Items You Need When Applying For a Loan
Have These Items Ready When You Apply For a Loan
It used to be that lenders mailed out verifications to employers, banks, mortgage companies, and so on, in order to verify the data supplied by borrowers. Nowadays, the interest is often in speed and getting answers quickly so alternate documentation has become more widely used. Alternate documentation means that underwriting answers can be obtained with information supplied directly from the borrower instead of waiting around for verifications to come back in the mail.
The following is required for most standardized loans as part of alternate documentation processing. Items may differ according to whether your loan is a conforming (Fannie Mae or Freddie Mac), non-conforming (jumbo) loan, government loan, or a portfolio loan.
Verifications are still mailed out, but usually as part of quality control procedures.
These are the things you need to supply to your lender to get a quick approval using alternate documentation
- W2 forms for the last two years
- Pay stubs covering a 30 day period
- Federal tax returns (1040s) for the last two years, if:
- you are self-employed
- earn more than 25% of your income from commissions or bonuses
- own rental property
- or are in a career where you are likely to take non-reimbursed business expenses
- Year-to-Date Profit and Loss Statement (for self employed)
- Corporate or partnership tax returns (if applicable)
- Pension Award letter (for retired individuals)
- Social Security Award letters (for those on Social Security)
- Bank statements for previous two months (sometimes three) on all accounts. All pages.
- Statements for two months on all stocks, mutual funds, bonds, etc.
- Copy of most recent 401K statement (or other retirement assets)
- Explanations for any large deposits and source of those funds
- Copy of HUD1 Settlement Statement on recent sales of homes
- Copy of Estimated HUD1 Settlement Statement if a previous home is for sale, but not yet closed
- Gift letter (if some of the funds come as a gift from a family member)
- Gifts can also require:
- Verification of donor’s ability to make the gift (bank statement)
- Copy of the check used to make the gift
- Copy of the deposit receipt showing the funds deposited into bank account or escrow
- Landlord’s name, address, and phone number (for verification of rental)
- Explanations for any of the following items that may appear on your credit report:
- Late payments
- Credit inquiries in the last 90 days
- Copy of bankruptcy papers if you have filed bankruptcy within the last seven years
- Copy of purchase agreement (if you have already made an offer)
- To document receipt of child support (if you desire to show it as income)
- Copy of Divorce Settlement (to show the amount)
- Copies of twelve months canceled checks to document actual receipt of fund
- Copy of Social Security Card (or other documentation of social security number)
- Copy of Driver’s license
- Copy of DD214
- Copy of Note on existing loan
- Copy of HUD1 Settlement Statement on existing loan
- Name, address, phone number, loan number of existing loan/lender
What is a land contract?
An alternative to a non-conforming loan is the use of a land contract, which is allowed in some states. A land contract is an agreement between a buyer and a seller, where the buyer agrees to make periodic payments to the seller. The title to the property only transfers to the land contract buyer on fulfillment of the land contract obligations.
A land contract can be helpful for those who need time to establish or improve their credit rating. There are only small closing costs, and payment can help establish a good mortgage payment record. This can help establish an overall good credit rating, and it is possible for the buyer to later refinance the land contract with a conforming loan.
On the other hand, there are risks associated with land contracts. Land contract purchases are not necessarily recorded in the public record, and there are no guarantees that the seller will be able to transfer a clear title to the buyer upon fulfillment of the land contract. There also is no lender assuring that the purchase price for the property is justified, and no inspection of the property’s condition.
Another alternative to a non-conforming loan is assuming the seller’s mortgage. By assuming a mortgage, if the mortgage is assumable, it is possible to save on closing costs, and may allow you to obtain a favorable interest rate.