The requirements for buyers getting mortgage loans have been a rapidly moving target for about 2 years. As the housing crisis continues to play out, the mortgage and lending industry have been at the forefront of blame as well as new regulations, mostly in the form of new and extra documentation for almost every step of the home-buying process, especially obtaining a loan.
So how do you prepare yourself for a new loan? What should you plan for in terms of documents, timing and expectations when you make contact with a loan officer? Consider these tips:
1) Have you looked at your Credit Report Recently?: Each state allows users to get one free credit report annually…get those reports, and note any mistakes or inaccuracies. Some mistakes are easy to fix, others may take weeks of follow-up, but you don’t want to go into your mortgage person’s office and get blindsided by information that isn’t accurate. More than ever, your credit history determines not only your ability to get a loan, but the kind, terms and interest rates, too.
2) Do you have your Federal Tax Returns?: This means your complete returns, whether prepared by you or someone else. If you did your own taxes online with a service like Turbo Tax, just print off the final version you sent to the IRS. Most of the time you will be asked for two years’ worth of data, but be prepared to get asked for additional years.
3) Can I see your Proof of Employment?: This means either W-2’s or W-9’s for the self-employed. Again, this is probably just two years’ worth, but be prepared to get additional years if requested. This may include providing a check stub as well that shows who you work for, your hours, rate of pay, etc.
4) What Other Sources of Income do you Have?: If you get income from non-employment sources like alimony, commissions, overtime, on-line ventures, social security, pensions, trust funds, child support, other retirement income, etc., you’ll need to bring documentation showing those income streams.
4) If You’re a Renter, or Do You Have Limited Credit History?: If you don’t have a long credit history or have never had a mortgage, you may be asked for:
a) Proof of Rent Payments: Canceled checks or receipts showing consistently paid, on-time rental payments.
b) Utilities Payments: Proof showing that you’ve made regular, on-time payments, over time, especially if your consumer credit history is limited.
5) What Other Assets Do You Have?: Whether you own a fleet of taxis, other pieces of real estate, commercial property, stocks, bonds, etc., be prepared to show proof of ownership of those.
6) What Other Monies Do You Owe?: You’ll need to gather a list of all your creditors; student loan payments, car payments, other installment loans, credit cards, child support, alimony, private loans…anything you pay for. Canceled checks and/or statements will work.
7) Can I see Your Current Bank Statements?: Some mortgage entities will want to see the bank statements for your accounts: checking, savings, IRA’s, etc.
8) Getting a Gift of Money for a Down payment? You’ll need to show a host of documents; a copy of the canceled check, the deposit slip, an affidavit from the giver attesting to such a gift and that repayment is not expected; proof that the giver could give the money.
9) Previously Filed for Bankruptcy? Dig out all your paperwork; the bankruptcy proceeding documents, the schedules, everything.
10) Getting an FHA or VA Loan? You’ll need a copy of your Social Security card, proof of ID, and your enlistment proof for a VA loan.
11) Opened a new bank account recently? You may get asked for a letter indicating where the money came from to open the new account.
12) Moved Around A Lot? Be prepared to bring the details of your previous addresses, especially if you’ve lived in your current place for less than two years.
Getting a loan is a bit more difficult than it used to be, and the burden of proof and paperwork is much, much higher than it has been. That’s good, as lenders realize that proof of ability to repay the loan should be the #1 priority, and that only comes with…proof.
Start early to get your paperwork in order. Unless you’re a superior with record-keeping, you may have some digging to do, but the reward will be a smoother process once you start, and solid justification for why you should be getting a loan!