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10 Steps to Get Mortgage Ready - Mortgage Application Checklist

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Mortgage and Lending with Tampa Bay Florida FHA, VA, USDA & Jumbo Mortgages NMLS#237468

We face an environment today in the mortgage industry unlike any other time. The mortgage industry went from, "Have a pulse? Sure, we can get you a loan!" to "Are you willing to give up your first born for this mortgage?". It is not that difficult but going from the days of no-doc loans to full documentation and many government changes to "protect the consumer" (we won't get into that) can make it feel that way. You, the consumer, though can help yourself in the mortgage process and know exactly what will be expected from you upfront to get your mortgage to those sweet words of, Clear to Close.

 

10-Point Application Checklist to Start a Basic File

Money

1. Income: You will need matching tax returns, W-2's, and pay stubs.  I emphasize matching because now more than ever there are extra steps to prevent fraud and every loan application requires a tax transcript straight from the IRS to verify tax returns received are tax returns that are filed. You will be required to provide the last two years of your W-2's as well as federal tax returns and the last 30 days worth of your pay stubs. Self-employed? You will be required to provide an un-audited YTD P&L and balance sheet.

 

2. Debts: You must disclose all debts. This includes any other property owned even if you don't owe a mortgage. The taxes and insurance (if applicable) will still need to be counted against you. Please don't assume the property will not be found, this is mortgage fraud and no stone is un-turned. Have a copy of your last years tax bill as well as your insurance declaration page. If you have recently applied for a debt, it will show on your credit report and be ready to show proof of the debt taken out.

 

3. Credit: Lenders will pull a credit report with credit scores from all three major credit reporting bureaus. Your credit report as a good indicator based off your past as to how you will handle your debt in the future. Be ready to explain any reason for any derogatory credit in the last 24 months. You will need to provide a letter explaining your situation and potentially provide proof to back up your explanation. It is advised that you monitor your credit for any inaccuracies and try to fix any erroneous reporting 3 months prior to applying for a home loan. CreditKarma.com is a great site to monitor your Transunion report on a regular basis and AnnualCreditReport.com allows you to view your report from the three bureaus once a year. If you find any out-of-date items, 7 years for most and 10 years for bankruptcy, contact the bureaus to have the information removed. A lender experienced with credit can also help you correct your report to maximize your credit scores.

 

4. Assets: You will need to provide the last 60 days worth of assets. For checking/savings accounts this means your last two monthly statements and for other assets like 401k's and IRA's this usually means the last quarterly statement. The Patriot Act, implemented in 2001, has placed heightened scrutiny of assets to protect against illegal activities and money laundering so be prepared to document/source any un-sourced deposits (sourced deposits are items like direct deposits from employer) over $500. Assets are a good indicator to lenders that even in case of an emergency (loss of employment) you will still be able to keep up with your monthly obligations while you seek new employment.

 

5. Gifts: If you are going to receive a gift for down payment or closing cost, while 100% acceptable) be prepared to document how you will be receiving the gift, who it will be from, and where the donor will be giving the money from. A gift letter, supplied by your lender, will be needed as well as documentation to prove the donors ability/access to monies for the gift. Gifts are acceptable from family, employers, and even non-profit organizations like your church. Gifts are not acceptable from the seller, builder, broker, or anyone involved in the transaction.

 

6. VA Loans: If you are seeking a VA home loan and currently not in service, you will need to provide a DD214. If you currently in service, your commanding officer will need to provide a service letter. Both these forms are utilized to acquire your certificate of eligibility from the Veterans Administration.

 

7. Divorce: Divorce, regardless of how long ago, can impact your mortgage application. Lenders will require your divorce decree as well as a separation agreement (if separate from decree), to verify if you are responsible to pay any alimony or child support as well as any other obligations resulting from the divorce. Recipients of alimony/child support are not obligated to count this as income, but doing so will count as income towards your total debt to income ratio.

 

8. Bankruptcy: Today, after a major economic recession, many applicants have faced bankruptcy recently. This does not disqualify you for a home loan. In some cases, you may qualify for a home loan after only one year if you can prove the bankruptcy to due to a loss of job and a reduction of income leading up to the bankruptcy. If you have faced bankruptcy in the past 10 years, you will have to provide your original petition with all schedules as well as your discharge of the bankruptcy. If you do not have this paperwork, it can often be obtained from your attorney for a nominal charge.

 

9. Foreclosure: Once again, we just faced one of the worst recessions in many years, many homeowners lost their homes due to a down economy. You may qualify after one year but general guidelines require 2-7 years after a foreclosure to qualify for a new home loan. A copy of the deed of trust will be required as well as a strong explanation as to why you faced foreclosure..."walking away" because your home was under water is generally not a good explanation.

 

10. Rentals or Other Real Estate Owned: As eluded to before, a schedule of all real estate owned will be needed. Generally, this will show on your tax returns in the form of a schedule E, but in the case it isn't, be prepared to show proof of taxes and insurance. In most cases, unless the real estate owned or leased is not on your schedule E of your tax return, the income derived from the rental is not allowed to be used as qualifying income but there are cases where it may be allowed. Always provide your lease agreements.

 

Being prepared for what will be expected of you is the best way to ensure you have the most pleasurable experience with your mortgage application. The days of negligent lending are far over, don't think keeping something from your lender will not go un-noticed; not only is that mortgage fraud, but it won't benefit anyone because you have to assume it will be found. For a complete and specific list of documents needed for your loan application, contact your mortgage specialist before you enter the marketplace.

Posted by

Joshua LeretteAn experienced mortgage industry professional, Joshua Lerette has helped home owners and potential home buyers across the country purchase andrefinance their homes for over 11 years. Based in Tampa, FL, Joshua Lerette is an well known expert in the industry and extremely well versed in mortgage products available to potential clients including FHA Loans, VA Loans, USDA Loans, Fannie Mae and Freddie Mac home mortgage loans as well as Jumbo Loans to help potential home buyers and home owners either purchase or refinance.

 
 
 
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