Why is it that a mortgage application stirs up so many emotions? Fear, anguish, frustration, annoyance… In the past, it was true. Applying for a mortgage was a serious pain. So much has changed in the industry, and some lenders are going out of their way to make the mortgage application process much easier than it used to be.
If you’re looking at buying a home, try not to listen too hard to the well-meaning people who are advising you to document your entire life. They mean well, probably because they had to do it themselves. And if you haven’t looked at your mortgage lately, you can put those nasty memories behind you because refinancing is now much easier, too.
Here’s a quick look at the documents that you’ll need to pull together. But, before you go killing trees with copies, check with your lender. It’s possible that they can verify some of this information without paper copies. Better, mortgage lenders can electronically gather this information on your behalf, with your permission. This list is probably the most you’ll have to gather. It’s quite possible, especially when refinancing, that you may only need one or two things from this list.
- Document where you’ve lived for the past two years. In some cases, this is as simple as typing up a list of your current address, and any other addresses you’ve maintained in the past two years. For a first-time home buyer who has been renting, you may be asked to get a letter signed by your landlord, verifying that you’ve been paying rent, and that you’ve paid it on time.
- Verify your income for the past two years. The fastest way to do this is to copy your last two tax returns, and then fill in the gap with copies of pay stubs from the past two months. Before you copy a 30-page tax return, check with your mortgage company, since they may only need the summary pages, or Form 1040. They may also ask for copies of the W-2 forms that you attached to your tax return.
- Prove all money-related assets. You’ll probably be asked to copy the last two or three months’ statements from all checking accounts, savings accounts, money market, IRA, mutual fund and brokerage (stock) accounts. Since most of these provide electronic statements, consider simply going online to print just what you need.
- Document all debts. Here’s the easy part, since your mortgage company should be able to pull a credit report on your behalf. This will provide all the information they need on credit card debt, installment loans (like student loans), car loans, and your current mortgage and home equity loans if you’re refinancing. It’s wise to ask for a copy just to be sure everything is correct.
- Oh, the sales contract! Of course you’ll need to send a copy of your original purchase agreement to your lender. A good mortgage company will keep the information on file, in case you choose to refinance later, saving you an extra step.
And here are some guidelines for specific situations:
- Income from child support or alimony. Please ask your lender exactly what documentation you need. Some say you need to copy all court records and include all cancelled checks. But, before you copy 10 years’ worth of paper, they owe it to you to tell you just what they need.
- Self-employed or paid by commission. You’ll need to include your pay-related schedules when you copy your tax returns. These pages break down the types of income you earned and help validate your income statements. If you own your own company, you may be asked for a profit and loss statement, balance sheet and corporate tax returns. But, based on your situation, the mortgage company should tell you just how much detail they need.
- Bankruptcy. Each lender chooses the how much risk they are willing to take when lending money for real estate. Of course you’ll need to copy any court paperwork, but you may also be asked to write a statement describing why you filed for bankruptcy. The mortgage company should be able to pull a credit report that will show you’ve kept up your good credit standing since completing your bankruptcy.
Mortgage processing has changed with the help of technology and some pretty smart people. All this refining means you benefit by gathering less paperwork for your mortgage or refinance. Don’t let bad memories or old advice keep you from a home loan that fits your budget. Work with a mortgage expert who’s willing to simplify your application and make less work for you.