First Steps to Getting a Home Loan

by HUD, U.S. Department of Housing and Urban Development

1. What Steps Need to Be Taken to Secure a Loan?

The first step in securing a loan is to complete a loan application. To do so, you’ll need the following information.

• Pay stubs for the past 2-3 months
• W-2 forms for the past 2 years
• Information on long-term debts
• Recent bank statements
• Tax returns for the past 2 years
• Proof of any other income
• Address and description of the property
• Sales contract unless this is a refinance

During the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The application process typically takes between 1-6 weeks.

2. How Do I Choose the Right lender for Me?

Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable. A lender that has the authority to approve and process your loan locally is preferable, since it will be easier for you to monitor the status of your application and ask questions. Plus, it’s beneficial when the lender knows home values and conditions in the local area. Do research and ask family, friends, and your real estate agent for recommendations.

3. How Are Pre-Qualifying and Pre-Approval Different?

Pre-qualification is an informal way to see how much you maybe able to borrow. You can be “pre-qualified” over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.

Pre-approval is a lender’s actual commitment to lend to you. It involves assembling the financial records (without the property description and sales contract) and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

Note added by Go Get Experts: If you’re in a hot market where potential buyers are bidding on properties, you probably need pre-APPROVAL to even be in the running. Ask your real estate agent or loan officer for advice.

Copyright HUD, U.S. Department of Housing and Urban Development. For more information, visit the HUD website.