Getting a home loan is an exciting thing. Many people look forward to the day when they will be able to purchase their own house. If you are thinking about applying for a home loan then there are a couple things you need to be aware of. For example, they will ask for a lot of information and documentation before they give you the loan. Here are some of the documents you should have prepared.

1. 2 Years Worth of Personal and Business Tax Returns

Tax returns are an important way to look at someone’s financial situation. This can give the lender the whole picture when it comes to where you are at financially. This is why your lender will probably ask you to give them your most recent 2 years worth of tax returns. If you own your own business and are self-employed then you will have to show them the business tax returns as well.

Tax returns are used as a way to prove income for most self-employed people. They generally use the adjusted gross income (AGI), not the net income. This is hard for many people because they deduct so many expenses. So if you know you are going to apply for a home loan, be careful about the deductions that you take a couple years before you apply.

2. Bank Statements

So now that the lender knows about how much money you make each year because of your tax returns, now they will want to see how you manage that money. This is why you should expect them to ask for a couple months worth of bank statements.

They will be looking at how you spend your money, how much you have in savings and how much money you have going in and out of the account each month.

This is why you should be careful about your budget in the months before you apply. A bigger savings, spending less than you earn, and having a little cushion will help to make you a better candidate.

3. A Credit Report

You must give them the credit report. This is something that will need to be pulled, but you will have to give your approval for them to pull it. In the credit report it will show them all of your outstanding debts, as well as past debts, how well you made payments, and if you can be trusted with debt. This is why it is so important to care for your credit years leading up to the home loan process.

By understanding these things you can be prepared for the loan application process. Contact a local bank, like Cheviot Savings Bank, to find out the mortgage rates and paperwork necessities for your situation.