Applying for a loan is easier than most people imagine. Getting the loan approved, however, not so much. But with the right tools and knowledge. The secret lies in effectively utilizing these tools to secure a home loan at an affordable rate. To shorten the time taken to process each home loan application, it is advisable to prepare all the required documents in advance, and in line with the new TRID rules and regulations. However, as is evident in this article, although accessing a home loan is sometimes a lengthy process, having the right documents can speed up the process.
Most people seek home loans for the sole reason of fulfilling the dream of owning a home, while those who already have one base their justification on such arguments as their house needs some work, needs updates, or is damaged. At Well-Suited Property Solutions, assess several aspects of the house to determine eligibility to qualify for traditional financing. In the case of an old property, such elements include whether the property needs new paint, plumbing repairs, has a damaged roof, broken windows, or is vandalized. When recommending home loans, Well-Suited Property Solutions encourages clients to perceive financing as an investment opportunity, which will help them achieve their living standards goals. No matter the reason for applying for a home loan, however, the following are some of the most commonly required documents.
The law requires the lender to identify the mortgagor by their identification documents. Besides, these documents are helpful when remitting property taxes as required by law. The identification must be valid (i.e., from the government), indicating the description of the mortgagor in person. If your documents are almost expiring, you should consider renewing them before applying for a home loan.
In the contemporary world of business, these are not just needed when applying for a home loan but are a prerequisite in all types of loans. This is especially so to individuals who are self-employed and whose income is not fixed and is a function of a combination of factors. It is a requirement that the mortgagor or homeowner provides bank statements for ALL of their accounts. Although some lenders insist on three-month bank statements, this condition can vary with the type and nature of the mortgage. Additionally, the lender may request for additional but related documents if such would strengthen the decision to approve. To the lender, bank statements are a way of evaluating the capacity of the mortgagor to service the mortgage. Another point to note is that save for gifts; you are obligated to close any funds you need to be in your account within a period of a minimum of 60 days. Additionally, these documents vary every month, and being requested for new ones in a new month is the norm.
3. Tax Returns
As a mortgagor, it is your responsibility to ensure that your tax returns are up to date, preferably a minimum of 2 years. These documents should have detailed information of up to date tax payments and should include all the pages of both the originals and the amended returns. To apply for any loan, transcripts of returns are considered insufficient. Since retrieving copies of tax returns from the IRS may take between 75 to 120 days, it is advisable to request and acquire any relevant tax documents in advance
To qualify for a home loan, you are also required to provide the W-2 forms from your employer. Every year, your employer is supposed to have provided you with Wage and Tax Statement reflected in this form and a copy to the IRS, reporting what you earn in an annual basis as well as what the employer has been withholding from your paycheck in the form of taxes.
5. Letters of Explanation (LOEs)
You are also required to submit LOEs to explain your financial behavior. LOEs help explicate such aspects as credit challenges you have suffered or are suffering or any external source of funds such as gifts that help you cover closing costs or down payment. If unsure, you can consult with the lender on what to include.
6. Court Documents
You also have to provide any legal documents that have influenced the behavior of your financial accounts, such as filings for bankruptcy. Documents of significant social milestones such as divorce are also required since they affect the number of resources you will have access to.
7. Current Mortgage Statements
Verifying the exact amount of your existing debt is a requirement for the lender. As such, you are required to provide documents showing the payment status of any outstanding mortgage loans tagged to your property. If you are a tenant, you may also be necessary to have full disclosure about it.
8. Earnest Money Deposits
These are records of your money transactions, mostly deposits. Have the documents in place indicating where and when you made a deposit and the mode, including copies of cash receipts or checks as proof.
9. Purchase Contract
Provide copies of contracts of any property you have acquired through the signing of a purchase and sales agreement.
10. Pay Stubs or P&Ls
If you are employed, a submission of your most current pay stubs is required covering the very last month. However, if you are self-employed, the lender may require your YTD Profit and Loss statement.