One of the foremost and basic steps that come in to picture while applying for a mortgage is the documentation of your income. However, contrary to the popular belief, there is a lot more to simply handing the paystubs. But before that you must be well acknowledged and aware of the stability of your total earnings. In addition to this, at time of making the concerned down payment, you will also be required to demonstrate all the sources from where the money is coming from. Here are some of the details that will help you on getting your hands on some of the best home equity loan rates.
How much total income you should actually have?
Let us get the basics straight on this. As a general guideline, your overall monthly housing expenses consisting of the homeowner’s insurance, property taxes and mortgage must not exceed more than twenty eight percent of the total income on the monthly basis. This also takes in to account the overall debt settlements that is inclusive of things such as car loans as well as the credit card bills should never exceed the thirty six percent of your monthly income. However, these fractions and figures do not come as any hard and fast rule. Whereas some lenders may get satisfied with lower ratios, however there are also lenders who demand much higher fractions than the standard ones. The latter is usually the case either when one have a really high credit history or very low existing debts.
A History of two year is optimum
While documenting your income, a lender demands some of your current paycheck stubs, especially the most recent one in the W-2 form. However, the real documents cover almost everything related to your pay checks such as your federal tax returns for the last two years which is generally obtained by the lender directly from the IRS. Prior to that, you might also be asked to another fill out other relevant forms in order to obtain as well as authorize the release from the IRS.
A lot of the lenders check for at least a total of two years of consistent or steady income source before authorizing any form of loans to their clients. Any gaps in this period of employment are however not at all entertained. In case you have changed jobs, it is acceptable only if the jobs you have switched belong to the same field. In case the change bought in the different jobs you have done during this period of two years is a major one say from being a school teacher you shifted to a sales expert or vice versa, then you might even get directly rejected by the lenders on this basis. In other words, mortgage lenders only look for stability these days and before lending out any kind of loan to you, they just want to make sure that your new and correct career is working out perfectly for you. That is why, such form of credibility and consistency is required in the job documentation and paystubs especially when it comes to choosing the best home equity loan rates.
Receiving money for your down payments
In case you manage to receive some money for clearing all your down payments, then you must also be able to produce documentation and other relevant material for generating a proof of the source from where you got it so as to implement it. If it was a form of gift, say from your family members or any other relatives then you must be required to produce a gift letter where the person gifting the money to you must clearly state the same.
Pearl Anderson is a finance writer and expert of http://www.getlenderqualified.com/. He recently published a paper that highlighted some of the expert tips for choosing the best home equity loan rates. He is currently based in Vancouver. For more information, check out this article on A beginners Guide to Business interruption Insurance