The most important piece to obtaining a mortgage to get a home is supplying the necessary documentation for all the income you would like the bank to consider as a means to pay back the mortgage loan. These income documents include tax returns, W2's, pay stubs, bank statements, child support payment schedules, SSI and disability award letters, etc. While some lenders may require a little less documentation than others, the grave majority are going to require items such as the aforementioned ones as proof that you earn enough income to afford to pay back the mortgage loan.
One of the main things that slows down the mortgage process and makes it a sometimes frustrating experience is a person's ability to supply the necessary income documentation in a timely manner, as a lot of people do not have the proper filing systems they should have for important financial documents. When items must be searched for, ordered online, obtained from an accountant, requested from human resource and so many other things it greatly slows down the mortgage process and makes for a more frustrating experience. The more prepared you are the easier and more pleasant your home buying experience will be. If you are considering getting a mortgage to buy a home, here are the top documents that you will want to start collecting and should always keep together in some sort of filing system for repeated use. What these documents have in common is they all document most or all your income which you will use frequently as you apply for more loans in the future. These documents are as follows:
- 2 most recent pay stubs
- 2 most recent bank statements
- w2's from last two years from all employers
- Child support payment schedule (if applicable)
- Social security award letters (if applicable)
- Disability award letters (if applicable)
- Tax return Schedule E for rental income (if applicable)
- Additional documentation for any extra income you would like the bank to consider as a means to pay back the mortgage loan.
Once these documents are collected which show how much monthly income the borrower has coming in, it is then compared to how much monthly debt the borrower has going out with the use of a credit report. Once these documents have been reviewed the lender will then determine how much of a home the borrower can qualify for based on a percentage of their remaining monthly income after all their debts have been paid. The lender will then issue the borrower a pre-approval letter for that amount which will allow the buyer to begin shopping for a home. It isn't until after the buyer finds a home that the next stage of the mortgage process begins.
Once the borrower has found a home the very next thing that the borrower will need to have in place is their homeowner’s insurance quote which the lender will need immediately. It is a good idea to already know or at least have an idea of what insurance company you will be going with for your homeowner's insurance quote so that when you finally find your dream home you will be already ready and not slow up the process. This will mostly complete the borrower's initial obligation to move the mortgage process to the next phase which is underwriting. It is here where the entire file is further reviewed and verified for accuracy and integrity. This is where all the financial and real estate documents are verified, previous employers of the borrower are contacted, previous landlords, tax transcripts are requested from the IRS, etc. Once the underwriting process has been completed the lender may ask for additional documentation from the borrower in order to approve the loan. Once these documents are submitted by the borrower, they are sent back to underwriting for review. If the documents are approved the lender will then clear the loan to close and a closing date can be set.
Though there are a few more moving parts to the mortgage process just knowing and understanding the required documentation and having them readily accessible at a moment’s notice will greatly improve your home-buying experience, limit unnecessary frustration and speed up the process. For additional information or questions about obtaining mortgage or how the mortgage process works contact one of our consultants today!