From a mortgage loan officer's point of view... important things to know before you apply for a home loan!
One of the reasons you were confidently referred to FFTH.info is that we are very proficient in helping you avoid inconveniences and delays that often plague home purchases. 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 StubsPay Stubs should reflect 45 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 us 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 employmentPlease have available correct dates for: 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 returnsPlease 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 Bank 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 (over $250) reflected on bank 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 - FHA, USDA, VA, FNMA, & 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 (non sufficient funds) 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. Your reserves should be at least $2400 after closing.
• 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.