Definition of Mortgage Application Checklist
All mortgage lenders need paperwork which verifies all of the aspects of your financial life including assets, debts, and so on. A lender will request a number of documents for this purpose. This is precisely what a mortgage application checklist is all about. Here are some of the things you can find in a checklist:
- W-2 forms of the last couple of years, if you’re earning a paycheck.
- 1099 forms or profit & loss statements if you are running a business.
- Recent stubs from your paychecks.
- Recent returns on your federal tax as well as the last couple of tax returns.
- You will also have to give a full list of debts including student loans, credit cards, child support payments, car loans, and so forth along with their minimum monthly balances and payments.
- A list of your assets, mutual fund statements, bank statements, automobile titles, real estate, brokerage statements, etc.
- Canceled checks for mortgage and rent payments.
Now, let’s take a look at each aspect of this list:
The guidelines usually require you to present your most recent tax and W-2 wage statement. Some borrowers may even be asked to hand over their W-2s for a couple of years.
If your loan has not been closed when the new W-2s are received by the employees, then the lender can also ask for that instead.
Borrowers who are self-employed might even need to submit current-year statements for profit & loss, especially when more than half of year is over, or they have not filed a tax return in the previous year.
When there was the housing boom, there were a lot of self-employed borrowers who received a loan without any income documentation. These loans are very rare as of now. Barney Frank and other misguided political leaders helped cause the housing crash back in 2008 and 2009 which is still reverberating today.
Guidelines to acquire a loan usually specify a single month’s verified income. You could even prove this using your paycheck stub which is probably emailed to you.
You need to provide your tax returns which includes all the schedules and pages. The returns are going to be checked for unreimbursed business expenses by employees, self-employment losses, and any signs of loan discrepancies such as reported income which don’t match your W-2s.
You will have to sign IRS Form 4506-T which allows the lender to obtain your transcripts pertaining to your tax returns from the IRS. The lender is going to get your tax return transcript from the IRS and match it with the return copy you gave to them. You need to realize this.
Ordering transcripts is now a standard in the industry since it can help prevent fraudulent activity.
List of debts
All of the documents mentioned above will let the lender know the amount you earn. This list tells lenders how much is owed every month. The lender will then be able to calculate your debt-to-income ratio. This is a fundamental aspect of the loan evaluation process.
A percentage of your monthly income will be spent on paying debts, including student loans, mortgages, minimum credit payments, child support, and so forth.
List of assets
Lenders want current statements and maybe previous bank statements too. The documents are scrutinized so as to verify you aren’t misguiding them about the source of the money being paid down. If you have saved money for a down payment, without any gifts from your family, then your bank records are the best way to verify this.
The lender will also want to know about all of your other assets as well. The lender will need evidence that you have sufficient investments and savings to be able to deal with unexpected expenses after paying the down payment and the closing costs.
Canceled rent checks
It is not uncommon for renters to be asked to supply twelve month’s worth of canceled checks and statements to prove the rent has been paid within the stipulated time period. Renters who don’t have this documentation could provide the name and contact information of the landlord for verifying these monthly payments.
For homeowners, lenders may ask for canceled checks or statements where the mortgage was paid on time. Any of your late payments are most likely to show up on your credit report as well. You need to correct any and all of the errors in it, including the following:
- Accounts that are listed on the report which aren’t yours. This is usually a case of mistaken identity and may sometimes even be because you are a victim of identity theft.
- Notations say accounts are open when you’ve closed them.
- Incorrect details when it comes to your credit limits, account opening dates, amounts owed, and so on.
- Home sale contracts, including details on its purchase price.
- Proof that gifts aren’t loans.
If you receive gifts or grants for the down payment, you will need to attain a letter from the bank of the giver which declares it was a gift and not a loan. The lender may even ask for the bank statement of the giver along with the canceled check.
Finally, it is critical for you to supply any documents that have been updated as well if that is requested by the financial entity you are seeking a loan from. Documents expire after 60 days. When you are ready to purchase a house you will need to submit all the most current documents to the lender to try to secure a loan.