Image courtesy of Flickr, Johann Dreo
Lenders require that you provide documents to verify your income, assets, credit and other qualifying information. Gather these documents ahead of time to avoid unnecessary delays.
When in the market for a new purchase loan or refinance you'll be required to gather and send to the lender many different documents used to underwrite your loan. We find that it's good practice to begin gathering these documents early in the loan process to help avoid delays.
Read on for a list of the most common loan documents required.
With your permission, the lender will pull a "tri-merge" credit report. A tri-merge report pulls your credit report from all three credit bureaus Experian, Equifax and Transunion, and then merges this data together to form one single credit report.
The credit report will contain the following information most important to the lender:
For a thorough explanation of what's in your credit report and how mortgage lenders use your credit report and score, check out this article.
When you work with a mortgage lender to get a purchase loan, you will have to show the lender a copy of the Residential Purchase Agreement signed by all parties involved in the transaction. This must be the final purchase agreement that your purchase is based upon.
You can get a copy of the purchase agreement from your real estate agent.
The lender will require that you send in the last two years of your federal tax returns, along with a signed Form 4506-T which authorizes the IRS to release information regarding your returns to your lender.
If you own the company you make your income from, the lender may also request that you provide a current Income Statement and Balance Sheet from your business.
Copies of your W-2's (if applicable) for the last 2 years will be required by the majority of all lenders. If you do not have this copy on file you will have to request a copy from your place of employment or tax professional.
Copies of your 1099's (if applicable) for the last 2 years will be required by the lender. 1099's are typically issued to people who work independently, such as real estate agents, dentists or sales reps. The party that pays you is required to send you and the IRS a 1099 declaring how much you've been paid.
Copies of your pay stubs (if applicable) for the last 30 days will be required by the lender. The lender may require that you submit an additional, more recent pay stub, prior to funding your loan to ensure you are still employed and are still earning the same income.
If you receive income for child support, alimony, disability or separate maintenance you must provide the Award Letter to the lender from these sources as proof of income, but only if you are using these income sources to qualify for the loan. An award letter outlines what amount you are to receive and for how long you will receive it.
Complete copies of your bank account statements for the last 90 days from all bank accounts will be required to show that you have 3 - 6 months of payment reserves. Some lenders may require more than 3 - 6 months of reserves depending on your unique situation.
If you have any investment accounts, such as 401Ks and IRAs, you may also be asked to provide copies of these statements if they are material to qualifying you for the loan.
Lenders may require a copy of your social security card, or they may ask you to submit copies of a document that contains your social security number, such as a W-2, income tax return or letters from the Social Security Administration.
Lenders need to know that your home is insured and has sufficient coverage in case of damage from disaster.
If you're purchasing a new home, the lender will want to see that you have either attained a policy, or have initiated the process of attaining homeowners insurance, pending the finalization of your purchase.
If you're refinancing, the lender may ask that you provide your homeowners insurance declarations page, which shows your annual payments and the amount of coverage you have.
The lender may ask you for your most recent mortgage statement from one or all of your properties (if applicable).
The lender will use the information on your mortgage statement to verify and qualify you. Information about your mortgage, such as the final loan payoff amount, whether or not you have a pre-payment penalty and what your monthly loan payment is will all be looked at.
The documentation you provide is used by the lender to prove the information you provide in your loan application. For example, if you state that you make $8,000 per month, this must be quantified with supporting documentation such as pay stubs, tax returns and other income documentation. If it doesn't, you will be re-qualified based on the income you can prove. This may significantly change your loan terms, or even disqualify you for the loan all together.
Because documents must be manually reviewed and signed off the lender's Underwriter, be sure you begin the process of gathering these documents and deliver them to your lender as early as possible to help ensure a speedy closing.
Real estate agents receive commissions from home buyers and sellers, collectively earning over $50 Billion per year. Learn how commission amounts are set, who pays them, and how they work in this article. Read more.
List of secured property tax rates for all counties of California fiscal year for 2014-2015. Read more.
If you live in California and are over the age of 55 you can effectively reduce your property taxes when buying a new home. Read more.
Houston Vs. Dallas? If you are considering moving to either of these major metropolitan areas, we've created a resource to help you make the decision process a little easier. Read more.
You've heard the term used before, but what does loan closing mean? Find out all you need to know about the process. Read more.
Whenever there is money to be made or money to be spent, some unscrupulous folks will take advantage, trying to game the system or commit all-out fraud. Read more.
Foreign real estate investment in the United States, both commercial and residential, is a huge phenomenon that is only expected to accelerate, maybe even to skyrocket, in 2016. Read more.
In this article, we explore how homeowners insurance works and what happens in the event of a house fire. Read more.
Your DTI is used by mortgage lenders to determine whether you qualify for a loan, and if so, for how much. Improve your DTI with these 16 tips. Read more.
In this article we explore some creative financing options for your next home purchase. Read more.