Taking a mortgage or home loan can be an intimidating process, especially when you are surrounded by heaps of documents that you don’t understand. Luckily, we’ve broken down the process for you. This article aims to shed light on the home loan documents required, and how home loan calculations work. We will tackle this topic in a simple, easily digestible manner.
Home Loan Documents Required
The first step in getting a home loan, apart from blending your credit history, is to be fully aware of the home loan document required to present. Here are the essential documents a borrower should prepare:
Identification Documents
Ensure you have valid like ID, a passport, driver license, or social security card. Such documents should be government-issued to prove your identity and secures your application.
Proof of Income
Your potential lender will want to see your financial ability to repay the mortgage. This means presenting your pay stubs, W2 forms, or each year’s tax returns for the past two years if you are self-employed.
Bank Statements
Your bank statements, generally, the past two months are essential to provide. They are used to verify your monthly income and the cash reserves that you intend to use for closing costs, down payments, and others.
Employment Verification
Some lenders may necessitate verification of your employment. This could be through a letter from your employer or by calling your workplace. This helps ascertain that you are gainfully employed and able to repay the loan.
Credit History
The lender will make a hard inquiry into your credit history. So, making sure you maintain a good credit score is essential during your application process.
Home Loan Calculation
Understanding your home loan calculation is vital in managing your finances. Your mortgage payment consists of the principal, interest, taxes, and insurance (PITI).
Principal
This is the initial sum loaned to you by your mortgage lender which you must reimburse over the loan term.
Interest
The interest is the cost you pay to your lender in returns for borrowing their money. The interest rate is typically a percentage of your principal.
Taxes
Real estate taxes imposed by local or state entities are part of your mortgage payment. Your lender divides the annual taxes by 12 and adds that to your monthly payment.
Insurance
You can’t safeguard your property without insurance. It usually includes homeowner’s insurance and in some cases private mortgage insurance or flood insurance.
Secondary Aspects
Other documents you might encounter are related to the property. These documents can include a purchase agreement, property inspection report, and a home appraisal report. They certify the property’s quality, value, and legality.
Conclusion
Acquiring a home is a major milestone, but without the right guidance, the accompanying paperwork can be overwhelming. Luckily, with this simple and comprehensive guide, you are a step closer to understanding all the home loan documents required as well as home loan calculations. Strict adherence to the process and submission of genuine documents is crucial to accelerate your home loan approval. Be sure to seek professional assistance if necessary, to simplify the procedure. Ultimately, the dream of owning your home can be a reality with the right knowledge and preparation.
Rawat