Buying a house is a long process and generally the decision to buy the new home is the longest part of the process. In order to make the actual loan process easier, preparation is key. I will provide a few tips that will have you ready once you make the decision to buy.
Here are the key documents your bank will request to process your loan;
Tax returns: Your lender will want full returns, which means depending on your occupation and how you are paid it may differ. Have prepared, fully signed tax returns for your business (if applicable) and personal, K1’s, W2’s, all schedules. If there is any way you were paid they are going to want to see it. Some lenders want 2 years and some want 3 years, so just to be safe have 3.
Year to Date Profit and Loss: If you are a small business owner, your lender is going to want to see how you are doing so far in that given year.
Paystubs: Once you know that you are going to proceed with the loan process, get the last 4 paystubs for you and any other borrower on the loan. That may be overkill, but better safe than sorry.
Current Mortgage: If you own any current properties they will want to see homeowner insurance policies, HOA coupons, and most recent mortgage statements for all of them. Once they pull your credit they will see them and ask for them, so just have them ready.
Bank Statements: Generally they will want to see the last 3 months bank statements for all accounts that have funds. This really has two purposes, one to see where the down payment will come from and two to verify that you have reserves. Reserve requirements vary but usually the bank will want to see that you have anywhere from 3-12 months worth of funds to pay for the home in the bank after the down payment.
Derogatory History: If you have had a short sale, foreclosure, or bankruptcy the lender will want to see a discharge letter and a hardship letter explaining the reason. This is usually to satisfy a mitigation requirement for the lender and/or a regulatory guideline.
Here is the most important tip I can give in this process… Have all of this information saved electronically. Have it in either PDF form or another electronic form, so as soon as the application is taken you can send this all to the lender right away. Timing is critical in a real estate transaction and hopefully this list can help you be properly prepared.
Please leave a comment or contact me with questions.