The first thing you should do if you’re thinking about purchasing a house is to gather financial information. This information is essential for a lender to assess your eligibility for pre-approval and also aids you in determining the size of the property you can afford. You should know some things about obtaining financial data before requesting pre-approval.
Information on Income
Your salary is one of the most crucial pieces of information a lender will consider. This will enable the lender to calculate the monthly mortgage payment you can afford. You’ll need to obtain your W-2s and pay stubs to supply this information. Your W-2s will record your earnings for the previous two years, while your pay stubs will reflect your current income.
Lenders will often ask to see your tax returns, pay stubs, and W-2s. This will give the lender more proof of your income and better understand your total financial status. To acquire this information, you’ll need a copy of your most recent two years’ tax returns. You must also provide your firm’s profit and loss statement if you’re self-employed.
Assets and Debts
A list of your assets and obligations is another crucial information a lender would want. This will assist the lender in calculating your debt-to-income ratio, which is critical for evaluating whether you qualify for a mortgage. You’ll need to collect bank statements, investment account statements, a list of your debts, and a schedule of your monthly payments to submit this information.
Your current financial assets, such as your checking and savings accounts, will be displayed on your bank statements. Your investment account statements will list your stocks, bonds, and other investments. Additionally, the lender can estimate how much you pay each month toward credit card bills, auto loans, and other obligations with the aid of your list of debts and monthly payments.
How to Organize Your Financial Information
The next stage is to arrange the financial data you have collected now that you know what to do.
Here are some pointers to get you going:
- Make a folder: Make a folder exclusively for your home-buying process to store all your financial information in one location. Doing this allows you to keep everything organized and easy to find when you need it.
- Once you have gathered your financial data, scan each document and store it on your computer or the cloud. Doing this will ensure you have a digital record of everything, which will be helpful if you need to retrieve your data rapidly.
- Maintain everything current: Be sure to keep everything current as you continue to collect financial data. For instance, add a new pay stub or bank statement to your folder as soon as you get them.
Why it’s Important to Gather Financial Information
Buying a property requires gathering financial information since it enables you to determine the price range you can afford. Knowing this information will allow you to look for houses within your price range and bargain for a better mortgage.
In addition, the pre-approval process will go much more smoothly and quickly if your financial information is structured and easy to find. This is because the lender will have all the data they want to make a judgment, and you will only have to spend time looking for missing papers or responding to inquiries about your financial situation.