Unless you’re the type that looks forward to tedious tasks like filing your taxes, you’re probably not thrilled at the prospect of hunting down the necessary paperwork to hand over to your lender. Not having these documents at the ready, however, could result in a delay in application approval and possibly losing your dream home to an interested party that was already prepared to pounce.
With a mortgage and the keys to your new house waiting at the finish line, this is one scavenger hunt worth embarking on as soon as possible.
Ready to get started?
W-2 Forms or 1099 income statements
Time Period: 2 years
Income is power in the mortgage game, but no lender will just take your word for it. If you have an employer, you will need to hand over two years worth of W-2s, while self-employed mortgage seekers will need to provide 1099s or profit loss statements.
Time Period: 2 years
Handing over full tax returns wasn’t a requirement most lenders stuck to prior to the housing crash, but those days are long gone. Lenders are now interested in seeing your full income picture and comparing tax returns to W-2s in an effort to squelch loan fraud. They are looking at everything from reported income to unreimbursed employee business expenses to rental property income — anything that sheds more light on what money you really have to work with.
Time Period: 1-2 months
Without verifiable, stable income, a lender will quickly put an end to any dream you once had of homeownership. While employment verification can vary depending on the lender and type of loan, you’ll need to be prepared to at least hand over 1-2 months worth of paycheck stubs.
Time Period: 2 months
If, after closing day, your bank account will be wiped out, that shows a level of financial hardship lenders are weary about. Instead, they want to see that you have enough cash reserves to handle these expenses plus comfortably take on the mortgage payment you’re agreeing to. Also, be aware that unusual deposits outside of your normal income will need to be explained.
Cancelled Rent or Mortgage Checks
Time Period: 12 months
There’s nothing lenders love more than an applicant who has a proven track record of paying their bills on time every month. This can be accomplished by showing cancelled, on-time rent or mortgage checks.
A List of Debts
Get ready to bare it all. Lenders need to be able to calculate your debt-to-income ratio to ensure you can handle your mortgage and all associated homeownership expenses which requires knowing exactly what your monthly debt obligations are. Include everything from credit cards to student loans to car payments — it all counts.
Other Paperwork You Might Need (Yes, There’s More)
Proof of Alimony or Child Support
If you’re using alimony or child support payments to qualify for a loan, you’ll need to provide proof of the amount and possibly your divorce papers outlining the agreement and verifying that the payments will continue for 2-3 more years.
If you want to take advantage of all VA loans offer to veterans, you will need to have proof that you are, in fact, a veteran or active-duty service member. Veterans need to show their separation documentation (DD Form 214) and active service members must have a statement of service that includes their start date, branch, and a signature from a senior officer.
Letter Explaining the Source of Your Down Payment
If you’re fortunate to receive money for a down payment as a gift from a relative, that’s not a problem, but your lender will want to make sure it’s actually a true gift and not another loan you’ll be obligated to pay back after closing. You may even be required to show a bank statement from the person offering the gift as a proof of funds.
You might be exhausted and frazzled after this scavenger hunt, but it will certainly save time down the road and could help you land that home you’ve been dreaming about. Now aren’t you glad you did it?