Getting a Home Loan
6 documents you will need to go through the process
Here’s our home loan tip of the day: Think about warm fuzzies when it comes to the home loan application process.
Think about the holidays and family gatherings. Think about the backyard barbecues. Think about the pencil marks on the door frame that chart the growth of a child. These are lifelong memories that make owning a home so special.
And these are the things that make going through the home loan process absolutely worth it.
So, what do you need?
A little more than you used to. After the housing crisis in 2009 led to significant numbers of borrowers defaulting on their mortgages, creditors are even more cautious and require even more information to assess a borrower’s ability to repay their loans. That means lenders need more financial documentation on the people they loan money to.
It might seem like they are asking for a lot of information, but it’s nothing to stress over. It’s just part of the process when it comes to buying a home. Again, keep those goals in mind – these are reasonable requirements asked by the lender in the big picture.
What you’ll need:
- Tax returns – The lender will need to see full versions of your federal tax returns, typically the two most recent years. They want to make sure you have a consistent income. These will be examined closely, so make sure they are accurate and up to date. The lender will also probably want you to sign a Form 4506-T, which allows them to request a transcript of your taxes directly from the IRS so they can compare that to your tax return.
- W-2 forms – The lender will want to look at your most recent W-2s from all current employers for each applicant. If you’re self-employed you may need to show your lender proof through 1099 forms, direct deposits or other means.
- Bank statements – Recent bank statements will need to be provided to the lender. Usually, they want to see the past two months’ worth of statements to verify income and assets. They may also ask to see investment assets, such as a life insurance policy. And if you’re making the down payment yourself, you will need to show where that money came from and have proof that it was not borrowed.
- Permission to access your credit report – You won’t have to provide the lender with this report, but you will be asked to give verbal or written permission for the lender to access those credit reports from the three reporting bureaus. If you have unpaid collections, multiple late or missed payments on the report, you will likely be asked to explain.
- Renting history – If you are currently renting a home or apartment, the lender might ask you to provide proof that you have made your rent payments on time, such as providing canceled rent checks. They may also ask your landlord to provide documentation showing you paid your rent on time.
- Asset list – In addition to the bank statements (checking, savings, etc.), your lender might also ask you to provide a list of assets, so your lender knows you are financially sound.
If your lender allows you to use a gift for part or all of your down payment, you may be asked to provide proof of where you got that gift. For example, if it came from a family member, you may be asked to provide a copy of their bank statement that includes the account where the gift came from. The family member who provided the gift may also need to provide a letter saying that the money was a gift and not a loan.
Additionally, you may have to provide documentation to your lender. For example, in lieu of providing a W-2, you may have to provide a profit and loss statement for your business in addition to 1099 forms.
And, yes, it’s absolutely worth all the effort
Buying a home is a major purchase, and you – and the lender – need to make sure you are making a purchase you can afford.
Remember, when in doubt ask questions. Not sure how to obtain a particular document? Ask a mortgage loan professional – that’s why they are there.
“To me, that’s one of the most valuable services we offer: answering questions face-to-face. We can talk on the phone and via email as well, but we enjoy meeting homebuyers in person,” says Alan LaFollette, Vice President, Home Lending at FNBO.
“We truly believe we are a partner on the journey toward a new home. Questions are part of the process, and we have answers ready whenever our homebuyers need them.”
A final note
While you are house hunting, it may be in your best interest to lock in an interest rate. For example, at FNBO, the bank offers a “Lock & Shop Program” that allows borrowers to lock in a rate for up to 60 or 90 days, and if interest rates go up in that time, your rate will stay the same.
“And if rates go down, we’ll match that lower rate. The borrower wins either way,” says LaFollette. “And that’s the whole idea.”
Got Questions? Stop by your local FNBO branch today and visit with a mortgage loan expert.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.