What Documents Do I Need to Get a Mortgage?
One of the most confusing, and often times frustrating, parts of buying a new home or refinancing an old mortgage loan is submitting all of the documentation required by lenders. If the last time you got a mortgage was pre-TRID, pre-SAFE, pre-Dodd-Frank, the differences in the process can be shocking, demanding, and downright frustrating. But they don't have to be. In another blog, I outlined the loan process and what is generally involved. Knowing how the mortgage process works is step 1 in a frustration-free application, and knowing what documentation is needed is step 2.
If you gather this information in advance, return requests for it quickly, and provide as much information as possible up front, you save yourself a lot of headache, and you can be one of those people who talk about how pleasant the home buying process is. Obviously, different loan products call for different sets of documentation, but below are some standard items you should have prepared, or at least readily available, along with a few suggestions to have your mortgage made easy.
For just about every mortgage product under the sun, you'll need to have the following:
- Copy of valid goverment photo ID. This can be a driver's license, passport, visa, or ID card. The key word to avoid frustration is valid. If your driver's license has expired, get it renewed to ensure you only have to send it once. Also, be sure the ID is legible - trying to fax an ID or copy it to paper then send can oftentimes make the ID impossible to read - we don't care so much about the photo, but we do need to be able to read things like address, expiration date, etc. This is part of a lender's requirement to follow Patriot Act rules.
- Unexpired insurance policy with adequate coverage. If you're buying a new home, you may not have a policy in place, but at the very least we'll need to know who you'll be using for insurance so we can send them lender requirements for when the policy is available. If you're refinancing and your insurance is set to expire soon, you may need to provide a renewal notice, or (if the insurance provider refuses to provide a renewal w/updated premium) a rewritten policy to extend the coverage dates.
Income documents will vary by loan program, and even by borrower (different borrowers may have different income documentation requirements for the same loan product)
For salaried or hourly borrowers, income documentation may vary greatly (we may be able to simply use a full verification of employment from your company and that's it). Generally, it's a good idea to have the following ready to go or at least easily accessible:
- Most recent 2 years W2 forms
- Most recent 30 days paystubs reflecting year-to-date income
For borrowers who have income from self-employment, investments, real estate owned (REO), or retirement:
- Most recent 2 years federal tax returns, all schedules (depending on how self-employment is structured and how funds are distributed, both personal & business returns may be required)
- Award letters/evidence of receipt for distributions of investment income/pension/social security/etc
For borrowers using alternative income documentation:
- 12-24 months personal and/or business bank statements (One program we offer for example, requires either 12 months personal statements and 3 months business statements, OR 12 months business statements and 3 months personal statements)
***INCOME TIP*** - for any deviation in standard income (bonuses, time off that causes your 'year to date' income not to match your salary/hourly rate, etc) have a letter of explanation and preferably a paper trail to document the deviation.
- Standard asset requirements for down payment, closing costs, or cash to close is 2 months asset statements (bank statements, investment portfolio statement, etc), and all pages must be included (for example, if page one says "page 1 of ____", we'll need the statement in it's entirety
- Additional asset statements may be required for bank statement loans (typically 12 months of complete statements), asset depletion loans, or loans requiring reserves. If funds required for closing or loan approval, we'll need the required number of months for each account being used.
- If gift funds are being used, a gift letter & documentation that the gift is from an acceptable source will be required. Some loan programs require proof of funds as well (meaning, if the gift is coming from a family member, that family member's bank statement may be required)
**ASSET TIP** Don't move money around between multiple accounts within 2 months of working on a mortgage. When funds are moved and large deposits noted, a lender will want to have a papertrail which could involve a lot of paperwork when many accounts have money moving between them. It's best to keep your funds in one place and have them in order 2+ months prior to buying a home or refinancing. Of course, you can still move money around, but if you do, be prepared to document the movements.
Every borrower is unique, and for that reason, many loan files will require non-standard documentation for different scenarios.
- For situations that could require monthly liabilities, supporting documentation will be required (divorce decrees, legal separation agreements, etc)
- If you'd like to close your loan in a trust, the trust will need to be sent to the lender for review (in most instances closing in a trust is fine, but the trust will have to meet investor guidelines)
- Letters of explanation for recent credit inquiries, derogatory credit accounts, or any deviance in income or assets. Your loan officer should be able to advise exactly what types of explanation will be requested by underwriting, and why.
**DOCUMENT TIP** Giving authorization to share information to a 3rd party (your lender) to your financial companies can save you time. For example, if you use a CPA, they may have pdf files of your tax returns readily available, so with your approval, they can send them. Your attorney will likely have easy access to court records, and while most banks have easy online access to full statements, you can also have the bank fax statements with your authorization. If you pay professionals to help with your finances, they likely have electronic copies that can save you from digging around for paperwork.
Without preparation, documentation for a mortgage application may seem daunting. The truth is, it can be. If you have complicated financials, inconsistent income, and a shaky credit history, the documentation requirements from a lender may be tedious. However, preparing before you begin the process and knowing what documents to have on hand can make the process streamlined, fast, and stress-free. Working with an experienced loan officer can also make your life a whole lot easier.
And remember, we're here to help you get your loan closed and funded as quickly as possible. We don't want to deal with any documentation that isn't 100% necessary, and we don't care about your private details. Messy divorce? We don't want the details, we just want to be sure any resulting liabilities are included in the loan file. Trust that indicates behind your modest exterior you're an uber-quadrillionaire? We don't care and we're not telling anyone, we just want to know the trust verbiage isn't going to have Fannie Mae asking us to buy back your loan after closing. We don't judge, we just want to get your loan closed, just like you.