruptcy or foreclosure.
If, however, you’ve simply missed a few payments owing to extenuating circumstances, you’re not necessarily out of luck. You just have to provide the necessary documentation that proves the circumstances and shows that you caught up on the payments.
PROOF OF ASSETS AND LIABILITIES
To prove that you have the desired assets you’ll typically need to provide:
- Checking and savings account statements for at least the past 60 days
- Most recent statement for retirement and investment accounts
- Documentation for the sale of assets prior to applying for the mortgage
Lenders will also want to know about your liabilities – your debts. So, typically, you’ll need to provide the pertinent paperwork for such things as auto loans and student loans.
Easier Isn’t Always Better
According to industry experts, when it comes time to apply for a mortgage, you need to shop around and perform your due diligence. Just because you already have accounts at your bank doesn’t mean your bank will be the best mortgage lender for you.
So, first, do some research. Today, you can find nearly all the information you need online. Sure, there will always be a few disgruntled reviewers, but when you find a consistent pattern or trend, let that guide you.
Second, don’t go with the first likely looking lender you come across. Do some comparison shopping to find the best rates and terms. Doing so can save you thousands – maybe even tens of thousands – of dollars over the life of the loan. And don’t forget to factor in other important considerations like customer service.
Talk to Your Miami Agent
While an agent isn’t a financial advisor, your Miami agent can still provide some guidance and point you toward likely lenders. Buying a home is a big step – probably the largest financial transaction of your life – and it pays to get all the expert assistance you can. So before you apply for a mortgage in Miami and take that irreversible step, contact us today at 305.771.1710.