Mortgage Check List
1. What makes you a good candidate for a loan?
Before you apply for a loan, put yourself in the lender’s shoes. You’re about to sign $300,000 over to somebody you’ve never met! What kinds of questions would you ask the candidate before you sign over the money? What evidence would you want to see that they are capable and reliable to pay their debt to you? What is the purpose of the loan? Now think about your own loan request. Before you apply, you should be aware of what lending underwriters look at before they approve your loan request.
Your loan application is evaluated for approval by the underwriters. Their evaluation takes into account the following details:
- Appraisal of property - An appraisal is performed on the home you want to purchase by an independent contractor. The fair market value of the home is estimated based upon the condition of the home, the neighborhood, and other factors. When applying for a loan, you’re borrowing a certain percentage of the total property value.
- Assets and income – Your assets and income are verified and calculated. All available funds you have, including income, equity and bank accounts, are considered against your loan application. Can you pay the loan back is the question.
- Down payment – The more money you are able to put down the lower the monthly payments on the loan itself. Down payment sizes vary with loan type, but the rule of thumb is generally to pay the most you can up front to decrease interest rates or monthly fees.
- Credit history – You should be familiar with your credit history. This is what lenders look at to determine your ability to take on a new loan and pay on time. Your history reflects all your past and current debts, including late payments and outstanding liens.
If you don’t already have access to your credit report, make sure you sign up for a copy of yours before you begin the process of applying for a home loan. Understanding how to read your report will help you when negotiating with a lender.
2. What’s required to apply for a home loan?
Make sure you have the following information ready to pre-qualify:
- Current income
- Outstanding debt
- Amount willing to apply to down payment
Once we have this information your lender can better inform you as to what loan types are available to you.
The next step is applying for a loan based upon the home you wish to buy. For the loan application process, a good deal more information will be required to process your request. To help facilitate this, we’ve compiled a handy checklist you can print and use. You may want to consult with an experienced loan officer to get help completing your information preparation. You should have the list completed before applying to avoid delays.
3. Loan application checklist:
Required for Loan Application:
- Copies of the home purchase sales contract or offer to purchase, including all relevant documentation signed by both buyer and seller. This can include the initial loan application and declaration of purpose for loan.
- Home listing paperwork with details of the property for sale. Included should be an appraisal of the property by a licensed appraiser. Be sure to include any termite reports if applicable.
- Your W-2 forms for the last two years of employment. Include all corporate, partnership or LLC tax returns as well.
- Your latest pay stub as well as any invoices for contract work.
- Complete employment history for at least the last two years, including the name of your employers, their address and contact information. Be ready to explain periods of no employment.
- Your social security number. Also, you will need the social security number of any co-borrowers. If you are not a US citizen, a copy of your Green Card or H-1 Visa is also required (front and back).
- Complete bank statements covering at least the last three months for all checking, savings, money market or other accounts. Be sure to include addresses, bank account numbers and balances (generally present on the statements). Essentially all liquid assets at your disposal. Also include copies of cancelled checks applicable to debt payments, if available.
- A copy of your credit report. It’s easier to have a copy on hand so you can fill out your credit history with your lender and explain in writing any bad credit that exists. If you’ve filed bankruptcy, you must include all records of the filing with your report.
- Copies of your tax returns covering the last two years. This should cover all forms submitted for both years’ returns, especially if special tax forms for self-employment, sale of property or other such transactions were present.
- Records of stocks, bonds and investments. You may plan to use the value of your investments toward your home purchase. Be prepared to supply detailed documentation of these investments to your lender, including account numbers and serial numbers for bonds.
- Latest IRA or retirement plan statement. The approximate current value must be stated. If you have a SSA-1099 or W-2P, then copies must also be provided.
- Copies of life insurance policies in place, including policy numbers, total value and information regarding insurance company contacts per policy.
- Details on automobiles owned, including make, year, current market value and copies of title or loan paperwork if still financed.
- Identify any outstanding construction loans with copies of the construction contract, cost schedule and plans with signatures present where relevant.
- Provide letters stating value of monetary gifts if any of the payment for a home (including down and closing) is covered by a monetary gift. A signed affidavit is required to identify no repayment is necessary for the gifts (generally a form provided by the lender). If possible, be sure to speak to a lending counselor before dealing with such funds in case they may affect your loan eligibility.
- Documentation of all other income obtained in the last 12 months not identified thus far is required. This can be in the form of receipts, contract and statements from whatever source the income comes from.
- Rental details including landlord contact information, your rental history for at least the last year and receipts to verify rental status and payment history.
- If you are self-employed, you must provide a balance sheet and a statement of profit and loss for a minimum of the last two years, including any relevant receipts to verify current employment status.
- If you are divorced or separated, you must provide documentation identifying divorce agreements, tables of alimony or child support payments, and receipts related to all costs associated with your divorce or separation, whether paid or received.
- Students must provide transcripts for the last two years of school if you are not employed during the time you attend school. If you have graduated, a copy of your diploma will also be required.
- If you own rental property then all related mortgage paperwork must be provided, along with documentation of pending payments, receipts for past payments, mortgage company contact information and signed Federal tax returns. If the property is being rented, be prepared to show copies of all rental agreements. Should the property be listed for sale, copies of the listing and details on the escrow number and sales contract must be provided.
- If you require affordable housing, provide certification of attended counseling (such as a certificate) or of inspection (certificate or equivalent documentation).
- If you are refinancing a home, provide evidence of various types of home insurance, such as earthquake, fire, flood and other hazard types.
- If the property being refinanced was owned for less than 1 year, you’ll need a copy of your closing statement, such as a HUD-1.
- Once you’ve completed your checklist, you can create a folder for all your information and when you speak to your lender, you’ll be prepared for whatever comes your way!
"I am no expert, but I truly believe that anyone who signs a new home loan without checking Lowest Mortgage Rates may end up paying far too much. I know that is true for me!"
Heather Sealton -- Rhode Island