In today’s mortgage industry when it comes to getting approved for a home loan, it has substantially changed. Just a few years go it was very easy to get approved for all the loan programs being offered. Low credit scores and low or no documentation still got you approved which is why the housing industry is in the state it is now. Traditionally, low documentation used to mean no income verification but you needed to put 20 to 25% down, verify your assets and job. In the boom times, lenders left the ladder requirements out.
So, in today’s market what you can do to increase your chances of being approved is providing documentation to alleviate the lender’s concern and lower their risk. Besides the typical copies of W2’s, bank statements, and paystubs, you should also have readily available:
1.) A copy of the canceled earnest money deposit check (front & back) along with the escrow deposit receipt. If you are into saving paper & get all account information online (which is a good thing for green living), then access your account online and print out the check.
2.) A legible copy of the signed purchase contract and any addendums. If you're using a broker or agent, you should have both brokers' names, business addresses, and phone numbers. If you reside in a state which requires real estate attorneys to close real estate transactions, the same information is needed.
3.) If you're purchasing a property and selling a residence at the same time, you'll need a copy of the listing agreement, if the property is under contract, a copy of the signed purchase agreement. When the property closes, you may be asked to provide a copy of the actual proceeds received from the escrow or settlement company. The same applies for if you just recently closed on a property within the last 90 days.
4.) If you received gift funds, the giftor must provide evidence that they actually had that money available to give. Proof such as a copy of the giftor’s recent bank statement should be sufficient. The giftor will have to write a gift letter affidavit, available from the loan officer, stating that the money is a gift and it does not have to be repaid. In summary, you’ll need a copy of the check, bank deposit receipt and the corresponding bank statement showing the deposit.
5.) If applicable, copies of divorce decrees, social security, child support, and alimony.
6.) If you own your own business, have available copies of the last two years' federal business tax returns and a year-to-date profit and loss statement. A letter from your CPA indicating that you are self-employed or a copy of your business license may be acceptable by some lenders, but have your tax returns and profit-and-loss statement done just in case.
7.) If you've deposited any large amounts into your bank in the last 90 days, be prepared to provide an explanation letter with proof of where the money originated from.
8.) If you've had a bankruptcy or foreclosure, make sure you have a full copy and a written letter explaining the reasons and the discharge papers.
9.) If you have any paid judgments against you but still show as unpaid have a copy of the recorded satisfaction of judgment.
10 ) If you are buying a home and will use it as your new primary residence and making your existing home into a rental, you should have a signed lease agreement as well as documentation of obtaining a deposit from the new lessee.
Frank Collins is an avid investor in real estate and contributor to Jumbo Home Mortgage and
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