You want a mortgage to cover that dream home you found—and your lender has some questions for you when you’re applying. After all, they have to determine if you’re qualified, and this process goes beyond, “Can you afford this house?”
Some of the questions will be completely expected; others will be less so. They’re not prying, though. They just need to know all the facts. But for preparation’s sake, here are some of the main questions you can expect to answer.
1) What are your assets and debts?
Obviously, more assets and less debt are preferable. Prepare to show them bank statements and an investment portfolio (if you have one), and any other proof of cash reserves. Along with that, you’ll have to provide information on credit cards, car payments, student loans, and other debts.
2) Where’s your proof of income?
They want you to be gainfully employed, and they want you to prove it, in the form of pay stubs, invoices, and verifiable documents. You’ll also have to show proof of other income, such as alimony or child support.
3) How much down payment can you afford?
The more you can put down, the better it is for everyone. Be prepared to have an exact number in mind.
4) How’s your credit?
This one is twofold: you’ll need to provide your credit score and report when you first apply, and when you’re ready to close. Make sure if anything changes during the in-between time, it’s for the better (meaning no new debts!).
5) Are you currently involved in a lawsuit?
If you are, expect to provide proof of why a judgement against you won’t affect you financially.
6) How about a divorce?
Don’t worry, they’re not judging your love life. But they do need to know if and how a divorce will affect your finances.
7) How do you plan to use the property?
Again, this isn’t about personal judgements, but they do need to know whether you’ll be an occupant or an investor. There are differences between the two when it comes to mortgages, and you’ll need to answer honestly.
Once you know what questions to expect, you can think like a lender, and avoid any surprises that can stand in the way of you and your new home.