Prepare yourself to produce a small mountain of paperwork if you are financing a home. Remember that the bank is about to lend you a small fortune, so before giving you a mortgage, it wants to make sure that your property is worth what you are paying and that you'll be able to pay the money back. Specific requirements will vary from one lender to another, but are generally similar. The process may seem overwhelming, but the bank will send you an organizational checklist. If both you and your partner will be named on the mortgage, you will both need to supply the appropriate information.
Your FICO Score
The first step is to give the bank your social security number so that they run a credit check and find out your FICO score. The Fair Isaac Corporation (FICO) has a scoring system that determines your credit worthiness based on factors such as income, prior borrowing history, debt load and timeliness in making other payments. If your score is very high, you will qualify for lower interest rates and a greater variety of loan choices. It is a critical piece of information required by lenders.
Documentation of Income
You will need to prove your income. Recent pay stubs, a couple of years of personal and/or business income tax returns, and a year or two of W-2 forms are the most important papers for income verification. Income tax returns are crucial if you are self-employed and don't have regular pay stubs and W-2s. If you receive alimony, child support, social security, court settlements or any other type of income, you will need to document your payments.
The lender will want to see proof of other assets you may hold. If you already bank with the same lender, they will be able to pull your account information directly. You'll need to make copies of recent statements to verify deposit accounts with different institutions. If you already own other property, you will need proof of a homeowner's insurance policy and recent real estate tax bills. Landlords with income property may have to show copies of current leases which demonstrate rental income.
Car loans, students loan or any other type of debt will factor into your eligibility for a mortgage. The bank will require paperwork related to your loans and payment history. If you have other mortgages, they will want to check out the paper trail related to those as well.
Documents Related to the Subject Property
The bank will ask for documentation related to the property you are buying, including a copy of your executed purchase and sale agreement and other sale documents. The loan department will set up an appraisal of the property to verify that it is worth at least what you are paying for it. Prior to closing, you'll need to show evidence of a new homeowner's insurance policy. Depending on where the property is located, you may have to provide a fire certificate, termite inspection or other types of certification. If you're buying a condominium, you will need copies of the condo documents and current condo association budget.
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