Death in the family, illness, loss of a job, or divorce can take a great toll on our daily lives and finances. If tragedy strikes and you are unable to afford your monthly mortgage payments and find yourself falling behind, you may be able to modify your home loan to catch up and avoid foreclosure.
Documents Your Mortgage Provider Needs To Get You Approved
Before you begin the process of purchasing a home, you must first prove that you are responsible and capable of paying off the loan you take out. As such, lenders are obligated to collect specific documents to review before they begin approving your application for a home loan.
Before you can borrow money for a home loan, lenders want to know that you have steady employment. With steady employment comes a steady income which lenders see as a signal that you are responsible and financially stable, provided you are trying to purchase a home within your means.
You must provide your lender documents like your W-2 forms from the past two years, as well as pay stubs from the past month or two.
If you are self-employed, you must work a little harder to get approved for a home loan since self-employed applicants are considered high risk. As such, you must provide K-1 and business tax returns to your lender for review.
Bank Statements & Other Financial Records
Your lender will also need to look at your bank statements and other financial records such as:
- Gift letters: If you were provided money by friends or family to purchase a home, you will need to provide information about it such as who it was from, their relationship to you, the gift amount, dates funds were received, etc.
- Alimony or child support documents: If you pay or receive alimony or child support, it is a good idea to provide this information to your lender to show proof that you are regularly receiving or making these payments on time.
- Proof of assets and collateral: After you have closed on your home, lenders need to know that you will be able to keep up your monthly payments. Having enough money saved up in the form of assets and collateral can help ensure you don’t fall behind.
- Rent payment history: If you rent a home or apartment, lenders will want to see records that you paid your rent on time. You can ask your landlord for a verification form or provide payment receipts from the past year.
Proof Of Identity
Naturally, lenders need to verify that you are who you say you are to avoid fraud and identity theft. Therefore you must provide identifying documents:
- Driver’s license or other state-issued ID
- Proof of residency if you are not a U.S. citizen
- Proof of military service if you are a veteran
List Of Debts & Your Credit Score
Everyone has debts, be it student loans, car loans, or credit cards. Lenders will require a list of these debts before approving you for a home loan to help ensure that you are not taking on any more payments than you can afford. Remember, lenders want you to be able to repay your loans. If your monthly expenses exceed your household income, lenders not approve a loan as you are already paying more than you can afford each month.
Your credit score will also be under scrutiny. A good credit score benefits you by simplifying the loan process, and making it easier to negotiate larger loans and lower interest rates.
It’s important to note that as of July 1, 2017 credit bureaus don’t have to collect tax lien and civil judgement information in order to calculate your credit score. While this change can benefit you, it is important to offer up this information to your lender so you can help them make an informed decision as to how much you can afford to borrow.
Please note: This list of documents is not all-inclusive and may vary from lender to lender. Talk to your financial advisor and lender about required documents and what to do if you cannot find a specific document. Practice good, accurate record-keeping skills to make borrowing and providing documented proof easier.