Preparing the necessary financial documents ahead of time speeds up the mortgage application process. Nonetheless, mortgage lenders are unique, and some may ask you to provide additional documentation. Below is a breakdown of the necessary documentation needed in each mortgage application situation.
Proof of Income
Your mortgage lender may ask for proof that you have a source of income to be sure that you will pay the loan back. You may be asked to provide copies of pay-stubs and W-2 copies for the past two years. Your home loan lender will use W-2 form to track your income history and verify that you have a source of income. You may also be asked to provide addresses and names of all the companies you have worked for in the past two years.
Mortgage lenders must ask for a credit history to assess how risky or creditworthy a borrower is before giving them a loan. Borrowers with an impressive credit history are likely to qualify for better loan options and large loans with favorable interest rates. Your lender will ask for your date of birth and social security number to verify your creditworthiness.
Copies of Insurance Covers
Mortgage lenders use homeowner’s insurance to verify that a borrower has sufficient coverage on a property before applying for a home loan. Homeowner’s insurance covers any event or damage that may affect the value of your property. Borrowers may also be asked to provide a copy of title insurance as a protection against any error in their property’s title. In short, a copy of title insurance helps verify the property’s legal description, the names on the title, and the taxes.
Down Payment and Source of Funds
Borrowers must prove to the lender that they have some money to close the costs for them to qualify for a mortgage loan al. Some of the acceptable sources of funds include proof of receipt of funds and gift affidavit, money market funds, the sale of an existing property, or stocks and bonds. However, a lender may ask a borrower to provide copies of their bank statement, a statement of listing agreement and signed contract on their sold property, and copies of certificates or statement from their bonds and stocks brokers. Borrowers may also be required to submit additional documents based on their credit or application report.
Details about Your Property
Many lenders often ask for a copy of a signed sales contract to verify that a borrower has security. You could also be asked to provide phone numbers, addresses, and names of the attorney, real estate agent, or insurance agent involved in the sale of the property. Furthermore, some lenders can ask borrowers to provide a copy of bank statement to verify the deposit they placed on their home. You could also be asked to provide legal description or listing sheet, but this is optional. People whose property is condominium may be asked to provide their recent budget, by-laws, and condominium declaration. You can consult an expert in home loans to help you understand what documentation is required to get approved.