Blog posted On January 23, 2020
When you apply for a mortgage you know you’re going to need a lot of paperwork. The more prepared you are before you start your mortgage application the better, especially in today’s busy market where time is of the essence. Before you apply for a mortgage, it’s best to gather your documents ahead of time. You know you’ll need bank statements, tax returns, and pay stubs, but what else will you need?
Depending on your financial situation and how you are planning to pay for the down payment and what type of mortgage loan it is, you may need more documentation than the average home buyer. Here are some examples of further documentation that MarketWatch contributor and home buyer Sara Rathner needed for her home purchase in September 2019.
To increase her down payment, Sara sold some shares from her former company, which resulted in a large, one-time deposit in her checking account. Any large, one-time deposits will require a written explanation. In Sara’s case, she had to contact her former employer to get a letter documenting the wire transfer regarding her shares.
If you expect any unusual deposits during your mortgage transaction, let your lender know so you can get the appropriate documentation. These types of deposits may include the sale of property or stock shares, the sale of a vehicle, an inheritance, or a gift. Documenting deposits is not just limited to your checking account, any large deposits to CDs or savings accounts will also need to be explained.
If you rented a home or apartment before buying your new home, you may need to provide a record of on-time rent payments. Lenders may ask for records going back 12 months. In Sara’s case, she switched banks five months before applying for a mortgage, so her bank statements only showed five months’ worth of on-time rent payments.
When you rent through an organized management company, you may be able to easily acquire any rental records with a phone call or email. However, if your previous landlord is hard to get a hold of or no longer managing properties, you may be out of luck. It’s important to be diligent about your rent payments and keep your own records. Even though you’re buying a home, your rental history matters!
Could your new iPhone show up as a credit inquiry? If you finance a high-cost item like an iPhone or furniture and pay it off in installments this is similar to opening a new credit card or line of credit. If you’ve financed any recent purchases, be prepared to explain those to your lender and provide the proper documentation.
Peruse a copy of your credit report before you apply for a mortgage. Something as simple as not returning a cable box to your former cable company – or worse actually returning the equipment and never having it logged – can land you in collections and hurt your score. You can request a free copy of your credit report each year at www.annualcreditreport.com.
When you’re interested in buying a new home or refinancing your current mortgage, talk with a lender early. Once we start the financing process, we can let you know about all of the documentation you’re going to need ahead of time, before you’re facing a deadline!