Mortgage Documentation and Communication
Understanding Mortgage Requirements
Do you have questions about mortgages or home equity loans? Mars Bank helps people better understand how banking and in some cases, how personal finance, works. One subject that always leads to questions is the requirements and paperwork of getting a mortgage.
What documentation is needed in the mortgage approval process?
Income Documentation
If you are applying for a mortgage, you must show the financial ability to repay the loan. A mortgage or refinance requires two years of income verification. This means paycheck stubs and W-2 forms generated by an employer and/or signed federal tax returns. You will be asked to sign Form 4506-T which authorizes the bank to request documentation from the IRS.
For self-employed individuals or sales people who earn commission and bonus, a two year average of income is verified from tax forms. Also a current year profit-and-loss statement or written verification of employment is required. If you own rental property, you must show income as well as real estate tax and insurance expenses specific to each property.
Asset and Other Documentation – Especially for First Time Homebuyers
Proof of sufficient funds for down payment, closing costs and necessary reserves is also required. Two months bank or investment statements are sufficient. Often, young homebuyers are helped by a family member with a gift towards a down payment. This is acceptable, however, proof that the money is a gift is needed. A gift letter from the giver and documented receipt is usually adequate. Grant funds may also be available for first time homebuyer individuals or families whose income is at or below 80% of the median income for the area in which they reside.
Current renters will need to show payment verification (canceled checks) showing on-time payment for a year. Other documents, such as a divorce decree or child support income verification, may be required.
Be Early and Often – In Communication
While providing detailed documentation can be daunting, be proactive. Contact a bank early in the process, discuss requirements and provide documents in a timely manner. By talking to a lender early in the process, you can avoid problems, and you also may be pre-approved for a loan amount.
Mars Bank is your one true community bank, focused on helping you reach your financial goals. Read more articles and watch videos here in our Connections series. Download our mortgage documentation checklist. Or send a question via email.
