What information do banks need from me to apply for a mortgage loan?
You will want to organize your finances before you go to the bank. While each bank may require different documentation, at BankLiberty the minimum you will need is:
- Most recent 30 days worth of pay stubs
- Most recent Federal Tax Returns, all pages, schedules, K-1s, and W2s
- Most recent 3 months worth of bank, investment, and retirement statements
- Information about any additional monthly payments such as car loans, credit cards, student loans, etc
- Photo ID.
What is a credit score?
A credit score is a primary indicator of how likely borrowers will repay future debt. Mortgage lenders review your credit history by reviewing your credit report. This report gives an indication of how well you have paid your bills and other financial obligations in the past. Additionally, the report will show how much debt you already have, for example, your credit cards, car, student and other types of loans.
The most common credit score used by lenders is the FICO®score, which can range anywhere between 300 and 850. The higher the FICO credit score a borrower has, the better. Your FICO credit score will determine the amount of money you can borrow and the terms of your loan, including the interest rate and length of loan. Credit scores do vary and change.
What is an escrow account?
Your mortgage lender may require or suggest that you set up an escrow account. With an escrow account, you pay a fixed amount each month in addition to your mortgage payment to an account—the escrow account—that is maintained by the lender. The lender then draws on that account to pay property taxes and homeowners insurance as those bills become due. Escrow accounts ensure that money will be available for these types payments, which are more than paying toward the principal and interest on your loan.
What is private mortgage insurance?
Private mortgage insurance applies to borrowers who make a down payment that is less than 20 percent of the selling price of the mortgage. Mortgage lenders often require a borrower to acquire another type of insurance, which is private mortgage insurance. This insurance covers the lender in the unfortunate event that the borrower is not able to repay the loan and the lender is not able to recover costs of the foreclosure and also selling the property.
Where can I learn more?
Freddie Mac's Online Guide to the Homebuying Process
FannieMae's Guides for Homebuyers and Homeowners
U.S. Department of Housing and Urban Development's (HUD) Guide to Buying a Home