Interest rates are very favorable for purchasing a home or refinancing a mortgage. Knowing what to expect can greatly enhance your chances of securing the best financing, while also limiting some of the common issues that arise during the process. Obtaining a loan today is more invasive than in the past.
Government regulations are in place to ensure quality loans for investors and protect consumers from predatory lending, as well as to fight terrorism and money laundering.
Under current regulations, lenders must scrutinize an applicant much more closely, so expect to document your file completely, detailing at least two years of employment, all sources of income (unless it is a stated income loan), assets, property value, and credit profile. Here is a quick reference guide to help steer you through the process and prepare the necessary documentation:
Complete a Loan Application
Include details of the property being financed, your residential history, social security number, contact information, job history (at least 2 years), assets, liabilities, and properties owned.
Documenting Your File
Aside from an independent investigation of facts, you will be required to supply documentation to support your application.
Items that will/may be requested:
If purchasing a home, a complete copy of the purchase agreement (or escrow contact to request documentation).
- Two years tax returns and W2s, K1s, 1099s;
- If the current year taxes are on extension, a copy of the extension will be required;
- If self-employed (own more than 25% of the company), 2 years business tax returns and year-to-date profit and loss;
- One month of pay stubs (be prepared to supply pay stubs received as the loan is processed);
- If there is rental income, copy of all leases are required;
- Social security income to be documented by supplying the awards letter;
- If receiving disability income proof must be supplied by documenting permanent disability, and amount of monthly payments;
- Child support or alimony, if used to qualify, requires a copy of the final divorce decree or court documentation proving the income, as well as documentation of its receipt (such as canceled checks, or bank statements showing the deposit proving receipt of the past 12 months). In addition, you must prove it will be received for the next 3 years.
- Two months statements of assets (bank, brokerage and retirement) – all pages, even if blank. Be prepared to supply statements received during the loan process;
- Explanation and source of any large deposits made on the statements provided;
- If real estate is owned free and clear, a copy of the deed of trust (we can obtain through a title company if desired);
- If a new car is owned and does not have a loan, a copy of the title may be required;
- If selling a residence, a copy of the estimated HUD 1 (settlement statement) from escrow will be requested (or escrow information to request HUD 1). If a property was sold, a copy of the Final HUD 1;
- Gift funds being used for the transaction need to be documented with a gift letter explaining the amount of the gift, the relationship between the parties, and proof of funds, such as a bank statement from where the gift will be given;
- Other types of assets owned may require documentation of ownership and/or value.
- Copy of driver’s license (or other official photo identification);
- Copy of social security card (or proof of social security number).
- Explanations for all derogatory credit;
- Explanation of all inquiries for the past 90 days;
- If a bankruptcy was filed in the previous 7 years, provide the final bankruptcy court papers.
Being prepared and documenting your loan request increases your chances for a favorable disposition and easier loan process. Elite Financial will assist you in all aspects of documenting your file, as NOT ALL ITEMS listed above are required for all loans.