Mortgage lenders require a lot of documentation to complete a mortgage application. Forgetting something or getting the wrong information can cause lengthy delays. It could even cause borrowers to miss a deadline and lose the house they have their eyes on. Therefore, applicants should make sure they have all the documentation they need organized and ready to go, prior to getting your home mortgage loan.
Each lender has a different set of needs, so it’s important to ask before you begin. However, there are a series of documents most mortgage lenders will need. In general, there are fourteen document categories lenders will use to examine four main areas of an applicant’s life.
First, the mortgage lender will want to verify that all applicants have good credit. To avoid any surprises and save time, have the lender pull credit reports from Equifax, Experian, and TransUnion ahead of time. These documents will also give the lender a preliminary look. If there is something significant on them, he or she can say something without having to do a hard credit check. Learn more about how you can manage your credit score to help reduce your loan’s interest rate here.
Bankruptcies and foreclosures will also need to be addressed. Therefore, gather documents for any that have occurred in the last seven years. The goal is to show the lender that they have been satisfied and any associated financial demands associated with them have ceased.
Next, the lender will want to examine an applicant’s expenses and liabilities. Start by compiling a list of debts. Include proof of the balances for each one or the monthly expense incurred. Canceled rent or mortgage checks or some other type of proof that these have been paid on time will help here as well. Lastly, if an applicant has been divorced, include copies of the divorce decree as well as any court orders for child support, alimony, or additional expenses they pay. Paperwork showing these have been paid on time can be helpful as well. Once again, pulling an early credit report will help with many of these items.
With all the expense portions out of the way, it’s time to address assets. Start by creating a list of assets and providing proof of their value. These could include cars, art, investments, or anything of significant value. Lenders will also want at least two months of bank statements for each bank account to show the amount of cash on hand.
If friends or family will be helping an applicant with the down payment, the lender will want proof of this as well. Generally, a letter from each person will be enough. In these letters, the individual should include the amount and expressly state that the money is a gift and not a loan. This will prove to the lender that the money will not have to be repaid. Your lender will have the appropriate verbiage to help you out.
Just saying the household brings in a specific amount of money each month isn’t enough. Mortgage lenders will want proof. In most instances, one month of pay stubs will prove the applicant is still employed and how much income they bring in each pay period. Applicants will also need W-2 forms for the last two years as well as at least two years of tax returns.
The lender will also want to see proof of any other income. Individuals who are self-employed will need to provide year-to-date profit and loss statements to show the business is financially stable. Child support payments and alimony coming into the household can help. Other types of income could include SSI, commission, bonuses, tips, or a Schedule E form for rental income.
As a general rule, it’s better to have extra paperwork on hand than not enough. Applicants can bring in two or three months worth of pay stubs, for example. This can help avoid delays by having the information, if there are additional questions.
Once all the documents have been collected together, organize them to make them easy to find. Accordion files with large envelopes work perfectly for this. By having everything gathered together and organized, it also shows the mortgage applicants attention to detail. Quick books or some other form of electronic filing make this quick and easy as well.
As your Realtor, I’m here to answer questions you may have as you move through the process. My goal is to help you feel comfortable and confident through the entire home buying process.
Photo credit: Getty images/Marchmeena29