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Applying for a mortgage isn’t something you just decide to do one day and then do it. A home purchase is one of the biggest moments in a person’s life, especially when it comes to finances. It’s probably safe to say that most people know to do their homework first when it comes to finding the best mortgage deal, but there is actually a lot of ground to cover before you even get that far.

                There are three things you will want to do right away, and even though we’re listing them in order they don’t have to go in any order and they are equally important. These three things will help put you in a much better position financially for when the time to apply for that mortgage finally arrives.

                The very first thing you should do (seriously, as soon as you make the decision to buy) is take a good look at your credit. Don’t make the mistake of assuming you know what shape your credit is in and what might show up on your credit report. Also, don’t assume that if your credit is in rough shape there isn’t anything you can do to fix it anyway. Everyone is entitled to a free credit report every year, so take advantage of it. Get the report and review it thoroughly.

• Start with the negative to get those issues resolved quickly.
• Look for any accounts listed as delinquent or any negative feedback such as late or missed payments.
• If there are any errors or discrepancies on your credit report you can dispute them with the credit reporting agency to try to get them removed.

Once you feel you have addressed all immediate issues in your credit report (if any), you want to set a day each week where you take time to manage the resolution of any credit issues, since it may require follow up calls or additional outreach. You have to be persistent and continue until you feel each issue has been completely resolved.

The second thing you should do is to improve your debt-to-income ratio. This is something that banks look at when you apply for a loan. There are really only two ways to do this; increase your income or reduce your debt.  This doesn’t mean you have to go out and start a new career or find a new job, but to increase your income you need to make more money somehow. Maybe you can get a part-time job to earn some money on the side. Do you have a talent or special skill? Turn it into an income stream.

The third thing you should do is start saving for a down payment. This can be a challenge, but there are ways and saving any amount is better than saving nothing at all. There are way too many saving tricks and techniques for this article (like selling items on Facebook Marketplace, having a yard sale, etc.) Check out our Facebook page for some great savings tips. However you decide to make it happen, make a plan to start as soon as possible. If you’re able to save money to put towards your down payment it could save you some money or, at the very least, give you one less thing to stress about so you can spend more time looking at listings and finding the perfect mortgage.

Now, you have the foundation down and you’re working towards your goal of finding a home and applying for a mortgage. What should you gather? What will your bank ask you for when you fill out a mortgage application? While every situation is unique and some items may or may not apply to everyone, there are some basic items you should have ready to go, just to be on the safe side.

You will be asked to provide proof of the following things:

Your Identity
Obviously, your bank will want to verify that you are, in fact, yourself, and that nobody is trying to apply for a loan under your name (let’s all be thankful for banks that care enough to watch out for their customers). You will be asked to provide a state issued photo i.d., such as a drivers license or state photo i.d. card.

Your Income
Your bank is going to want to see your paystubs, and they will likely ask for at least one month’s worth. You should have two months’ worth of paystubs ready to be safe. And yes, they should be the most recent ones.

Your bank will also ask you for at least two years’ worth of W2s and 1099 forms to prove any income. Self-Employed or commissioned? You’ll have to have two years’ worth of tax returns as your proof of income.

Assets & Debts
To show your assets and debt you’ll need to provide the most recent two to three months’ worth of the following:

• Statements for any checking, savings, 401K, IRA, stock, mutual funds, etc. A safe rule of thumb is, if the account is listed on the application, be prepared to provide documentation for it.
• Documentation for any debt such as credit cards, student loans, etc.
• Judicial decree or court order for any obligations due to legal action.

Credit
Your bank will check your credit report, you don’t need to provide copies to them. They will ask for your permission first, which you have to grant. They will check your overall credit score, which will influence the rate you’re approved for or the loan programs you qualify for. Having a few blips on your credit report doesn’t have to mean denial, but you may be asked to provide additional documentation for decision making purposes. If there are late payments, collections, or derogatory marks on your credit report you may have to do some legwork to make a case for yourself as a responsible borrower.

If You’re Applying for a Construction Loan to Build a New Home
If you’re applying for a construction loan to build a new home, you will be asked to provide a copy of the deed if you already own the land you plan to build on, or a signed sales agreement to purchase the land. You should also have a copy of the final construction contract with plans and specifications for the home.

Additional Items You May Be Asked For
All banks are different and all situations unique, so there is a chance you may need something in addition to the previous items.

• If you are applying for your first mortgage, you may be asked for proof of your rental history showing stability and consistency in making payments. Canceled checks should be provided. You may also be asked to provide references, such as former or current landlords.
• If you’ve recently gone through a divorce or are in the process, you may need to provide the divorce decree for any questions on assets, alimony, child support, etc.
• For those that don’t have much of a credit history (we all have to start somewhere), you might want to have some additional documentation that shows a 12-month history of making payments for things such as cell phone bills, utilities and cable. Anything you have that shows a history of making payments regularly and on time for at least a year will be helpful.

Are You Ready Yet?!
We just about covered everything you should need to get started with your mortgage application! If you’ve taken the time to do the three foundation items and you feel confident that you’ve got everything on your list, all that’s left is to apply.

One final “to do” item, even though we said we were done. You’ve put in the time and hard work into getting your finances in shape and preparing to apply for a mortgage… DON’T make the mistake of choosing the wrong bank for your mortgage. A mortgage is something that you’ll be paying for many years to come, and over those years so many things can happen.

The right bank will work to make sure you’re happy for the life of your mortgage, not just during the applications process. You want a bank that can help when it’s time to refinance, if you want to put on an addition, if you decide to take out a home equity loan, and more. You also want a bank that treats you like a valued customer and not just a number.

Learn More

Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1-800-692-6279 or email [email protected]. Member FDIC. Equal Housing Lender.