The Basic Mortgage Documentation
The Basic Documentation Requirements
pay stub to cover one full month
W-2 statements for the past 2 years
2 years 1040 tax returns for self employed and sometimes business returns if other than a sole proprietor
bank statements to cover at least two months
retirement account if being used for closing and reserves
letters of explanation for any credit issues and/or employment gaps
letters of explanation for recent inquiries on the credit report
Based upon questions answered on the application you may be asked for other document to include but not limited to:
divorce decree or separation agreement
court order for child support
birth certificates for dependent children
documentation for loans which are contingent liability
notes receivable
any loan information which is not listed on the credit report
The list could go on and on based upon the application and it's contents.
There have been times in my career during the initial
mortgage credit analysis that I have been questioned and sometimes scorned by the applicant for requesting further documentation. Just as I have seen borrower's who have been complaining about this very issue online, let me say that I am in full defense of the lender/loan officer/processor on this one and here is why.
Often when a loan representativerequest the documentation, at application and it may be left on their desk, mailed or at any rate given to themat a later date. Sometimespay stub are not clearregarding the rate of pay, the number of pay periodsor the dates of receipt. This can beespecially trueif the borrower has changed jobs within a recent period of time.
When the documentation initiallyreviewed; there can be discrepancies which have to be cleared up by further documentation. I know, this makes theeverybody want to scream. The loan officer hates it as much as you do. Sorry, but this is pretty standard procedure because if you send a pay stub without the employer's name on it; there will either have to be a verification of employment done or something in writing from the employer identifying the employee. If there are garnishments for child support on a pay stub (and you did not mark the adequate question on the application); this must be backed up with a divorce decree and/or court order; along with evidence the amounts have been paid timely and for what length of time they are to be paid.
Bankstatement must be original, all pages with all large deposits explained.Oh yes, I am afraid it is some of my business as the loan cannot be approved if you have made another recent loan that is not supported in your other obligations. Further, only 70% of the vested balance of retirement accounts may be used toward closing cost and reserves.So if your statement does not give this information....suck it up and get it...it makes it easier for everyone and gets the loan done without further delay.
The loan representative can verify a lotof theinformation without coming back toyou but why would you not want to help the process alone and bring all needed information upfront and keep this from happening as much as possible. Normally a good loan officer will request the applicant to bring in most current income information, assets for 2 months and employment information and residency information to cover the past 24 months.
You know better than the representative if you pay other debts that do not show up on the credit report. He/she should not have to ask you for that documentation which may include child support or alimony. You are aware most of the time if you have made inquiries for credit, so an explanation is in order. If you have changed jobs within the past two months; it is necessary to verify the past employment in most cases.
There are many questions and concerns at making sure the loan criteria is suitable for the investor guidelines. Loans receive quality control audits so therefore, someone, someday will have to answer for something left undone.
Remember, if you were the lending institution; you would want to make sure your investment was sound....just common sense.
The Basic Mortgage Documentation
By: Cathy Jones
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