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Mortgage advice to help you select a mortgage lender and choose the right mortgage loan. Check the facts about mortgages before you apply for mortgage financing.
Mortgage Advice : Documents Required for Mortgage Financing
Have the following documents ready before applying for a mortgage loan:
To Establish Income:
- W2 forms for the last two years
- Most recent pay stubs for a 30 day period
- Federal tax returns (1040's) for the last two
years, if:
- You are self-employed
- Earn a regular income from capital gains or earn a sizable interest income or earn more than 25% of your income from commissions or bonuses
- Own rental property
- Or are in a career where you take non-reimbursed business expenses
- Year-to-Date Profit and Loss Statement (for self employed)
- Corporate or Partnership tax returns (if you own more
than 25% of the business)
- Pension Award letter (for retired individuals)
- Social Security Award letters (for those on Social Security)
To Establish Assets:
- Bank statements for previous two or three months for all accounts
- Statements for two months on all stocks, mutual funds, bonds etc.
- Copy of latest 401K or other retirement assets statement
- Explanations for any large deposits and source of those funds
- Copy of the HUD1 Settlement Statement on recent sales of homes
- Copy of Estimated HUD1 Settlement Statement if a previous home is for sale, but not yet closed
- Gift letter (if some of the funds come as a gift from a family member)
- Gifts can also require:
- Verification of donor's ability to make the gift (bank statement)
- Copy of the check used to make the gift or a copy of the deposit receipt showing the funds deposited into bank account or escrow
Note: If the printed statements does not contain the borrower's name, account number, and the name of the institution, especially those obtained over the internet, these may not be accepted by the lenders
To Establish Credit:
- Landlord's name, address, and phone number (if you rent - for verification of rental)
- Explanations for any of the following items which may appear on your credit report:
- Late payments
- Credit inquiries in the last 90 days
- Charge-offs
- Collections
- Judgments
- Liens
- Copy of bankruptcy papers if you have filed bankruptcy within the last seven years
Other Documents:
- Copy of purchase agreement (if you have already made an offer)
- To document receipt of child support (if you desire to show it as income)
- Copy of Divorce Settlement (to show the amount)
- Copies of twelve months canceled checks to document actual receipt of funds
Mortgage Financing Facts : Lenders Need Verification
Mortgage financing details are included in the offer because the seller has the right to be informed of your financial plans in order to evaluate them. Except for 'no asset verification' loans, the lender has to verify where the money for mortgage financing comes from. This helps protect against fraud and determines your qualifications as a borrower. A savings history and additional assets indicates a level of stability. Providing the lenders with the most recent bank statement copies is one way to document funds in your bank account. Copies of stock certificates and tax records must also be provided to the lender. If part of the down payment of your mortgage financing will be made from the sale of stocks and investments, copies of the documentation would also have to be provided. Sometimes family members would 'gift' a certain amount, meaning that it is not to be repaid. In such cases, you are required to fill a 'gift letter' form that states the relationship between the parties, the address of the property purchased, the amount and the source of the funds. Details of a 401K or retirement program must be provided. Personal property details need not be documented unless you plan to sell them to make the down payment. Some companies may also grant mortgage financing down payment assistance to their employees. Savings bonds must also be documented. Usually, you cannot borrow money to make the down payment. But if you secure the loan against an asset you own, then you can borrow the amount.
The size of the down payment affects the mortgage approval. A larger down payment makes it easier to get approved for a mortgage. The interest rates fluctuate and you may likely have to make a larger mortgage payment. Adding a maximum acceptable interest rate in the offer protects against such an occurrence. Sometimes, the buyer may ask the seller to pay all or part of their closing costs or provide some other financial incentive as part of the offer.
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