With interest rates dropped to historical lows, you may ask yourself if this is the right time to buy a new home? We do not know where the interest rates will go; however, the present loan terms have made house purchases more affordable, especially for those who want to finance their homes through a mortgage. The idea of a mortgage may be overwhelming for new home buyers, as well as regular customers. The mortgage application process includes multiple documentation and many other things. Mortgage loan documents checklist, Do you know what they are?
Following is the list of the papers and documents that will be required for the closing agreement.
- Employment records
- Income statements (if you are self-employed)
- Bank statements
- Income certificates
- Tax returns
- and possible bankruptcy documents, divorce decrees, and home sales contracts
Employment Records
The income certificate is important for financing companies because it provides information about the borrower’s financial status and the type of mortgage they can secure. Also, the lender will demand employment records from all purchasers to receive benefits from lower interest rates or secure the best interest rates. This includes the recent pay stub for the past 30 days. So, since the mortgage approval process and house hunting may take some time, you should be prepared to send the updated payslip when requested.
Income statement
What if you are self-employed? How can you convince lenders to give you a lower interest rate? Entrepreneurs who use self-employment income to qualify for loans must submit their annual income statements to lending companies. Both the accountant and the bookkeeper can prepare this report for you. Remember not to complicate the profit and loss (P&L) statements if you manage these files by yourself.
The most important things to list are:
- Revenues
- expense
- profit or loss
P and L is just another way for lenders to determine your tax status. You should provide this information even if you run a small business or it serves as an additional cash flow.
Bank statements and income records
Your income and employment records will represent part of your cash flow and financial history. You will be required to provide recent bank statements and financial reports to give the lender a good picture of your tax status. To take advantage of historic lows of home mortgages, you should resubmit the latest bank and investment reports (just like your employment record).
Tax Returns
No one likes paying taxes; however, this is another important factor for financing institutions to ensure the borrower’s credit history. Therefore, you must provide signed copies of tax transcripts for the past two years. However, you don’t have to bother if you are unable to provide tax returns to the lenders. According to Per Hud.gov, “The tax returns obtained directly from the Internal Revenue Service (IRS) can be used in place of signed tax returns, and the borrower can pay the cost of such records.” You can apply for a tax transcript from the IRS website.
Other Key Mortgage Documents
Here is some other mortgage loan documents checklist that will help you in securing the best home loans.
i) Divorce Decree
If your income involves child support or alimony, you will need to show the court order or bank records to prove the child’s custody.
ii) Bankruptcy
If you have been bankrupt in the past seven years, you must provide your lender with all bankruptcy documents, including the time and date of termination.
iii) House Purchase Agreement
If you want to sell an existing house before buying a new home, you may need to provide a complete house purchase agreement for the sales process.
Final Thoughts
Applying for a home mortgage seems like a daunting task, but RateChecker.com promises to make the home loan process as smooth as possible. We hope this mortgage loan documents checklist will be helpful to you. However, if you still have questions, please visit our website or read our top 8 mortgage terms to review the terminologies and take benefits of the best mortgage interest rates.
