Getting a mortgage today requires way more paperwork than it did in 2007. Let’s discuss Documents Required For A Mortgage Loan. In the years prior to the Great Recession, it was easy to get a mortgage. I like to call it the wild west…Lenders offered loans to borrowers with just a statement like, “yeah I make $150,000 a year”.
And without any supporting documents…YIKES!!
Unfortunately, many borrowers couldn’t afford their mortgages and ended up defaulting (you may know this as foreclosure or short sales). As a result, Congress began requiring creditors to better assess borrowers’ ability to repay their loans.
QUICK MORTGAGE TIP: To judge a mortgage applicant’s ability to repay, lenders must account for the homebuyer’s assets, debt-to-income ratio and credit history. (More on that here)
The exact documents required for a mortgage loan, depend on your situation. For example, someone who is self-employed will likely have to provide different forms than someone who is employed by a company.
Depending on your unique situation, here are seven documents that act as the foundation for every mortgage.
1. Tax returns
Mortgage lenders want to get the full story of your financial situation.
Lenders generally want to see one to two years’ worth of tax returns. This is to make sure your annual income is consistent with your reported earnings through pay stubs and there aren’t huge fluctuations from year to year.
2. Pay stubs, W-2s or other proof of income
Lenders may ask to see your pay stubs from the past month or so. Your tax returns help give them a clear idea of your overall financial health, while pay stubs help them gauge your current earnings. If you’re self-employed or have other sources of income (such as child support), you may need to show your lender proof through 1099 forms, direct deposits or other means.
3. Bank statements and other assets
When assessing your risk profile, lenders may want to look at your bank statements and other assets. This can include your investment assets as well as your insurance, such as life insurance.
Lenders typically request these documents to make sure you have several months’ worth of reserve mortgage payments in your account in case of an emergency. They also check to see that your down payment has been in your account for at least a few months and did not just show up overnight.
4. Credit history
In order to assess you as a borrower, lenders often pull your credit report — with your verbal or written permission.
I do a credit report audit with all my clients. We will review a tri-merge FICO credit report for any errors & omissions.
Often Times I can help boost scores 25-50 points which helps save you money
5. Gift letters
Your family might help you buy a house by giving you money. If that’s the case, you’ll need to provide a written confirmation the money is indeed a gift and not a loan. The documentation should list their relationship to you as well as the amount of the gift.
6. Photo ID
This is simply to prove you are who you’re claiming to be.
My goal is to know you as a borrower and ensure you can make your payments on time.
The typical homebuyer will have to provide information about their assets, debts, income and credit history. However, the exact Documents Required For A Mortgage Loan can vary from person to person BUT this should get your prepared.
I hope you enjoyed the read.