Here are the documents that you will need for a loan

Why do mortgage lenders ask for so much documentation? They seem to need information that requires digging in back records many times. How can you be better prepared for what is required?

Other than property associated characteristics like loan amount, loan - value ratios etc,?your personal characteristics?are based on 4 basic areas of consideration.

1) Credit History
2) Debt Ratio
3) Job History
4) Asset Reserves

If you have a high credit score, low debt ratio, over 2 year job history, and 6 months of income in the bank you are considered an?”A” paper borrower and worthy of the best programs available. That is the key to loan pricing. The more you can prove the lower your rate and fees.

However, a small percentage of overall borrowers actually position themselves into this category and for some it is not because they don’t qualify for “A” paper it is because of poor organization and storage of the necessary documentation to qualify for that category. When they are asked for the list of items needed to qualify they choose a program that has lesser qualifying standards and as a result a slightly higher rate or higher fees.

Borrowers will give exceptions for a low credit score, or a higher debt ratio, or no reserves….there are even programs that will allow for 2 areas to be unqualified. The rates?are higher and the allowed loan amounts and loan - value ratios are lower.

1) Legible copy of drivers license and social security card: These are the items that will prove who you are and are required of all borrowers.

2) Copies of bank statements: Depending on your income status (self employed or W2) you will need anywhere from 3 months of personal returns for W2 wage earners to 24 months of business bank statements for self employed borrowers. These are used for several reasons. First of all, for W2 borrowers?they show the monthly income flow and even if minimal will reflect average balances that are used towards your asset reserves.?

For self employed borrowers bank statements can be the key to really qualifying as “A” paper. Lenders will allow 50 - 75% of all deposits into a sole proprietors business bank account as PERSONAL INCOME. If your business has high ticket prices with low margins this makes your income qualifying status very strong. All it requires is keeping all pages of all bank statements available for 2 years. If the statements says 6 pages and page 6 is blank…include it anyway because it will be requested.

3) Copies of other asset account statements: This would include last 2 statements for all investment accounts, retirement accounts etc. This will provide strength to your asset reserves.

4)?W2’s or CPA Letter: Wage earners will need their last 2 years W2’s to prove 2 year job history. Self employed can provide either a letter from a CPA indicating your employment status for the past 2+ years as self employed, or a business license showing valid for at least 2 years.?Either of these will validate your 2 year employment status.

For refinancing, additional documentation will be requested:

5) Current mortgage statements: Most recent copy of mortgage statement for all mortgages. This helps underwriters access payoff information directly from the lender. They will only use the balance indicated on the statement as an estimate of payoff. The actual payoffs will include prepayment penalties (if applicable), unpaid interest, unpaid late fees, impound shortages etc. Many times this payoff balance is higher than what your statement actually reports.

6) Current “Insurance Declaration” page: This is your home owners insurance policy. There will be 1 page, usually the first page, that will be titled “Insurance Declaration”.

7) HOA Statement: If you have a homeowners association have a copy of the recent statement available.

By keeping the above items sorted for easy access you will make the qualifying process much easier. Remember, most lenders do make exceptions for items missing or insufficient but it will cost you a higher rate or higher loan costs.

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