August 12th, 2014 7:22 AM by Jackie A. Graves, President
There is no getting around the paperwork
involved in applying for a mortgage loan.
Mortgage lending qualifications have tightened in a post-recession
world—meaning whether you’re applying for a government-backed loan, a qualified mortgage loan or even a
jumbo loan, you’ll face more paperwork than ever before.
Fail to turn in some of the required
documents, and you could get turned down.
Your lender may require more or less, but
here are the general guidelines to help you prepare.
Show How You’ll Use the Mortgage Loan
Before a lender will approve your mortgage
loan, they need to know what you’re borrowing the money for and how you’ll
manage the expenses that come with the property. You might need to show this
Information about the property in question
Your purpose in getting the loan
Present and proposed housing expenses
Copy of contract if it is a purchase
Copy of current mortgage statement if refinancing
Much of this information is a matter of
public record, and both your REALTOR® and your lender can help you gather
what you need.
In addition to verifying why you’re asking
for a mortgage loan, a lender will also verify you are who you say you are.
This means providing a personal identification documents such as the following:
Often two forms of government identification,
such as a passport and driver’s license
Social Security number
Copy of divorce decree if you are divorced
Legal status, legal problems or other
financial obligations that would not appear on the credit report
Income and Assets
Your lender will want to know about your
income and assets. Presenting a complete picture of your net worth can increase
your chances of getting approved for a loan. Start gathering
the documentation below.
Proof of income for each borrower on
application—two years of W2 forms or paystubs, if you are a wage earner
Two years of tax returns (with all schedules)
Year-to-date profit and loss statement if you
Documents about other possible sources of
income such as child support, Social Security or alimony
Proof of assets for each borrower on
application)—two or three months of bank statements for all assets, with all
pages of the statement
Explanations of any bank accounts opened in
the last six months
Letter of explanation and a source for any
money given to you as a gift
Credit, Borrowing History and Debt
If you’re shopping for a qualified mortgage,
you’ll face tight income-to-debt ratio requirements. Under the Dodd-Frank Act, a borrower can have no more than a
43% debt-to-income ratio, and lenders are required to verify your
income—and check your credit to make sure you qualify under these terms.
Be prepared to supply a lot of this
information about your borrowing history and debts:
Credit report disclosure form—a document
allowing the lender to pull a copies of your credit reports and credit scores
Information about bankruptcies—including a
copy of petition and discharge, a written explanation of what happened to cause
the bankruptcy, and how your situation has changed
Information on any other properties owned and
what current debts you hold
Letter from your current or previous landlord
showing positive rental history
Keep in mind, whenever you send anything to a
lender, it is important to present it in an easy-to-understand way. Be as brief
as you can in your explanations.
Also, your paperwork must present a complete
picture, one that cannot be open to misunderstandings by an overworked
underwriter on the other side.
If you approach the mortgage loan application
process the right way, you will be more apt to provide the lender what
they need, making it a smooth process.
By: Angela Colley | Updated from an
earlier version by Laura Sherman.