While buying a home, it is quite common for anyone to apply for a mortgage. The mortgage lender may require the buyer to submit several documents that include detailed information on your financial past and present, how much you earn and your monthly debts and account balances to help them predict your financial future. Understanding the purpose and function of the primary documents used in the mortgage process will help you navigate more confidently from application to closing. Mortgage lenders or housing professionals can help you learn more about the home buying process. These mortgage lenders often rely on data conversion services to convert the various paper documents they handle into digital format for easy organization and handling.
While the mortgage pre-qualification checklist requires details such as your name and any co-buyers’ names, current address, estimated annual household income and estimated monthly household debt expenses, mortgage pre-approval requires several additional documents to complete a full mortgage loan application. For pre-approval, the mortgage loan officer may ask for your residential address, landlord names and addresses for the past two years, bank account statements, current real estate holdings, W-2 or I-9 tax forms for the past two years as well as a list of any new monthly debts not listed on your credit report.
Make sure you collect the following documents before applying for a mortgage –
Proof of Income
The lender needs to make sure that youâ€™ll be able to repay the loan and your paycheck is high enough to allow you to meet the mortgage payments every month. They may require you to submit a W-2 form, your most recent pay stub, and tax returns from the past year, which are proofs of steady income. While tax returns prove what your income was last year and the year before, recent pay stubs prove that you’re still earning the same amount.
Based on income history and the size of the loan, additional paperwork may also be needed. For instance, a self-employed person may have to submit even more documents such as profit and loss statements or 1099 forms.
List of Debts
Lenders may ask you to create a complete list of your debts such as credit cards, student loans, car loans, alimony and child support payments, along with a breakdown of balances and the minimum monthly payments on each, as debt-to-income ratio is a key component in determining your overall credit score. Those with high-interest debts are less likely to qualify for the lowest rates on a mortgage. Consider paying your outstanding debts, before applying for a mortgage. If you had bankruptcy within the last several years, you may be asked to submit your bankruptcy-discharge papers.
Inventory of Assets
You should also prepare an inventory of assets including bank statements, investment records, retirement accounts, real estate and auto titles, and any other investments, which make up a large part of your financial picture. This list helps the bank to be sure that you have enough savings to weather any unexpected expenses after you close on the house. Even if you have received down payment as a gift, provide documentation that declares it was a gift and not a loan.
Show the Money Source
For those making money from other sources such as child support or alimony, or earning rental income from investment properties, it is important to show detailed information about that, such as a copy of the divorce decree or a copy of the lease agreement.
Most lenders also recommend buyers to sign an IRS Form 4506-T, which allows them to get a transcript of the tax returns from the IRS.
The mortgage application process may involve a number of paper documents, which can be digitized and streamlined with the support of an experienced data conversion company.