Sharpen Your Expectations Before Buying

Home buyers, particularly first-time home buyers, typically don’t know a lot about the process of financing a property. To avoid making mistakes, you need to know what you should expect. Below are two important aspects of the process you should consider before launching your search.

Affordability now and in the future

Regardless of the level of income you have today, you need to figure out what the future may hold before you sign on the dotted line. For example, if you’re planning to have kids sometime down the road, how will these happy additions impact your family income? What effect will job changes have on your current income level? And have you planned for monthly payments into your rainy day savings account?

Everyone who looks to buy a home will have a payment amount that is affordable today, but in the face of your answers to the questions above, will that number still work for you down the road? These are some questions to consider as you think about homeownership.


Shortly after you close on your home, it is likely that your mortgage will be bundled with other similar mortgages and sold off to investors. To ensure that lenders won’t be asked to repurchase what they call defective mortgages from these investors, they will do everything in their control to deliver a quality product.

What this means is that you as a home buyer must expect to provide lots of detailed documentation to your lender. At times, especially toward the end of the process, you may be asked for things that seem completely unnecessary, such as copies of bank deposits or letters explaining why you had a $40 collection two years prior.

If your lender is asking for something, it’s for a specific reason. To keep the process moving, your best bet is to get the lender what is needed. Quickly.

What Constitutes Income in the Mortgage Process?

When you’re considering buying a home, one of your first questions should be, “What can I use as income?”

One obvious answer is salaried or hourly income, providing that it’s stable and you can prove that you expect to continue receiving it for the foreseeable future. Ideally, you’ll have two years of stable work experience to show, but that isn’t absolutely necessary.

Changing/starting a job

If you have changed jobs in the previous two years for either a better position or a pay increase, that’s fine with your lender, as this demonstrates upward mobility.

Recent college graduates, who are usually entering the workforce for the first time, may be asked to provide transcripts showing the dates of attendance and graduation.

Other income

There are other less obvious income sources, such as commissions, self-employment income, Social Security, disability settlements, and unemployment benefits. Some can be used under certain guidelines; some can’t be used under any circumstances.

In applying for a mortgage, you should be able to show earned commission or self-employment income for a minimum of twelve months; ideally, it should be twenty-four months. Expect to provide full documentation: Self-employed borrowers will need tax returns signed by their tax preparer and year-to-date profit-and-loss statements.

Social Security must continue for at least three years, and a disability settlement must have no end date, indicating it is expected to continue. Unemployment can’t be used, as it will eventually end.

Contact your mortgage professional for more information on what does and doesn’t constitute income.