Documents
If you are buying or refinancing a home, some basic documents are helpful to get started:
1. If you are salaried, provide two years of W-2’s and one month of pay stubs OR if you are self-employed, provide two years of tax returns or 1099’s if applicable and a YTD profit and loss statement. It is important to include all schedules from your tax returns, most people don’t realize that several line items are added back to increase your Adjusted Gross Income.
2. If you own rental property, provide rental agreements and two years of tax returns.
3. If you wish to speed up the approval process, also provide three months of bank statements for each bank, stock, and mutual fund account you own.
4. Provide recent copies of any stock brokerage or IRA/401K accounts that you may have.
5. If you are requesting cash-out refinance please provide a short letter explaining what you plan to do with the proceeds (1 page maximum in length).
6. Provide a copy of divorce decree if applicable.
7. If you are NOT a U.S. citizen, provide a copy of your green card (front and back), or if you are NOT a permanent resident provide your H-1 or L-1 visa.
Get qualified
Getting qualified before you apply for a loan can help you understand how much you can borrow. When buying a house, you may get pre-qualified or pre-approved. You can typically get pre-qualified over the phone or on the Internet in a few minutes. A pre-qualification is not as beneficial as a pre-approval where you go through a more rigorous process, including verification of your credit, income, assets, and liabilities. It is highly recommended that you get pre-approved before you start looking for a house. This will help you:
1. Determine the maximum house you can buy, so you don't waste time looking for properties you cannot afford.
2. Position yourself in a stronger position when you are negotiating with the seller, because the seller knows that your loan is already approved.
3. Choose quickly, since your loan is already approved.
To shop for a loan, you will need to:
1. Think about how long you plan to keep the loan. If you plan to sell the house in a few years, you may want to consider an adjustable or balloon loan that offers a fixed interest rate for as short as 12 months or as much as 10 years. On the other hand, if you plan to keep the house for a longer time, you may want to look at fixed rate loans.
2. Understand the relationship between rates and points. Points are considered to be prepaid interest and are tax deductible. Each point is equal to one percent of the loan. For example, 1 point on a $150,000 loan is $1,500. The more points you pay, the lower the rate you will get. Due to the current economy many lenders have a different way of calculating this detail and it could cost you more money to buy down the rate. If you plan on living in a home for more than 7 years then this may be a way to help save money in the long run.
Compare different programs. Shopping for a loan can be difficult. With so many programs to choose from, each has different rates, points, and fees. It's hard to figure out which program is best for you.
3. That's where an experienced Mortgage Consultant can help you make a decision that's best for you.
Obtain loan approval
Once your loan application has been received, the loan approval process starts immediately. This involves verifying your:
1. Credit history.
2. Employment history.
3. Assets including your bank accounts, stocks, mutual funds, and retirement accounts.
4. Property value.
Based on your specific situation, additional documents or verifications may be required. To improve your chances of getting a loan approval:
• Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
• Do not make any major purchases. Do not buy a car, furniture, or another house until your loan is closed. Anything that causes your debts to increase will have an adverse affect on your current application.
• Do not move large sums of money into your bank account unless it can be traced. If you are receiving money as a GIFT from friends, family, or other relatives, know that this is completely acceptable and legal, but please contact your mortgage professional immediately so that the proper forms can be completed, showing where the funds originated and confirming that the money is a gift and NOT a loan.
• Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney to authorize another individual to sign on your behalf. But the lender needs to know in advance and the lender MUST approve the POA before the loan can close.
Close the loan
After your loan is approved, you will be required to sign the final loan documents. This will normally take place in front of a closing attorney or title company of your choice, depending on the state that you live in. Be prepared to:
• Bring a cashier’s check for your down payment and closing costs if required. Personal checks are normally not accepted. The Good Faith Estimate has the amount of money needed to close.
• Review the final loan documents. Make sure that the interest rate and loan forms are what you were promised. Also, verify that the name and address on the loan documents are accurate.
• Sign the loan documents.
Your loan will close and the funds will be disbursed to the seller and closing attorney or a title company shortly after you have signed the loan documents. On refinance and home equity loan transactions, federal law requires that you have a 3-day right of rescission to review the documents before your loan transaction can close and before funds may be issued to you.
