Paper gathering before buying a new home is a good idea. It will take to track all the documents but doing it before you need will help to close the table faster.
When you apply you can owe your lender a stack of documents during underwriting. This will show that you can repay the loan. Following papers must be verified in Mortgage application:
- Income and Employment
- Credit History
- Assets and debts
- Rental History
- Other info., like child support, divorce, BK or other gift proceeds
Mortgage Application Information
In Mortgage Application the first step is to complete the standard application form called the uniform Residential Loan Application. This form is mandatory to fill for each borrower. This form asks for personal and financial details. Lenders use this form to check borrower’s eligibility for a mortgage.
A renowned real estate and mortgage broker, Mark, who works with United Brokerage in Thousand Oaks, California, says “Here is what I am telling you about myself…
There are few important documents that the lender wants to confirm that you can pay the amount that you borrow.
Consistency and stability are two main points that the lender notes while checking borrower’s income. Mark Zimmerman, president of Gold Eagle Capital mortgage says that this assures the borrower can afford the mortgage payment.
See what you will need as a proof of income:
W2 IRS Form– Your Mortgage lender will ask for W2’s from the last one to two years for each applicant. Ask for IRS copies of these documents you submitted with tax returns.
Pay stubs. Lenders want pay stubs from the last 2 pay periods or the last 30 days .This could be signed by the borrower. Pay stub can be in paper or electronic form. You will have to give documents if you receive overtime or commission payments. Pay stubs and w-2 forms show your total income.
Income Tax Returns-Lender will ask for your tax returns from the last two to three years for the dedications you claimed. Copies of returns will be needed along with IRS form 4506-C.
Alimony and/ or child support documents. In this kind of payment you need to show proof that you will receive the amount from the last three years after the date of mortgage application. Copy of court orders can also be acceptable.
For freelancers, self –employed workers and independent contractors’ lenders need two years of steady and self-employment in the same industry. You can give lenders the letters or contracts from current clients. The lender may ask for two years’ worth of federal tax returns, both personal and business plus a cash flow analysis.
Assets & Liabilities
For calculating your debt-to-income ratio. Lenders will check debt obligations through this calculation. You will have to list all your monthly debt payments auto and student loans, credit cards, existing mortgage and assets.
For assets and debts following documents are required:
Bank statements: Two to three months bank statements are required to check that you can cover dawn payments and closing costs, and also maintain cash reserves, if required.
You will get these statements through mail, or download them online. In case of any large deposit lenders want all documentation explaining the source of deposit.
Retirement, 401k’s, and investment accounts. In case you are going to pay your cash through retirement or investment account then you will need to provide two to three months statements. It consists of 401(K) plans, stock investments and certificates of deposit.
Gift letter required if using gift funds. To cover your down payment some loan programs allow you to take family financial gifts. Gift form is required from the family member who will plan to give you money to cover your down payment. Lenders will also ask for bank statements to confirm the source of money.
Credit History Verification
While applying for mortgage credit checks is a bigger part. Lender will ask to submit credit reports.
“Some dents and scratches don’t prohibit buyers from obtaining a loan” says Zihmer.
In case late payments, collections or other derogatory marks show up in your credit reports then the lender may ask for a letter to explain these items.
Your interest rate influences your credit score.
In any loan program Mark says” There is a minimum credit score that you will need to qualify.
Higher the credit score lower will be the Interest rate.
Other Misc. Records
Depending on the situation the other additional mortgage documents required are:
Signed copy of purchase and sale agreement. It includes the purchase price and other details about the home that you are going to buy.
Rent payment history and your references. Payment proof of the last 12 months required in case you have been renting. It includes cancelled checks and contact information of landlords from the last two years.
Divorce documentation decree. This document is required to check whether you have to pay child support or alimony.
Bankruptcy or foreclosure records. If you have bankruptcy in your credit score then you need to ask from the lender how long you will wait before entering into the mortgage market. In bankruptcy, lenders may ask for proof that your debts have been discharged, or they are no longer outstanding.
ID for non-US citizens. Lenders may ask for permanent residence and immigration status. For this you will have to submit a copy of your green card, employment authorization document or an approved visa. Verification needed in case you expect to earn income.
Alternative information to help a thin credit file. As you agreed, the lender wants previous credit paying history if you have little or no credit history. Alternative data such as borrower’s utility, cell phone, rent, cable TV and other bill payments required for credit scoring.
Summary: Documents Needed for Mortgage
Start organizing your files with the help of documents checklist
First scan all papers and save them on your desktop. Label all documents with consistent naming.
You can also do it straight from your mobile phone. If you are submitting a hard form then don’t give originals, copy all the documents and give copied form to the lender. Keep all the documents in one envelope. This one is the simple way to produce the documents when lender ask from you:
Mortgage Application information:
- Complete detail about the type of mortgage you want.
- Full information about the home you are going to purchase
- Basic identification information for each borrower.
- Last two years employment information
- Household expenses and monthly income.
- Complete list of your assets- what you own- and your liabilities-what you owe
- Purchase price and details of home transactions
- Declaration of no objection in case of any legal issues.
- Your signatures for the clearance the information you provide is accurate
- Optional information for government monitoring purposes.
- Purchase contract signed by all parties
- ID’s issued by government
- 2 years of W2 IRS forms.
- 2 pay stubs
- 2yrs of income tax returns.
- Signed and dated IRS FORM 4506-C.
- If you are self-employed: some combination of business and personal income tax returns, signed profit and loss statement, and list of all business debts.
Assets and Liabilities
- All statements of accounts listed in application such as credit cards, student loans and investment accounts are needed.
- If there is any large deposit than documentation needed for that.
- In case of legal action judicial decree or court order should be provided.
- For late payments, collections, judgments, or other derogatory items on your credit reports, a letter of explanation is required.
- Bankruptcy and discharge papers required
- Thin credit file: payment history for utility, cell phone, cable TV, car insurance and other bills.
Depending on the lender your actual list of documents may vary. You need to ask the lender for a list of paperwork you might need to provide, and start collecting them before you begin the application process.
By following all these instructions you close on the home with less stress.