Preparing for the mortgage process
If purchasing or refinancing a home is in your plan for 2017, there are steps you can take ahead of time to make the process of obtaining a mortgage go smoothly. Mark Wells of Preferred Financial Services answers common questions about how to prepare to apply for a loan.
I have heard horror stories about having to document all kinds of things to get approved for a mortgage. What documents will I need?
The list is pretty simple for W-2 employees. You will need the last two years’ filed tax returns and W-2s, along with your most recent pay stubs covering 30 days’ pay.
I’m self-employed. Is it that easy for me?
Unfortunately, not. In addition to your personal tax returns and W-2s, you will need to provide the last two years’ business tax returns for any company of which you own 25 percent or more. The K-1s issued by any company that you own any portion of will be needed also.
Is that all?
That’s it for income documentation, but there are other items that will be needed. Your liquid assets will also need to be verified by providing the last 60 days’ statements from any checking, savings, IRA, 401-K, Roth IRA, or investment accounts. The key to avoiding additional hassle for these items is to make sure you include ALL pages of each statement, even if a page is blank.
They want to look at a blank page?
It’s pretty crazy out there, but not quite that crazy. If a statement says ‘page 1 of 6,’ they have to make sure there is no information on page 6. That’s why you have to provide all pages.
Income documents, asset documents—is this all?
Sometimes the documents you provide generate questions of their own that require further documentation. This is where the mortgage process can get frustrating. But if you know ahead of time what the underwriter is looking for, you can go ahead and put the supplemental information together at the start and save some headaches.
What kind of questions might come up?
For self-employed borrowers, if your company has any short-term notes on the balance sheet of the tax return, you will have to show that the note has either been paid off, or is routinely renewed annually by the lender. This will require a letter from the lender stating the case for your note, and a copy of the note itself. In regard to asset issues, showing that your down-payment funds have come from ‘earned and saved funds’ will require you to show that all deposits into your asset accounts over the past 60 days have come from a verifiable job or from an account that contained funds that were ‘earned and saved.’ Images of the deposit ticket will be needed if your bank statement does not show the source of the deposit. If your down payment is coming from a gift, you will need a Gift Letter, and 30 days’ bank statement from the person who gave you the gift, showing they had the capacity to give you the funds without borrowing them.
Because each person’s finances are slightly different, Mark recommends you reach out to your mortgage broker well in advance of your mortgage application, to compile a complete list of what you will need when you apply. He is happy to help you with this or with any other mortgage questions,and can be reached at 864-235-9596 or Mark@TheGreatestRates.com.
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