If you’ve spent months searching for the perfect home, the last thing you want are delays in the mortgage approval process. Unfortunately, a delay in getting approved for your mortgage can push back the closing or be a viable reason for the seller to cancel the purchase contract.
One problem that can cause a delay is faulty or missing documentation. Even after going through the pounds of paperwork during the mortgage application process, lenders often request more documentation.
According to one loan officer, most borrowers don’t understand exactly how much detailed information the lender will need to approve their loans. Here is a list of documents your loan officer may ask for. You should be prepared to provide these documents, or copies of them, at a moment’s notice.
All W2 forms for each person who will be a co-borrower on the loan.
Copies of completed tax papers for the last two, and perhaps even three, years; include any schedules or attachments.
Copies of one month’s worth of pay stubs.
Copies of the last three bank statements for every bank account, IRA, 401K, or stock account that you have. Bring a copy of your most recent statement for any assets you have.
A copy of the back and front of your canceled earnest money check. Contact the bank if this has not yet come through.
Copy of the sales contract and all riders. You’ll also need your agent’s name and the name of the agent or broker representing the seller, addresses, and phone numbers, and the same information for both your attorney and the seller’s attorney.
If you are selling a current residence, you will need to provide a copy of the listing agreement and, if the home is under contract, a copy of the sales contract.
If gift funds are involved, the giver must provide proof that he or she had that money to give, such as a copy of the giver’s recent bank statement. You must then show the paper trail for the money, including a deposit slip. The giver will have to fill out a gift letter affidavit, available from the loan officer, indicating that the funds were a gift and the gift giver does not expect repayment.
Complete copies of all divorce decrees.
Copies of an old survey or title policy for the home you are buying, if available when you apply for the mortgage, or when it becomes available during the purchase process.
If you are self-employed, you will also need to provide complete copies of the last two years’ business tax returns and a year-to-date profit-and-loss statement and balance sheet with original signatures.
A list of your addresses for the last seven years.
If you have made any large deposits (that is, something larger than your normal monthly income) into your bank accounts in the last three months, you will need to provide an explanation as to where the funds came from with proof, such as a letter from your parents stating they have given you this cash as a gift and it need not be repaid.
If you have opened a new bank account in the last six months, you will need to provide a letter explaining where the money came from to open this new account.
Addresses and account numbers for every form of credit you have.
Documentation to verify additional income, such as Social Security, child support, and alimony.
If you have had a previous bankruptcy, bring a complete copy of the bankruptcy proceedings, including all schedules and a letter explaining the circumstances for the bankruptcy.
For a Federal Housing Administration (FHA) or Veterans Administration (VA) loan, bring a photocopy of a picture ID and a copy of your Social Security card.
Also, bring proof of enlistment for a VA loan.
If you have any judgments against you, you will need to provide a copy of recorded satisfaction of judgment, and copies of documents describing any lawsuits with which you are currently involved.
If all this seems like too much work, or if you can’t get your hands on all of the documents you need to complete your application, you might want to think about getting a no-documentation loan, also known as a "no-doc" loan.
No-doc loans are for people who either can’t, or don’t want to, provide the documentation lenders need to process a conventional loan. No-doc loans are relatively easy and fast, but be prepared to pay extra for it. Depending on what kind of documentation you do or do not produce, your loan could carry an interest rate that’s several percentage points higher than a conventional loan.
Once you’ve got your docs in line, you’ll need to think through several key issues before you can complete your loan application. Next week: How to figure out what kind of loan you need.
Oct. 17, 2003.