Dear Claire: What Documents Does a Lender Need?

Gathering Your Mortgage Application Documents: What the Bank Needs to Know

First off, you usually need your taxes. Maybe last year’s W-2s if you have a salaried position, your mortgage application, which, most of the time you can do online, and is pretty sweet. Your pay stubs for 30 days. This is, of course, if you are a W-2 employee, not if you’re a 1099 employee or not really an employee, such as a contract worker. If you work as an independent contractor, they’re going to need proof of income. Sometimes that might be a profit and loss statement, and a balance sheet for two years, tax returns, and all kinds of fun stuff.

It can get really complicated quickly if you own a business, so, as you’re going through this, it’s easy to understand that the bank wants to know what you have in debt, what you have in assets, and what money is coming in all the time. You’ll need to list your assets if you have a 401k, if you have an IRA SEP IRA, or a bank account. You’re going to have to probably provide them with at least three months of each one of those. Some of those statements are quarterly so you might only have one statement for them. That’s totally fine.

They’re also going to do a credit check so they’re going to pull your credit. That’s typically a $25 charge. The unfortunate thing is that the credit score you get on CreditKarma.com or FreeCreditReport.com or any of those retail side credit scores are not the same as the credit score that they pull for a mortgage. This is super disappointing because I know a lot of people out there who are watching their credit scores like a hawk and making sure they look good and are taking care of everything on it.

Also, it’s not going to be the same when they pull the credit report for a mortgage; it’s slower. Just know that and know that it’s not you. If it’s your first time buying a home, they’re probably going to want to see your rental history. Ideally, they’re going to want it to be decent rental history. They’re also going to check on any bankruptcies, any foreclosures, and any collections. Anything like that. Anything that comes up on your credit report is going to be double-checked and then, of course, the last piece is they’re going to force your funds. What the heck does that mean? It means if I have $100,000 buried out in my yard, I can’t use that to buy a house. What they want is to see money that’s been sitting in your account for a while and that it’s the same money you’re going to use to buy property. What they call that is sourcing your stop and will say, “I want to see $10,000 in one of the bank account statements that you gave us.” Makes sense, right?

But a lot of people don’t understand. It’s literally like, writing on it would be like writing your dissertation on your finances so they want to see this money has been in that bank account. The balance. It started out at this, and the ending balance was around the same amount and that balance is about what we’re going to have to use for you to be able to put a down payment on a house. If it helps, there’s always going to be crazy weird things that come up. Like if your grandmother gave you some money for a down payment or if your parents are giving you money for inheritance or anything like that, you’re going to have to have your grandparents or your parents give you proof of that. It can get a little weird but it’s always something that we can figure out.

As always give me a call and I’m happy to answer any questions you have about all of this. Take care.

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