Are you thinking of purchasing a new home and wondering what kind of documents you need to apply for a home loan? Primary Residential Mortgage is here to help. The specific forms you need to apply for a home loan depend on your unique situation. For example, someone who is self-employed will most likely have to provide different documents than someone who is employed by a company.
Mortgage lenders need to get the full picture of your financial situation and your ability to repay a loan. You may need to sign a Form 4506-T, which allows the lender to request a copy of your tax returns directly from the IRS. Typically, lenders want to see one to two years’ of tax returns to make sure your annual income is consistent with your reported earnings.
Your home lender may ask to see your pay stubs from the past few months. Your tax returns help give them a clearer idea of your overall financial health. In contrast, pay stubs help them better understand your current earnings. If you’re self-employed or have other sources of income (such as a trust or child support), you will probably need to show your lender proof of that income with 1099 forms or bank statements.
When assessing your ability to repay a loan, lenders might want to review your bank statements. If you have other assets, like stocks, bonds, social security, or annuities, they will likely want to see those statements as well. The reason that lenders typically request these documents is to make sure you have access to at least a few months’ worth of reserve mortgage payments in the event of an emergency. They will also check to see that your down payment has been in your account (called “seasoned”) for at least a few months.
To assess your risk as a borrower, lenders will pull your credit report, but you have to permit them first. You may need to explain any negative issues on your credit report, such as a short sale, bankruptcy, or foreclosure. Be prepared to explain in writing the circumstances of any negative items on your credit report. Typically, lenders look at one-time unusual circumstances differently from any habitual delinquencies.
Your friends and family might want to help you buy a house by giving you money. If they do, you’ll need to provide a written statement confirming that the funds are indeed a gift and not a loan. The documentation should state their relationship to you and the amount of the present.
You will have to provide a photo ID, such as a driver’s license or passport as proof that you are whom you say you are. This helps to prevent ID theft.
Don’t let the need for all these documents overwhelm you. After the Great Recession, home lenders understandably became more stringent about the home lending process and required documentation. These documents are a good safeguard for both the lender and you, to make sure that you aren’t buying more home than you can afford. If you have questions, feel to reach out to us at Primary Residential Mortgage.
Note: Opinions expressed are solely my own and do not express the views of my employer