It is no secret getting approved for a mortgage loan requires a fair amount of paperwork. Here is what you should know if there if there is anything questionable in your past…
When you apply for a mortgage for the first time or you’re a little rusty on the process, it’s reasonable to expect some shell shock in response to the documentation you will need to gather up. Lenders will want:
- two years tax returns
- two years W-2s
- 30 days of pay stubs
- 60 days of assets
In certain financial circumstances, lenders may ask for more things that may seem unnecessary. Such requests can include, but are not limited to;
- specific dates on everything
- missing pages of bank statements
- missing pages of tax returns
- anything inconsistent
If your lender asks for any piece of financial documentation, no matter how silly it might seem, provide it as fast as you can. Delays in providing supporting documentation for underwriting conditions can delay your interest rate lock as well as your ability to perform on your real estate contract. Following are the more common things that show up on mortgage applications and how to handle them.
Paper trailing– if you have any deposits in your bank account beyond your income, these will have to be paper trailed and sourced whether these monies are going to be used for the transaction or not. Lenders cannot ignore money in your bank account that cannot be documented.
Divorces– if you have been previously divorced even as long as 10 years ago, it is not out of the question for the lender to ask for a copy of the full divorce decree with all pages and schedules including the marital settlement agreement. Let’s say you have been divorced 15 years, the box on the mortgage application is marked “single.”While this should suffice, lenders will dig into your past which includes previous addresses, previous name changes, and previous marital status. If any of these background checks in the processing of your loan reveal that you were previously married, the bank will almost usually ask for the full divorce decree. A solid best practice when buying a home is to save all paperwork.
Birth certificate-this condition is added if you are unable to provide picture identification or, the question on the application on whether or not you are a US citizen is marked “no.” The question of whether or not you are a US citizen and the need for a birth certificate to show identification is usually not a condition an underwriter will sign off on without the supporting document. A good way to help prevent this is to go over all raw data on the loan application and make sure all data is correct including the declarations questions.
The Big 4
Short Sale– the final settlement statement from the transaction is critical. Many mortgage loan programs have a waiting time to be eligible for new financing.
Foreclosure– you’ll want the date of the trustee sale date. This is usually accomplished by obtaining a copy of the trustee’s sale date deed from your local recorder’s office.
Bankruptcy– if you did a chapter 7 or even a chapter 13, you’ll need to have all the pages and all the schedules including the schedule of creditors specifically identifying everything associated with the discharge. The discharge date, is the date at which the waiting time starts to secure new mortgage loan financing. Even if you’re already past the date, but you don’t have all the chapter 7 paperwork, your new loan process for buying a home can be put on hold until you have all of the appropriate documentation.
Loan modification– you will the full loan modification agreement you signed with your loan servicer.
Lenders do not intentionally try to make you provide more paperwork when buying a home. Based on your financial picture it might be necessary in order to meet federal compliance regulations all lenders must abide by. If anything identified above exists in your past or your financial picture is unique make sure to have supporting documentation and a seasoned loan professional working in your best interests.
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