Getting a Home Loan – Prepare Ahead
Get your Home Loan Document Checklist here, so you are prepared. Every lender requires personal documents to process and approve a home loan mortgage. The credit report provides some account names and account numbers, but this will give you the list to work on what is not easy to get.
Ultimately, having a copy of a home loan document checklist in your head will minimize the time you need to get the paperwork together. You’ll also need to provide more recent pay stubs and bank/broker statements as you get them during this process. At least one more credit check and employment verification are done before closing the loan. Try very hard not to change a thing once you are approved.
The Home Loan Document Checklist-
- 2 years of tax returns for every person on the loan. These need to be for last year and the year before
- 1099’s for the current year if taxes have not been filed – this may be required
- Year-to-date P & L if you are self-employed
- Business tax returns, if applicable
- A month of paycheck stubs or check copies for each person signing the loan
- Two months of bank or credit union statements for both checking and savings accounts
- Lender, loan number, and amount owed on installment loans- student loans, cars, etc.
- Addresses where you’ve lived for the last five years
- Brokerage account statements- last two statements
- List of assets- stocks, bonds, boats, homes, and cars where no debt is involved
- Your most recent 401(k) or other retirement account statement
- Documentation to verify additional income, such as Social Security, child support- paying/receiving or pension, and existing Home Loan Documents
Besides the Home Loan Document Checklist above, 2020 added a new challenge to getting a home loan. During this strange year, the IRS basically closed for months. After re-opening, the staff allowed in their buildings at one time was minimized to adhere to Covid guidelines. This has caused an overwhelming mailroom back up, and they are ultimately months behind normal.
People on W-2 income may not have as large of a challenge from this item. However, self-employed applicants will need a copy of last year’s tax return to verify that they are being honest regarding write-offs. Hopefully, lending wholesale companies will become more lenient on this requirement in the future. Until then, be prepared.
Also, know that unemployment income does not count towards home loan qualifying because it’s temporary. Self-employed people can not use PPP funds to qualify for a loan. To try to prevent this from being your problem at the last moment:
- Use a tax professional to file your taxes electronically
- Do not handwrite numbers on your tax return because it causes red flags
- Send your tax return from a post office counter and save the receipt
- Do not credit your return monies to the next year
- File as early as possible
Alternative Lender Products and Approvals
There are many kinds of home loan products. Stated Income Home Loans have gone away, but there are home loans where you can show bank deposits to verify income and other creative programs.
A gazillion online lenders have come to the web in the last 10 years. Choosing an online lender is a choice you’ll have to make if it’s the best decision for you. Know that many things can go wrong with a loan at the last minute, so we suggest that you use a reputable company whether you choose a brick and mortar or online company.
Another notable fact that we’ve run into frequently, is that online lenders and banks have a box that their borrowers must fall into. This box is fine for a majority of borrowers. However, self-employed borrowers, borrowers that need an explanation for a credit ding, and even people wanting a fast closing, do not fall into the box.
Shop for rates and time frames. Ask your lender about guarantees. If you are told that you qualify and at the last minute you don’t, your earnest money is at risk. If you close late, you are in breach of contract, and the seller can back out or fight you for money. Our job in our eyes is to protect you and your earnest money, so understand that no matter who you choose, we will follow up once or twice a week to make sure your lender is on track.
Ideally, having a “Fully Approved” Loan Qualification Letter has a lot more weight than a “Pre-Qualification” letter. Loan Approval requires the above paperwork submitted to underwriting, so it’s a good idea to be prepared in advance. When there are multiple offers on a house, cash is king. A fully approved loan is the second-best, and a pre-qualified buyer is third. If you have time, do your loan app before looking at houses.
Shop Lenders, Rates, and Fees
This Home Loan Document Checklist will be applicable for most home loan applicants. When talking with your lender, you’ll want to talk about any documents you are unable to provide. There may be alternatives. An example is that an FHA loan will allow utility bills to be used if there is minimal credit. Remember, a lender is on your side. Always be honest with your lender and brainstorm solutions if you need to
Anything out of the mainstream box will usually result in a higher interest rate. If you need a referral to our favorite local lender, a person in a building that answers his phone, Bruce Singer is the guy. He also has been in this business for 25 years, and a lender really has to impress us to keep our business. Include him in your lender interviews and rate comparisons. See our other loan and credit blogs for information about shopping lenders, loans, and rates.
This Blog was written by Kurt Grosse. Kurt is a 25-year Southern Nevada Realtor, X-Engineer, and Full-Time Protector. Give him a call today at 702-750-7599 for a consultation and to find the home that’s right for you.
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