As the rules for getting a home loan have tightened, the list of documents that home buyers must bring to their lenders is expanding. Home buyers and sellers often bristle with the mere thought of all the paperwork they expect they’ll have to come up with to do their transaction. this is above and beyond the basic loan application, contract, disclosures and closing docs from the real estate side of the transaction.
The worries start way in advance, before they even start visiting open houses. Some buyers begin to visualize – and even dread spending hours upon hours in the dark catacombs of their filing and bill paying systems combing through ancient files going back two maybe even three years.
In some respects, this vision of the experience of obtaining a home loan might not be to far off. Granted there are many hoops through which to jump and occasionally a loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought – or sold. Here are some of the more commonly asked for documents:
- ID (e.g., driver’s license, state-issued ID, passport). Who must produce it? Buyers and sellers. Lender wants to know that you are who you say you are. Also, buyers and the title insurance company wants to make sure you don’t have any outstanding leins or unpaid taxes. Sellers need to prove that you actually have the right to sell the home. This commonly goes unrequested until you get to the closing table, when you are requested to show it before signing. Most mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
- Paycheck Stubs. Who must produce it? A buyer financing their purchase with a mortgage. Buyers’ purchase price ranges are determined, in part, by their income and assets. Sellers usually only need to produce this in the case of a short sale and also have to prove an economic hardship.
- Two months’ bank account statements. Who must produce it? Buyers getting financing or sellers selling short. Buyers’ lenders now require proof of regular income and proof that the down payment money is your own or properly document with something like a gift letter from a relative. Short sellers? It’s all about the hardship.
- Two years’ W-2 forms or tax returns. Who must produce it? Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
- Updated everything. Who must produce it? Buyers who are mortgage applicants. These things change and because the time period between the first loan application and closing can be many months on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements and checks stubs. It is also quite common for them to call your office the day before closing to request a last minute verification of employment!
- Quitclaim deed. Who must produce it? Married buyers purchasing homes they plan to own as separate property. Married sellers selling homes that they own separately or joint owners selling their interests separately. With the Quit Claim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the the selling owner, making it possible for the title insurer to guarantee a clear and undisputed title is being transferred in the sale.
- Divorce decree. Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. This ensues that the seller has the right to sell. Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
- Gift letters. Who must produce it? Buyers using gift money toward their down payment. The bank wants to be sure the gift came from a relative and is their own money to give. They also want the relative to confirm in writing that it’s a gift, not a loan since a loan would need to be factored into your debt load.
- Mortgage statements. Who must produce it? Any seller with a mortgage. Since the title company will need to use them to order the payoff figurea from any mortgage holder who has to get paid before the property’s title can be transferred.
By no means is this an exhaustive list. Call your lender or give me a call if you are wondering what and when you will need to produce the documentation referred to above. Nancy Mikoda at 720-331-2444.