I am planning to apply for a mortgage next year. I am currently working on fixing my credit and finances, but want to know how far back a lender looks at those. For example, I have collections and judgments on my CR, but for my open/current accounts, I've had a "clean" payment history since March 2011 (Auto loan. My oldest credit card was opened in May 2012, so I have a low AAoA). Also, how many months of bank statements do they usually need and what do they look for? I also have a loan against my 401k with a $7k balance. Should I pay that off before applying for the mortgage? Do I need to show proof of my rent checks paid? How many years of tax returns is required? Anything else I should prepare for to better my chances of approval? Sorry for so many questions. I just want to be well-prepared before I apply.
Usually 2-3 years of tax returns, 60 days of bank statements, and 2-4 weeks of paystubs are required.
Whether or not your 401K has to be paid off may depend on your DTI. However, that may or may not be factored into DTI since it a loan secured by your own funds.
As far as how far back lenders look for things on your credit report, they go as far back as what is reported on your credit report within the SOL.
Usually proof of rent checks are only required if you have a low qualifying score or limited credit history.
To prepare, pay down your credit cards as much as possible to raise your credit score. If you have a low qualifying score, so many months of reserves may be required so you will need to evaluate your savings and add accordingly.
Whether or not your 401K has to be paid off may depend on your DTI. However, that may or may not be factored into DTI since it a loan secured by your own funds.
As far as how far back lenders look for things on your credit report, they go as far back as what is reported on your credit report within the SOL.
Usually proof of rent checks are only required if you have a low qualifying score or limited credit history.
To prepare, pay down your credit cards as much as possible to raise your credit score. If you have a low qualifying score, so many months of reserves may be required so you will need to evaluate your savings and add accordingly.
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Thanks. Just paid off all my credit cards. Planning to keep one in my wallet, one with automatic gym membership charges, and the rest in the sock drawer. I have very little money saved up, so I'm working on that. I have a lot of work ahead of me...
Sounds like you have a good plan. Good luck.
Starting Score: (2009) EQ = 626 | TU = 664
+1, you're on the right track. Good luck! :-)
Thanks for the reassurance. I needed to hear that I'm doing things right. 