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Documents you need to get a home mortgage

  • Lenders require more paperwork from all borrowers.
  • Never cross out, white out or alter any information on a document.
  • Documents expire in 30 days, so have access to updated versions.

Applying for a mortgage used to be easy: You'd complete an application and the lender would pull your credit score. More often than not, you'd be approved.

But nowadays, lenders require paperwork that documents every facet of your financial life: taxable income, assets, rent payments and more. And there's no escape. Every borrower must survive what we like to describes as "the flaming hoops of loan underwriting." "Even if you are the most perfect borrower, expect that you might still get singed going through these hoops."

 

These are the following list of items you may need to document income:

 

Paycheck Stubs, W-2s
 
Loan guidelines typically specify one month of verified income. You can prove this with paycheck stubs. Employees paid electronically may be able to access a corporate website to print out paycheck stubs.

Guidelines typically require the most recent Form W-2, but some borrowers are asked for two years of W-2s.

"If your loan hasn't closed by the time that new W-2s should be received by the employees, then (the lender) may ask for that, certainly," says Julie Miller, a sales manager at Prospect Mortgage, in Irvine, Calif.

 

Bank...Investment...Tax Documentation
 
Borrowers generally must supply bank and investment account statements for the last 30 days. An application for a jumbo loan could trigger a request for up to three months of statements.

In the past, only self-employed borrowers who went through full underwriting typically were required to present income tax returns. Today, almost everyone is expected to provide a recent tax return, including all the pages and schedules.

Borrowers also must sign IRS Form 4506-T, which allows the lender to get a transcript of the tax return from the IRS. This practice "has become an industry standard as fraud prevention," says Brad Blackwell, national sales manager at Wells Fargo Home Mortgage.

Tax returns are scrutinized for unreimbursed employee business expenses, self-employment business losses and telltale signs of loan fraud, such as reported income that doesn't match an employee's W-2.

Don't try to amend a prior year's tax returns to show more income. That's now a no-no.

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Profit and Loss Statement
 
Self-employed borrowers may have to submit a current-year profit-and-loss statement, especially if the year is more than half over or they haven't filed their prior year's tax return.

Many self-employed borrowers used to be able to get loans with little or no income documentation, but no more.  There are no more stated income loans.

 

Rental Property Income
 
Borrowers who include rents from investment property in their income need to show the income on their tax return. Canceled rent checks and bank statements showing those deposits might be OK if the property was purchased in the current calendar year.

Homeowners planning to buy a new home and rent out their current residence must provide a rental agreement, canceled rent checks and bank statements. They also must have at least 30 percent equity in their current residence. An appraisal might be required at the borrower's expense.

 

Gift Letter...Paper Trail
 
Borrowers who receive a cash gift toward their down payment should be prepared to provide a letter from the "giftor" that declares the gift isn't a loan. A copy of the giftor's bank account statement showing the funds, a canceled check and the borrower's own statement showing the funds also may be required.

These guidelines are much stricter than they used to be, especially for borrowers who want to get a loan insured by the Federal Housing Administration.

It's not that big a deal, except that Mom and Dad don't like to give thier children a copy of their bank statement, especially if there is a lot of money in the account.

 

 Other documents, letters

Renters must supply 12 months of canceled rent checks (front and back) and bank statements showing the rent was paid on time. Renters without that documentation can provide the landlord's name and contact information for payment verification.

Borrowers also may be required to provide a copy of a divorce decree, proof of a child's age if child support is counted as income, bankruptcy discharge papers and more. Lenders also may demand letters that explain negative items on a credit report or verify the borrower's motivation for the loan, Miller says.

 

Loan Documentation Tips

 
Bring in documents early. Doing so can speed up the process. Also, never cross out, white-out or alter any information on a document.

If you white-out anything, it's not a valid document for our purposes.

Always provide every page of every document -- even the pages that say "This page is blank."

They want that, too. If it says (page one of seven) they want to see all seven pages.

Finally, remain ready to supply updated documents.

Documents expire after 30 days, so if homebuyers take a long time in their house-hunting effort, we won't need the whole thing again, but they will have to bring the most current paycheck and that type of thing.