Prepare to get a Mortgage

mortgage

Prepare to Apply for Your Mortgage Loan Pre-Approval By David L. Parker

Often I am asked, “What do I need to apply and is it the same for everyone?” Preparing to apply for credit has its basic standards. I have heard this said, too, “What do you mean you need that, my friend did not have to provide that when he applied.” Everyone’s circumstances are different and what you need may or may not be the same as your friend who recently applied for a mortgage loan, so be patient and understand that applying and providing documentation will be unique to your own personal set of circumstances.

Below are the basics you will want to meet and be prepared when applying for your mortgage loan. I have broken them down into categories for you to carefully consider if you will need any of these items. Now, remember, every lender may or may not require all that is listed; or, they may even require more.

Personal Information:
Your lender is going to need to know your personal data that will include the following and will be for all borrowers applying for the mortgage loan:

Full Legal Name, Social Security Number, Home – Cell Phone Number, Date of Birth, Years of School, Marital Status, Number of Dependents & Ages, Present Address, Present Landlord Name, Address, Phone, If less than 2 years at present address provide previous with Landlord info to cover full 2 years

Employment / Income:

You will need to be prepared to provide information and documentation for your sources of income that you will be using to qualify. Alimony, child support or separate maintenance income do not have to be disclosed; however, if you are going to need it to qualify you will have to disclose it and provide documentation as follows:

1. W-2 Employed: Provide 2 year history of employment with name, address and phone number of your employer(s). Have your W-2’s for the last 2 years and your pay stubs covering the last 30 days.
2. Self Employed: Provide your last two years personal tax returns, all attachments, all schedules and if you are a partnership or any type corporation you will need the last two years of tax returns for that partnership or corporation with your K-1 distribution statement(s).
3. Commissioned: If you earn more than 25% of your income from commissions you will need to provide your pay stubs and your personal tax returns with all schedules and attachments for the last two years.
4. Truck Drivers: Believe it or not, truck drivers must provide their last two years tax returns as they may take deductions on the schedule A of their returns known as unreimbursed business expenses.
5. Interest/Dividend Income: If you receive a large amount of interest or dividend income you will need to provide your personal tax returns for the last two years with all schedules and attachments.
6. Social Security: You will need to provide your 1009R’s for the last two years, your most recent social security award letter.
7. Military Retirement or Disability Income: Provide your 1099s or W-2’s for the last two years depending on how reported to the IRS with your monthly income statement from that source.
8. Rental Income: Your last two years personal tax returns will be required with all schedules and attachments. If the rental income is from a partnership or corporation you will need to provide those returns as well along with any K-1 distribution document(s).
9. Child Support/Alimony/Separate Maintenance: If you plan on using this income to qualify you will have to provide evidence you have received it for the last 12 months and that the likelihood of its continuance will continue for a minimum of 3 years. It will be important to have cancelled checks or a print out from a third party source to evidence the funds coming in; for example, child support enforcement print out for child support. A copy of the divorce or support document to evidence the age(s) of the child(ren). Should the child be over 15 years of age, the income may not be allowed because of the 3 year rule.
10. Other Income: Any other income source has to be verified and sustainable for a minimum of 3 years. You will have to provide evidence of the income being received for at least 12 months and its continuance to be at least 3 years. A family member providing you “extra” money to get by on is not considered other income sources; so, check with your mortgage lender on other income sources and what they may require to count that income for you to qualify.

Liquid Assets

In order to verify that you have sufficient funds to carry out the purchase of your home, liquid assets will have to be verified. Also liquid assets will be used to establish you have reserves, if the loan approval requires you have reserves. It will be important that you prepare yourself with the following documents:

1. Bank statements for checking, savings, stocks, bonds, investments, money market, 401ks, 403bs or similar accounts that cover at least the most recent two months. If you receive quarterly statements, your last quarterly statement will be sufficient. If you have other reporting periods for these assets, just remember the most recent statement (other than monthly) will be required.
2. Large Deposits: Any large deposits that show on your bank statements (generally 25% or more of your earned income) must be explained and documented where the money came from for you to use.

Important Note: Even if you are not going to use any of the liquid assets it is best to disclose because automated underwriting systems look at your savings that is remaining after your purchase as a part of the qualifying process; so, it’s best to disclose all of the liquid assets – including retirement accounts with your employer.

Down Payment or Closing Cost Sources

Your lender is going to require that you provide them documentation and other related disclosures if your down payment is coming from any other source other than your own funds you have on deposit in your accounts. Here are a few samples:

1. Retirement Accounts: If you take money from retirement accounts you will have to provide the terms of withdrawal document and evidence of the funds coming from that source (copy of the check when you get it) and evidence of depositing into your personal checking/savings account.
2. Sale of Asset: Believe it or not if you are selling assets to gain cash for a down payment make sure you have it well documented; for example, if you were selling a car you would have a copy of the title showing you owned it, bill of sale, evidence of the funds (copy of the check) and the funds being deposited into your account – DO NOT ACCEPT CASH – have the purchaser convert the cash to a cashier’s check so the funds can be verified. Also, you may have to evidence the value of what you sold to support that it was worth what you sold it for to the purchaser.
3. Gift Funds: If you receive a gift from relatives you will have to verify the source, amount and deposit of those funds and depending on when you got the funds will determine what documentation will be required. Talk with your mortgage lender about their specific requirements on gift funds based on your particular circumstances.
4. Sale of Stocks/Bonds: You will need to evidence the sale of this asset as well by providing a copy of the check, statement of the account that you provided in the liquid assets section above and the check deposit slip into the account you deposited the funds for your use for down payment or closing cost.

Other Real Estate

If you currently own your home and plan to sell it prior to closing on your new home, you will have to at some point provide the closing statement (referred to as HUD-1) prior to your closing the sale of your home. Now, if you have a current mortgage on the home and can qualify with the current mortgage payment without selling the home to purchase your new home you will have to provide a listing agreement showing the home has been listed for sale.

If you plan to rent your current home there are various requirements depending on what type of new loan you will be getting. Talk with your mortgage lender at application that this is your intent and depending on if you are getting a conventional, FHA or VA loan the requirements/documentation will be different.

If you own other real estate you will need to have the following information:
1. Address
2. Estimated Market Value (your opinion at this point)
3. Name and amount of your mortgage company and payment.
4. Gross Rental Income
5. Annual Real Estate Taxes and when due.
6. Annual Homeowners, Flood or other insurance and when due.
7. Monthly Homeowners Association or Condominium Dues.
8. Copy of your current lease to verify the gross rental income.
Declarations

When applying you are going to have to provide answers to questions that may require supporting documentation and letters of explanation:
1. Judgments outstanding you: You will have to provide a copy of the judgment granted by the court. Most open judgments can prevent you from obtaining a mortgage so talk to your mortgage lender about it.
2. Bankruptcy filed in the last 7 years: Copy of the bankruptcy documents with all pages and schedules with a copy of the discharge will be required.
3. Foreclosure, Short Sale or Deed in Lieu will require evidence and explanation.
4. Lawsuit currently active: Will require explanations and supporting documentation
5. Federal Debt Delinquent: Will require explanations and supporting documentation.
6. Obligation to Pay Alimony, Child Support or Separate Maintenance: If you have to pay any of these you will have to provide documentation to evidence the amount you pay monthly and will be counted into your debts.
7. Borrowed Down Payment: If you borrow any of your down payment you will have to explain and provide documentation. Remember there are very strict guidelines on borrowing your down payment so make sure you discuss this with your mortgage lender.
8. Are you a co-maker or endorser on a note: Sometimes, depending on the creditor, co-signed or endorsed notes may not show on your credit report and it is your responsibility to notify your mortgage lender of any of these types of transactions.
9. Citizenship: If you are other than a United States citizen you will need to provide your status documentation.
10. Resident Alien: If you are a resident alien you will need to provide your status documentation.
11. Occupancy intent: The question asks if this property will be your primary residence. Some applicants I have encountered have said it will be one day. Though one day may or may not come, occupancy generally deals within at maximum 90 days of the purchase being completed; if not, then it is not owner occupied. Other occupancy types would be second/vacation home or investment property.
12. Owned property within last 3 years: This is used to determine if you may qualify as a first time homebuyer and possible benefits available with your lender.

As you can see by all the information I have gone over that it does require a lot of documentation to obtain a mortgage loan. Actually, I have been in the mortgage banking business for over 30 years and the requirements for standard conventional or government lending has remained the same in documenting personal, asset and employment history. Good mortgage lending practices will always make sure that you are not placed into risk that goes beyond reasonable ability to repay the obligation.

Feel free to contact David L Parker, Mortgage Banker NMLS ID 461786, BMO Harris Bank
Cell: 229-834-6372, Email: david.l.parker@bmo.com with any additional mortgage questions.

Please contact Marie Avery at 941-725-0911, or mortgagecom if you have any questions about our Florida Real Estate market

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