When you apply for a mortgage the first time, or if you're a little rusty on the process, it's reasonable to expect some shell shock when you're told what documentation you need to gather, as there's often quite a bit of it. If you plan to buy a home in the near future, a good best practice is to save all paperwork just in case it's something you end up needing.
Some of the initial information lenders may ask for includes:
- Tax returns for the past two years
- W-2s for the past two years
- Pay stubs from the past 30 days
- Asset reports for the past 60 days
These are the basic essentials, although you may be asked for other items, such as:
- A financial paper trail
- Specific dates on previous derogatory credit events
- A marital settlement agreement (MSA) from a previous divorce
- Any missing pages of bank statements
- Any missing pages of tax returns
- Details outlining anything that appears inconsistent
It is a good idea to provide the financial documentation to a lender as quickly as possible. Any delays in submitting these documents may postpone your interest rate lock as well as your ability to perform on your real estate contract. (Remember, a good credit score can help you qualify for the best terms and conditions on a mortgage and even help you afford a bigger mortgage. You can see where you currently stand by viewing your two free credit scores, updated each month, on Credit.com.)
To help you establish what other information you might need, consider the following.
1. You have undocumented money
If you have additional deposits in your bank account, other than your income, you will need to paper trail and source them, whether you plan to use that money for the loan or not. Lenders cannot ignore money in your bank account that cannot be documented.
2. You're divorced
If you were divorced, even as long as 10 years ago, a lender may ask for a copy of the full divorce decree with all pages and schedules, including the marital settlement agreement. Even if you mark the "single" box on the mortgage application, lenders run a background check and will see any previous marital statuses, addresses, or names. If you didn't provide a divorce decree upfront, lenders will likely ask for one after the background check.
3. You're not a U.S. citizen
Two instances when you'll be required to provide your birth certificate are if you are unable to provide picture identification or if you note on the application that you are not a U.S. citizen. In these instances, an underwriter will generally sign off on your loan without the supporting document. One way to prevent unnecessary holdups related to your birth certificate is to go over all raw data on the loan application and make sure you answered all of your declarations questions correctly.
4. You've been through a short sale
The final settlement statement from the transaction is critical. Many mortgage loan programs have a waiting time to be eligible for new financing.
5. You've been through a foreclosure
You'll want the date of the trustee sale. This is usually accomplished by obtaining a copy of the trustee's sale date deed from your local recorder's office.
6. You've filed for bankruptcy
If you filed for Chapter 7 or even Chapter 13 bankruptcy, you'll need all the pages and schedules, including the schedule of creditors specifically identifying everything associated with the discharge. The discharge date is the date at which the waiting time starts to secure new mortgage loan financing. Even if you're already past the date, but you don't have all the Chapter 7 paperwork, your new loan process for buying a home can be put on hold until you have all of the appropriate documentation.
7. You've had a loan modification
You will need the full loan modification agreement you signed with your original loan servicer when you apply for a new mortgage.
Lenders do not intentionally try to make you provide more paperwork when buying a home. Based on your financial picture it might be necessary in order to meet federal compliance regulations all lenders must abide by. If anything identified above exists in your past or your financial picture is unique, make sure to have supporting documentation and a seasoned loan professional (full disclosure: I am one) working in your best interests.
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