So you are ready to apply for a mortgage or refinance your current mortgage to terms better suited for you? You may be focusing on your home or researching the details of the arrangement, which is great, but you might want to get down to work on paperwork. You will always need to prove your ability to pay when taking out such a large loan. It's a good idea to be prepared for some serious paperwork. Below is a checklist of some of the information and paperwork involved in a mortgage or refinance application.
Proof of income
Whether you need recent pay stubs, tax returns or tax forms (like W-2s and 1099s from the past two years), it's important to be ready with the paperwork that proves you have income. You may even need the names and addresses of all employers for the past two years. Depending on your situation, you may also need to show documents accounting for Social Security and/or disability payments, pension income, dividends, child support, alimony, bonuses, overtime and any possible rental income.
Especially for a refinance, you will likely need to produce documentation for homeowners insurance to prove that you have enough coverage for your property.
Proof of assets
You will probably have to provide documentation about all of your financial assets other than your home. This means the titles or statements from savings accounts, stocks, bonds, mutual funds, CDs, retirement accounts, automobiles and any other real estate you may own. These will be evaluated to verify that you can cover a down payment, are being honest about the source of that money, and will still be able to afford monthly bills.
Your lender will also check your credit to determine how likely you are to pay your loan and how creditworthy you are. (You should already know what your credit looks like, and be sure that it is in the best possible shape.) It's smart to check your free annual credit reports when contemplating a new mortgage -- and to dispute any errors that might be hurting your credit score -- well ahead of applying. (You can check your credit scores for free on Credit.com every month to see where you stand.)
Good faith estimate
In an effort to make the closing process simpler and more transparent, the Consumer Financial Protection Bureau has launched a " Know Before You Owe" mortgage disclosure rule. Lenders will provide you with a loan estimate and a closing disclosure, which replace four previously used forms with two new ones.
It's important to remember that you will also have to provide basic identifying information, including your Social Security number, a list of addresses for residences from the past two years, a check for the application fee and -- if you're refinancing -- an appraisal.
Gathering all your documentation may not be very fun, but it is the only way lenders can trust that you can afford a mortgage or mortgage refinance. The more ready you are with the paperwork you need, the quicker the process can be over. It's a good idea to keep in mind that most documents expire after 60 days, so you may need to update. And remember that each lender may require their own documents, so contact them to inquire what you will need as soon as you know they are an option. There is simply no way to avoid the paperwork, so you may as well just focus on completing the checklist and talking to your prospective lender.
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