If you want to ace the home loan process it pays to be prepared.
While some sources report that it has become easier to obtain a mortgage loan, it is still far from as easy as it was 10 years ago. With the current rush to secure loans before interest rates go higher, lenders get backed up quickly. That means processing times can take longer. This is on top of new TRID rules and the coming seasonal rush. In order to speed loan applications through the system and close on time, it’s smart to have your paperwork in order in advance. This is especially true for those purchasing properties who want their pre-approvals to stick.
So what documents will you need?
1. Bank Statements
Virtually all loan types you would apply for today, will require you to provide bank statements. This especially applies to the self-employed and those seeking alternative income documentation loans. Expect to provide at least two – if not three – months of bank statements for ALL accounts. Watch out for large deposits, non-sufficient funds charges, and loan payments, which you didn’t claim on your initial conversation with lenders. Note that any funds you’ll need to close will need to be in your account for at least 60 days (unless they are a gift). Expect additional statements to be required if you roll into a new month.
Your mortgage lender will want, and need, to verify your identity to comply with the law. You won’t be able to close your loan unless you have valid ID. That means a government issued photo ID and perhaps one with at least 6 months left on it. So if yours is coming close to its expiration date, consider renewing immediately.
If you are employed by someone else, expect to provide copies of your last two years’ W2s. If you receive 1099s instead; you’ll need to provide those and your tax returns.
4. Tax Returns
Tax returns can be one of the trickiest documents when it comes to mortgage underwriting. You’ll need at least your last two years’ tax returns. Make sure you have all pages, of all forms submitted, including any amended returns and originals. Transcripts of returns are not sufficient. This gets trickier around tax time. You won’t be expected to file tax returns early. However, if you do file returns during the process, you’ll have to document that you paid any outstanding taxes and where that money came from. Due to staff cut backs at the IRS, some of the copies can take 75 to 120 days or more to retrieve. Make sure you request and receive them well in advance of applying for a loan.
5. Court Documents
If you’ve filed for bankruptcy or have been through a divorce, expect to have to provide all copies of all pages of related documents. This can be a real pain if you’ve shredded them to put that part of your life long behind you. Don’t expect a request by mail to return all of the pages and documents you need. Play it safe and go to the county clerk of courts office where the documents were recorded and get everything before you apply for your loan.
If you’ve got any credit bruises, gaps in employment, or are receiving any gift funds from family to cover your down payment or closing costs, you’ll be required to submit Letters Of Explanation. If you aren’t sure what to write, ask your loan officer for an example or for exactly what details need to be included.
7. Current Mortgage Statements
If you have mortgage loans on the home you are refinancing or other property, they will be requested to verify the debt, payment status, and loan details. If you are currently renting, then you’ll need to provide your landlord’s contact information and maybe proof of rental payments for the last 24 months. However, this last requirement seems to be fading with some lenders.
8. Purchase Contract
If you are buying a home, you aren’t going to get far without a signed purchase and sales agreement. Make sure to include copies of all pages and addendums.
9. Earnest Money Deposits
Any deposits made must be fully documented. That includes copies of checks, proof they cleared your account, and proof of receipt by the escrow holder.
10. Pay Stubs or P&Ls
Be ready to submit your most recent pay stubs covering the last month. If you are self-employed, you should be prepared to provide a YTD Profit and Loss statement.
Get these documents together early, save hard copies, copies in the cloud, and copies on backup drives.