It’s normal to feel a jumble of emotions when you’re in the home stretch of the mortgage process. Receiving approval and closing on your new house can be exciting, daunting, and tedious all at once.
This checklist will arm you with the knowledge you need to remain calm, cool, and have everything collected for the end of your home buying journey.
Get your ducks in a row
As part of the mortgage approval process, your lender is going to ask for some documents. Quite a few of them, in fact. The need to provide what’s known as “full documentation” is perfectly normal, so don’t fret. It’s intended to help protect you, strengthen the lending process, and safeguard the economy — all good things.
Unless you’re one of those super organized folks (lucky you!), your financial paperwork — both physical and digital— is probably stashed in various places. Take the time now to unearth:
- Paystubs or other verification of your income from the past several years
- Account statements from the preceding 30 to 90 days to verify the assets that will be used for your down payment or left in savings
If you like to be extra prepared, go ahead and locate the following documents as well. In some instances, your lender might ask for them:
- Financial statements (if you are self employed)
- A copy of the trust for any property held in the name of a trust
- Rental history and rental expense information (if you own multiple properties)
And be prepared to provide an explanation to your lender if any of these appear on your credit report:
- Multiple addresses within the last two years
- Delinquent credit
- Charge-offs, collections, or credit inquiries within the last 120 days
Know what to expect
While shopping for a home loan, be sure to ask a lender to disclose all closing fees you’ll be required to pay. That way, you’re not surprised as the clock counts down.
In many instances, you’ll be responsible for settling closing costs in full at the time of closing. If you’re lucky, the seller may contribute funds towards them. Or your lender could allow you to roll them into your total loan amount, which is helpful if you have a particularly large down payment or you don’t have a lot of extra cash on hand.
If you choose the latter, just bear in mind that you’ll be paying interest on your closing costs over time.
Typically, closing costs are between 2 and 5 percent of the purchase price and fall into three categories:
- Fees paid to the lender, such as the origination fee, discount points, and underwriting fees, and sometimes a processing or application fees
- Fees paid to third parties, including costs for the appraisal, property survey, title search, title insurance, attorney, credit bureau, flood certification, tax certification, and recording/state fees.
- Other fees like mortgage insurance and an escrow account, which is essentially an account that you fund and your lender manages. Each month when you make your mortgage payment, it includes additional charges to cover taxes and insurance. Those funds are placed in escrow and used by your lender to make payments on your behalf.
Once you’ve checked everything off this list, you should be prepared for whatever your lender asks from you. Take a deep breath, know that you’ve done a job well done, and snag those keys to your new home.
Want more info on the rest of the purchasing process? Download our Mortgage Playbook for everything you need to succeed.