If you have applied for a mortgage in the past year, you know that documentation standards have gotten more and more stringent. Even the most credit-worthy borrowers with assets and equity in their home or high down payment are being scrutinized. Gone are the days of reduced documentation or "stated" income.
All borrowers must now provide a myriad of paperwork in order to qualify for a mortgage. Here is a summary of some of the potential documentation you will have to provide:
Income: Past 30 days paystubs and W2s for the past 2 years are minimum. Be prepared to also provide tax returns, especially if you are self-employed or have rental properties. You will also be required to sign an IRS 4506t form which will allow the lender to pull a tax transcript for the past 2 years. The lender will use the transcript to compare to the other documentation you provided. If you had any gaps in employment, unusual changes in employment, or declining income, a letter of explanation (LOE) will be required.
Assets: At a minimum, 2 months bank statements on all accounts, all pages will be required. If you have any unusual deposits > $500, be prepared to write an LOE and document where the deposit came from. Any NSFs will make approval nearly impossible, so be prepared with a good LOE if you have any NSFs. Any brokerage accounts (mutual funds, investment accounts, 401Ks), will require the most recent quarterly statement, all pages. If you print any of these statements online, that is usually acceptable, but you must make sure your name and account number are both on the printout.
Derogatory Credit: If you have had credit issues in the past, be prepared to provide LOEs on any items that are still unpaid. You will also need to provide bankruptcy discharge paperwork, if applicable, and may need proof of the release of liens or satisfaction of judgements even if they are paid in full.
Divorce: If you went through a divorce, you may need to provide you divorce decree if you are receiving alimony or child support income or if there are items that still appear on your credit that were awarded in full to your ex-spouse.
Patriot Act: All borrowers regardless of the type of loan they are applying for must provide their driver's license and social security card. If you don't have your social security card, you can obtain a copy from the IRS.
Other Documentation: Believe it or not, there is a myriad of other documentation that may be required depending on your situation. A skilled mortgage professional will help you determine up-front what is required and will make sure your file is properly documented so that you will obtain a clean loan approval.
