Important things to know before you buy a home!

One of the reasons you were confidently referred to us is that we are very proficient in helping you avoid inconveniences and delays that often plague large transactions like this one. Without exception, the top reason for delays in obtaining loan approval and for delayed closings is incomplete or insufficient financial documentation received from clients, most notably missing pages of financial statements (i.e. page 1 of 3 or 1,3,5, and 7 of 9). This supplement was created to help you avoid these difficulties. If you have questions regarding any of the items that we may require please do not hesitate to call or email us.

Pay Stubs

Pay Stubs should reflect 30 days of year-to-date earnings- if possible need the last four pay stubs. If you do not keep your pay stubs and don’t have a way of getting the pay stubs, please call me to go over what is considered acceptable. In order to use income for qualifying, we need both history, and likelihood of continuance, we must make sure to make sure completely explain every detail to underwriting.

Current and prior employment

Please send your last two years of employment with the following information: Company name, psychical address, start and end dates, job title, HR phone number and monthly income. Any gaps in employment must be explained. Self employment, second job, seasonal, overtime, bonus and commission income generally require a minimum 2 year history to be considered.

Tax Returns- Most recent two year’s tax returns

Please include all pages, schedules, and addenda with federal tax returns when requested. State tax returns are not required. Be sure to include all corresponding W-2’s, 1099’s, and K-1’s as they are not always attached to the tax return. If you own more than 25% of the business then business or corporation then tax returns will be required. If you write off business expenses, your qualifying income will generally be reduced by the amount of your claimed deduction.

Statements (Bank, Investment, 401K, IRA, Stock Option)

ALL PAGES of Statements are required even if the first page is an advertisement and the last page is blank. Statements usually indicate either the total number of pages (i.e. 1 of 5) or indicate additional pages are to follow (i.e. continued on next page). If 4 of 5 pages are submitted, the statement is considered incomplete and an underwriter will suspend or condition the loan. The most common cause for incomplete statements is failing to copy the front and back of two sided statements.
• Large deposits reflected on asset statements require an explanation and ‘source of funds documentation’, which is another way of saying “ We need to know where it came from and we need to see documentation that supports the explanation”. During the late 1980’s and early 1990’s lenders discovered that personal loans, credit card advances, and undocumented gifts were frequently obtained just before closing. Since these debts were too new to be reflected on the borrower’s credit report they were not included in debt ratios used to qualify the borrower for the mortgage loan. FNMA and FHLMC established a rule at that time that all large deposits reflected on asset statements used to qualify, must be explained and documented. Fair lending requires that rule to be applied equally to all borrowers. (Sorry for the inconvenience!)
• Internet Asset Statements - FNMA and FHLMC will accept internet statements but the statements must identify the institution, your name and your account number. Unfortunately most financial institutions do not include this information on their online statements so it is best to provide actual hard copy asset statements when possible. If you use internet statements please look for the E-Statements
• Bank Printouts – are acceptable, but must be stamped and signed by an authorized individual at the bank.
• Moving Funds or Opening New Accounts After Application- can cause additional documentation to be required if it is done after application and prior to closing. If actual balances vary too much from the amounts stated on the application this can cause a red flag for underwriters who might require an explanation and documentation to verify the disparity. We realize that moving money around is sometimes necessary but please call us first so we can help you avoid unnecessary inconvenience.
• Bank Statement Tips – Your bank statements are considered part of your complete financial picture, and as such are reviewed in detail to determine if they support the facts stated in your application. Your pay should show deposited in to your bank account. Any non-payroll deposits require explanation and additional documentation. Your rent and other monthly debts and expenses should show paid through your bank account. Generally a 60 day history is required. Bounced checks and NSF charges are considered a negative factor.
• Savings and Reserves – Although not always required, having at least 2 months reserves, after closing, is considered a positive factor in the qualification process. Example: If you current pay $900 per month in rent and your new house payment will be $1200, and you have no reserves, be prepared to explain how you will be able to afford the higher payment.
• Gift Funds – may be allowed depending on the loan program. If you are receiving gift funds, we are required to document the receipt of funds, and the donor’s ability to give the funds.

Homeowner’s Insurance

A homeowner’s insurance policy should be in place no less than 15 days prior to closing to allow for closing documents to be prepared. You should contact your insurance agent as soon as you have an accepted earnest money contract in order to obtain a quote. We like to be proactive and establish contact with your agent as soon as possible so please forward their name and phone number to us as soon as possible so we can forward our mortgagee’s clause and advise them of replacement cost.

Appraisal Fee

This money is deposited but is fully refundable if an appraisal is not ordered. The actual appraisal cost may vary slightly but for conforming size purchases of existing homes the cost is usually $425 to $475. If you do not have a property yet, you can waive remittance of this fee until you have an accepted contract.

2 Year Residence History

- FNMA and FHLMC require lenders to verify residence history for each borrower on the application for the past 24 months. Information required includes property addresses, and Landlord’s name and phone number for each residence during the last two years. If corporate housing was used please list the property address and indicate employer as landlord.

Identification

A copy of your driver’s license and social security card. (Color copies if possible please) If you are not able to provide these two forms please give me a call.

Other Property

If you currently own your home and any other homes please include your most recent mortgage statement, current tax bill, homeowners insurance declaration page, and verification on homeowners association dues.

Credit Inquiries

We will need a signed and dated letter of explanation for all credit inquiries. Please indicate for each inquiry if you did or did not obtain any new debt.

Credit Explanations

Credit Explanations may be required for any derogatory credit reported. Copies of Bankruptcy filing and discharge papers will be required.

Required Cash Investment

Required Cash Investment may be required on your part depending on the program. At minimum, you will need to pay for your appraisal. Sellers typically will not accept an offer without some type of good faith deposit. Additionally, you may need a home inspection, termite inspection, survey, and if you are purchasing a vacant home, you may be required to turn on the utilities, all at your expense.

Very Important! Please do not have your credit pulled by any other creditors during the process of your loan. Do not purchase anything on your credit cards and do not apply for any new credit.