When applying for a mortgage, providing the correct documentation can seem like a daunting process. Depending on the situation, it may take you weeks to find all the necessary documents and forward them to your lender, for them to be requested. After. To increase the stakes, if you cannot submit your documents on time, it can seriously slow down the mortgage approval process. (Fortunately, Rocket mortgage® by Quicken Loans® eases the documentation process by allowing you to automatically share your financial information, speeding up the process, and reducing the amount of documentation you need to provide.)
While you may get frustrated after being asked to send in another income check, be aware that this process is meant to protect you from entering into a loan deal that you might not be able to stick to. Your mortgage lender wants to make sure that they give loans to borrowers who will be able to repay them. It is a process that protects you, the lender, and the economy as a whole.
How can you prepare to go into the process, so that you spend less time looking for paperwork and more time? looking for the house of your dreams? Here are some of the basic documents you should have on hand when you start your mortgage application, to help speed up the process of getting a mortgage.
To make sure you can pay your monthly mortgage payments, your lender checks that you have a stable and adequate source of income. This includes reviewing your employment and income history, as well as reviewing any other funds you receive on a regular basis (such as alimony or child support).
Gaps in your work history or frequent job changes may signal to a subscriber (the person who reviews all your paperwork and decides if you are approved for a mortgage) that you are a riskier bet than someone who has been in the same job for a decade because any work disruption can make it harder for you to make Payments.
In addition to verifying that you have a job, your lender will want to review your income history over the past two years. Underwriters are interested in a stable income, so fluctuations could be problematic even if your income is on the rise. If your income drops back to previous levels, will you still be able to make your payments? How likely is your income to stay where it is now and, with it, your ability to make mortgage payments? These are some of the questions an underwriter seeks to answer.
Here are some documents that underwriters consult to verify your income:
- Last 2 years of federal income tax returns
- Recent W-2s (going back 2 years) and recent pay stubs
- 1099 forms and income statements (if you are self-employed)
- Divorce decree or other legal document certifying that alimony and / or child support payments will continue for at least 3 years after the mortgage application is made and proof of at least 6 months of regular payments before the application
A common misconception with this part of the mortgage process is that it is impossible for people with non-traditional forms of income to get a loan. Although you may need to provide more supporting documents, as long as you have them (and a history of bank statements showing money was deposited into your account) to safeguard your reliable and ongoing source of funds, you should not. not have too much trouble using other forms of income to qualify for a mortgage.
Assets and liabilities
Lenders want to make sure you can down payments, closing costs and mortgage payments even if you are having financial problems. To do this, insurers examine your financial assets to determine if you have cash – also known as liquid financial reserves – to cover the mortgage.
This money can take many forms, including bank accounts, investment portfolios, retirement savings, and even money donated by a parent.
You will need to provide full documentation of any funds you plan to use to help you qualify:
- Recent statements of any account (for example, checking or savings accounts, investment portfolios, trust accounts) with readily available funds, going back at least 60 days or the most recent quarterly statement
- Most recent retirement account statements
- Proof, such as a copy of the check and deposit slip, that the gift funds are in your account
- Signed letter from the donor that includes a statement attesting that no reimbursement is expected
- Documents surrounding the sale of assets – proof of ownership, independent verification of the value of the asset, proof of transfer of ownership (such as a bill of sale and something, like a deposit slip, showing that you have received the proceeds )
Your lender will also review your liabilities or debt to income ratio, to determine how much money you have to pay regularly to various creditors. For this, a lender may ask for additional information about any long-term debt that you may have, such as car or student loans.
Your credit rating will be an important factor in determining whether you are approved for a loan and the terms available to you if you are.
For this step, you will need to provide your lender with verbal or written permission to withdraw your credit report. They will review your credit history and determine your level of creditworthiness. With certain events, like bankruptcy or foreclosure, you will have to wait a certain number of years before being considered eligible for a home loan.
If there have been extenuating circumstances that led to bad scores on your credit report, there are a few things you can provide to help prove that a negative event was beyond your control and that it was about. a one-off event. These include:
- Documents that confirm the event, such as medical bills or a layoff notice
- A letter of explanation that explains the documentation provided and illustrates what happened and why you couldn’t resolve the situation without taking out a loan
In addition to reviewing your credit report, if you are a current tenant, your lender may ask you to provide proof of rent payments for the past 12 months, confirmed by canceled checks, bank statements, or a landlord check.
Keep in mind that additional documents may be required depending on your particular situation. It is important to discuss the documents required to complete your loan with your lender.
A final mortgage document checklist
As you locate and organize your documents, compare your stack of documents against this checklist to make sure your lender has all the information they need:
- 2 years of tax returns
- W-2 of the last 2 years
- Recent payslips
- 1099 forms and income statements for the self-employed
- Divorce decrees verifying alimony and child support
- Proof of social security or disability income
- Bank account statements
- Equity or bond account statements
- Retirement account statements
- Proof of donation funds and gift letters
- Documents for the sale of assets
- Proof of long-term unpaid debts
- Letters of explanation for credit incidents
- Documented rent payments for current tenants
Of course, you will also need to prepare your mortgage application, which will include additional information about your current financial situation and the property you are considering purchasing. As with other large purchases, your lender will likely verify your identity with photo ID, so it’s a good idea to have one handy with the rest of your paperwork.
The bottom line: Organizing your mortgage documents saves time and energy
Having all of your documents in one place doesn’t guarantee your application will be approved, but staying organized can speed up the process and take some of the stress out of buying a home.
Keep in mind that your final list of documents may look different, as the documentation required varies from lender to lender. If you have specific mortgage requirements or a unique financial situation, consider asking your lender to provide their own list of necessary mortgage documents.
Ready to start the process, but intimidated by all the paperwork involved? Rocket mortgage® makes your mortgage application process easier. Get started online today or speak to one of our mortgage experts at (800) 785-4788.
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