First Time Home Buyer Guide: What You Can Expect: Home Possible Loans Part 2

Bank Statements and Assets Required for the Home Possible Loan Program

In the last section, we discussed the importance and some documentation that would be needed with the submission of pay stubs and Bank Statements for a first time Home Possible Loan Program. In this section, we will go a bit more into some additional asset documentation as well as credit documentation that will need to be provided by borrower looking to purchase their first home.

The Home Possible Program is a much more lenient on Bank Statements than the USDA program.

For acceptable asset documentation, the first time home buyer can bring in 401K, retirement and/or IRA funds for closing to show reserves. The underwriter for the lender will require the first time home buyer to provide the official most recent statement for these accounts, which shows any withdrawals and contributions as well as the vested balance. The other requirement for the first time borrower will be the terms and conditions. This document, which is usually labeled “Plan Summary” will outline all of the information in regards to taking a loan or withdrawing from the 401K account. Most first time borrowers may not even use the 401K to show funds for closing, but for reserves. In other words, the first time borrower just wants to show the underwriter that in case of hardship they will have a few months of reserves for paying the mortgage. By having these documents ready beforehand, the first time home buyer can send in a complete package with the assets mentioned in the previous update. Just as a reminder, the first time home buyer needs to provide the most recent official statement available, which may be quarterly or even annually. 

As a reminder, the underwriter will be looking for the first time borrower’s most recent Asset Statement for submission.

Why Credit History and Credit Score is Important

As with other programs, the lender will wish to see the credit history and current credit score of the borrower looking to purchase their first home through the Home Possible loan program. The credit of the first time home buyer is pulled for many reasons, such as seeing if there are any recent debts, any new credit lines, and inquiries from other mortgage companies for the first time borrower. For the Home Possible loan program, as well as other loan programs, the credit score must be above a certain requirement and all debt-to-income must be documented. If a borrower has inquiries within the last 120 days, these inquiries must be explained and documentation is required if any of the inquiries resulted in a new credit account or line being opened.

The underwriter also wants to make sure that the first time borrower isn’t going through the mortgage lending process at the same time with another home. If the first time home buyer has to open a new line of a credit, it’s highly recommended to talk with the Loan Officer first. It is a possibility that opening a new line of credit, especially taking out a loan for personal purposes, can actually result in being denied for the home loan. More specifically, if the first time home buyer opens a new account that puts them over the debt-to-income ratio limit, they will no longer be eligible for that loan.  It’s very important that any actions from the first time home buyer that may affect debt to income and also the credit score be discussed with the Loan Officer working with them on their first loan first.

For the next section, we’ll talk a bit about the Appraisal Report required for the Home Possible Loan program. 

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First Time Home Buyer Guide: What You Can Expect: Home Possible Loans Part 1

An Intro for Freddie Mac’s Home Possible Loan Program

For this part of the series, we will be discussing what a first time home buyer can expect with applying for a Home Possible Loan. Buying a home through a Freddie Mac’s Home Possible Loan Program has several differences and similarities from the USDA loan program. As a reminder, Freddie Mac’s Home Possible has two different types, Home Possible and Home Possible Advantage. The Home Possible and Home Possible Advantage Programs are both tailored towards the lower-to-medium income households. The Loan-to-Value or LTV requirements, flexible down-payment options, and Property-types approved by the program all are examples of how this program aims to make purchasing homes more affordable.

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Assets and Income Guidelines: Home Possible

Similar to the USDA, CONV, and FHA First Time Home Buyer Guides, we will be discussing Assets and Income first. The Home Possible Loan program is a bit more lenient in terms of requirements for asset documentation, such as bank statements. The first time home buyer can rest assured that household asset documentation is not required for this program. While large deposits do need to be sourced for this program, the large deposit “threshold” will be much more forgiving than the USDA program.

Non-payroll deposits of 1% or more of the purchase price will need to be sourced for Home Possible Loan programs. The underwriter needs to make sure that the first time home buyer’s money is coming from a credible, legal source, and will need to be documented. Non-purchasing spouse can submit their asset documentation only if they wish to. This includes others in the home that are over eighteen years of age. The only difference is if there are transfers going into the first time borrower’s account from another person’s bank account. If this is the case, that Bank Statement will need to be provided so the underwriter can source the transfers. Joint accounts will need to be submitted as long as the first time borrower is listed as an account holder as well. Other than that, submitting of Bank Statements is pretty straight forward.

architecture, wood, house, floor, interior, home

Just like for the USDA, FHA and CONV programs, the underwriter will require 30 days of the most recent pay stubs for submission. As mentioned before, pay stubs are used for determining the baseline for income, and can also see if there any deductions for other things, such as child or spousal support. In order to get an accurate reading on debt-to-income, if there are any other additional deductions besides taxes, social security, etc., then there will need to documentation provided to the underwriter to show how long the additional deductions will be affecting the income. If the first time borrower pays or receives child support, a child support order is needed, and if a first time borrower pays or receives spousal support, a divorce decree and separation agreement will be required. Both of these items are required because the first time borrower will need to have debt-to-income recalculated if these items weren’t previously shown. 

For the next section, we will dive into a bit more for the Home Possible Loan program with Part Two of the series!

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First Time Home Buyer Guide: What You Can Expect: VA Loans Part 2

Bank Statements and Assets Required for the VA Loan Program

In the last section, we discussed the importance and some documentation that would be needed with the submission of pay stubs and Bank Statements for a first time VA Loan Program. In this section, we will go a bit more into some additional asset documentation as well as credit documentation that will need to be provided by borrower looking to purchase their first home.

apartment, chair, contemporary

For acceptable asset documentation, the first time home buyer can bring in 401K, retirement and/or IRA funds for closing to show reserves. The underwriter for the lender will require the first time home buyer to provide the official most recent statement for these accounts, which shows any withdrawals and contributions as well as the vested balance. The other requirement for the first time borrower will be the terms and conditions. This document, which is usually labeled “Plan Summary” will outline all of the information in regards to taking a loan or withdrawing from the 401K account. Most first time borrowers may not even use the 401K to show funds for closing, but for reserves. In other words, the first time borrower just wants to show the underwriter that in case of hardship they will have a few months of reserves for paying the mortgage. By having these documents ready beforehand, the first time home buyer can send in a complete package with the assets mentioned in the previous update. Just as a reminder, the first time home buyer needs to provide the most recent official statement available, which may be quarterly or even annually. 

contemporary, furniture, home

Why Credit History and Credit Score is Important

As with other programs, the lender will wish to see the credit history and current credit score of the borrower looking to purchase their first home through the VA loan program. The credit of the first time home buyer is pulled for many reasons, such as seeing if there are any recent debts, any new credit lines, and inquiries from other mortgage companies for the first time borrower. For the VA loan program, as well as other loan programs, the credit score must be above a certain requirement and all debt-to-income must be documented. If a borrower has inquiries within the last 120 days, these inquiries must be explained and documentation is required if any of the inquiries resulted in a new credit account or line being opened.

The underwriter also wants to make sure that the first time borrower isn’t going through the mortgage lending process at the same time with another home. If the first time home buyer has to open a new line of a credit, it’s highly recommended to talk with the Loan Officer first. It is a possibility that opening a new line of credit, especially taking out a loan for personal purposes, can actually result in being denied for the home loan. More specifically, if the first time home buyer opens a new account that puts them over the debt-to-income ratio limit, they will no longer be eligible for that loan.  It’s very important that any actions from the first time home buyer that may affect debt to income and also the credit score be discussed with the Loan Officer working with them on their first loan first.

For the next section, we’ll talk a bit about the Appraisal Report required for the VA Loan program. 

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First Time Home Buyer Guide: What You Can Expect: VA Loans Part 1

An Intro for the Department of Veteran Affairs (VA) Loan Program

For this part of the series, we will be discussing what a first time home buyer can expect with applying for a loan as VA. Buying a home through a VA Loan Program has several differences from the USDA loan program, and is closer related to the Conventional Loan Program process. The VA Loan program is a loan program that is offered to those who have served, or the spouses of those who have served and passed away while on duty. There are strict guidelines for whether or not one is able to apply for a VA Loan.  These guidelines are: 

  1. You have actively served a consecutively 90 days during war time OR;
  2. You have actively served 181 days during peacetime OR;
  3. You have more than 6 years of service in the National Guard or Reserves OR;
  4. You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability

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Assets and Income Guidelines: 

Similar to the USDA, CONV, and FHA First Time Home Buyer Guides, we will be discussing Assets and Income first. The VA Loan program is a bit more lenient in terms of requirements for asset documentation, such as bank statements. The first time home buyer can rest assured that household asset documentation is not required for this program. While large deposits do need to be sourced for this program, the large deposit “threshold” will be much more forgiving than the USDA program.

Non-payroll deposits of 1% or more of the purchase price will need to be sourced for VA Loan programs. The underwriter needs to make sure that the first time home buyer’s money is coming from a credible, legal source, and will need to be documented. Non-purchasing spouse can submit their asset documentation only if they wish to. This includes others in the home that are over eighteen years of age. The only difference is if there are transfers going into the first time borrower’s account from another person’s bank account. If this is the case, that Bank Statement will need to be provided so the underwriter can source the transfers. Joint accounts will need to be submitted as long as the first time borrower is listed as an account holder as well. Other than that, submitting of Bank Statements is pretty straight forward.

apartment, architecture, beautiful

Just like for the USDA, FHA and CONV programs, the underwriter will require 30 days of the most recent pay stubs for submission. As mentioned before, pay stubs are used for determining the baseline for income, and can also see if there any deductions for other things, such as child or spousal support. In order to get an accurate reading on debt-to-income, if there are any other additional deductions besides taxes, social security, etc., then there will need to documentation provided to the underwriter to show how long the additional deductions will be affecting the income. If the first time borrower pays or receives child support, a child support order is needed, and if a first time borrower pays or receives spousal support, a divorce decree and separation agreement will be required. Both of these items are required because the first time borrower will need to have debt-to-income recalculated if these items weren’t previously shown. 

For the next section, we will dive into a bit more for the VA Loan program with Part Two of the series!

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First Time Home Buyer Guide: What You Can Expect: Conventional Loans Part 1

For this part of the series, we will be discussing what a first time home buyer can expect with applying for a loan as Conventional. Buying a home through a Conventional loan program has several differences from the USDA loan program, but can closer related to the FHA program. The Conventional Loan program is the industry-normalized loan program that most home-owners participate in. This program doesn’t target any potential first time borrower over a repeat borrower, unlike the FHA Program.  If you’d like to learn more about the Conventional program in depth, including reasons why people generally pick this program over others, please check out the Conventional Loan Program update!

Image result for modern living roomSimilar to the USDA and FHA First Time Home Buyer Guide, we will be discussing Assets and Income first. The Conventional program is a bit more lenient in terms of requirements for asset documentation, such as bank statements. The first time home buyer can rest assured that household asset documentation is not required for this program. While large deposits do need to be sourced for this program, the large deposit “threshold” will be much more forgiving than the USDA program.

Non-payroll deposits of 1% or more of the purchase price will need to be sourced for Conventional programs. The underwriter needs to make sure that the first time home buyer’s money is coming from a credible, legal source, and will need to be documented. Non-purchasing spouse can submit their asset documentation only if they wish to. This includes others in the home that are over eighteen years of age. The only difference is if there are transfers going into the first time borrower’s account from another person’s bank account. If this is the case, that Bank Statement will need to be provided so the underwriter can source the transfers. Joint accounts will need to be submitted as long as the first time borrower is listed as an account holder as well. Other than that, submitting of Bank Statements is pretty straight forward.

Image result for modern living room

Just like for the USDA program, the underwriter will require 30 days of the most recent pay stubs for submission. As mentioned before, pay stubs are used for determining the baseline for income, and can also see if there any deductions for other things, such as child or spousal support. In order to get an accurate reading on debt-to-income, if there are any other additional deductions besides taxes, social security, etc., then there will need to documentation provided to the underwriter to show how long the additional deductions will be affecting the income. If the first time borrower pays or receives child support, a child support order is needed, and if a first time borrower pays or receives spousal support, a divorce decree and separation agreement will be required. Both of these items are required because the first time borrower will need to have debt-to-income recalculated if these items weren’t previously shown. 

For the next section, we will dive into a bit more for the Conventional loan program with Part Two of the series!

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First Time Home Buyer Guide: What You Can Expect: FHA Loans Part 2

In the last section, we discussed the importance and some documentation that would be needed with the submission of pay stubs and Bank Statements for a first time FHA mortgage. In this section, we will go a bit more into some additional asset documentation as well as credit documentation that will need to be provided by borrower looking to purchase their first home.

Image result for interior design living room

For acceptable asset documentation, the first time home buyer can bring in 401K, retirement and/or IRA funds for closing to show reserves. The underwriter for the lender will require the first time home buyer to provide the official most recent statement for these accounts, which shows any withdrawals and contributions as well as the vested balance. The other requirement for the first time borrower will be the terms and conditions. This document, which is usually labeled “Plan Summary” will outline all of the information in regards to taking a loan or withdrawing from the 401K account. Most first time borrowers may not even use the 401K to show funds for closing, but for reserves. In other words, the first time borrower just wants to show the underwriter that in case of hardship they will have a few months of reserves for paying the mortgage. By having these documents ready beforehand, the first time home buyer can send in a complete package with the assets mentioned in the previous update. Just as a reminder, the first time home buyer needs to provide the most recent official statement available, which may be quarterly or even annually. 

Image result for interior design living room

As with other programs, the lender will wish to see the credit history and current credit score of the borrower looking to purchase their first home through the FHA program. The credit of the first time home buyer is pulled for many reasons, such as seeing if there are any recent debts, any new credit lines, and inquiries from other mortgage companies for the first time borrower. For the FHA loan program, as well as other loan programs, the credit score must be above a certain requirement and all debt-to-income must be documented. If a borrower has inquiries within the last 120 days, these inquiries must be explained and documentation is required if any of the inquiries resulted in a new credit account or line being opened. The underwriter also wants to make sure that the first time borrower isn’t going through the mortgage lending process at the same time with another home. If the first time home buyer has to open a new line of a credit, it’s highly recommended to talk with the Loan Officer first. It is a possibility that opening a new line of credit, especially taking out a loan for personal purposes, can actually result in being denied for the home loan. More specifically, if the first time home buyer opens a new account that puts them over the debt-to-income ratio limit, they will no longer be eligible for that loan.  It’s very important that any actions from the first time home buyer that may affect debt to income and also the credit score be discussed with the Loan Officer working with them on their first loan first.

For the next section, we’ll talk a bit about the Appraisal Report required for the FHA loan program. There will be some differences compared to the USDA program, so we will also outline those as well.

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