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The 4-1-1 on Mortgage Documents

Date: 
Author: 
Doug Lewandowski
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"Why does my mortgage lender need so many documents?" my clients ask. "Why do you need so much information?"

Requirements and regulations on the lender side have tightened since the housing crisis — and for good reason. Due to the economic impact of the housing crisis, some areas of the United States have still not fully recovered almost eight years later. Currently, there are 18.6 million U.S. Homes still sitting vacant. So what can we do to prepare ourselves so this doesn’t happen again?

Lenders need to make sure they are making smart lending decisions, not only for their business but, most importantly, for you. Here is list of what we ask for and why.
  1. Two years of W2s. The W2 form calculates your wages paid by your employer. Your wage will include any overtime, bonus pay, commission, etc.
  2. Two years of federal tax returns. In addition to the W2, we need two years of federal tax returns. This is because some occupations are able to write off mileage and other expenses that actually deduct from your overall W2 income. Are you self-employed or operate a rental or small business? Lenders require all schedules of your federal taxes to calculate your income since there isn’t a W2 available. You’ll want to provide all schedules because lenders can actually add back in depreciation and interest item lines to calculate your lendable income.
  3. 30 days of paystubs. Your paystubs give the lender year-to-date income information, hourly wage, bonus pay, employer’s information, etc. This will help support your W2 wage and demonstrate if your income is trending up or down.
  4. Bank statement. When I say a bank statement, I do not mean a printout off the internet. Lenders require a full statement with all transactions accounted for. You would either get this in the mail on a monthly basis or most banking institutions have online access to a PDF copy. If cash is needed to be brought in for the transaction it has to be proven on a bank statement ahead of time. If there are any large deposits on the statement they need to be sourced. This is to ensure another loan wasn’t taken out or there isn’t a business the lender is unaware of. If money is transferred from another account or gifted lenders, need proof in order to use the funds.
  5. 1003 - application. A thorough filled out application helps your Loan Originator and Underwriter to get a clear picture of your financial outlook. Listing all assets, retirement accounts, property ownership, etc. helps your lending ability. The more information you can provide your lender the better.
  6. Home owners insurance. Home owners insurance is a requirement on all home mortgage loans. Knowing the premium ahead of time will help your lender pin point the monthly payment into your debt to income ratios.
This is a very basic breakdown of financials needed for a transaction. Other items might include a divorce decree, child support information, purchase agreements, profit and loss statement, etc. Lenders need this information to ensure you’re financial position is set to handle any future adversities that may come your way.

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