When applying for a mortgage, it's important to be prepared with the right documents and information. Todd Huettner, owner of Huettner Capital, a residential and commercial real estate lender, explains that lenders need to get a full picture of your financial situation. This includes recent paystubs, bank statements, W-2 forms, tax returns, and more. You may also need to sign Form 4506-T, which allows the lender to request a copy of your tax returns from the IRS.
Generally, lenders want to see tax returns for one or two years. This helps them understand your annual income and any large fluctuations from year to year. In addition to tax returns, lenders may ask for payment receipts from the last month or so. This helps them measure your current income. If you have other sources of income such as self-employment or child support, you'll need to provide proof with 1099 forms, direct deposits, or other means.
When evaluating your risk profile, lenders may want to review your bank statements and other assets. This includes investment assets and insurance such as life insurance. For buyers who don't yet own a home, many lenders will ask for proof that you can repay on time. You may be asked for canceled rent checks (check that the landlord has cashed) for one year or for the landlord to provide documentation showing that you paid your rent on time. The next section of the mortgage application asks you to indicate the type of mortgage you are looking for, such as a conventional or FHA mortgage.
This is followed by details of the transaction including the purchase price or refinance amount, cost of any home improvement or repair, price of land (if purchased separately), estimated prepaid items and closing costs, mortgage insurance premiums (if applicable), and any discount points paid by the borrower. Finally, applicants must sign a signature section which is legally binding. In it, applicants verify that the information provided in the mortgage loan application is true and correct and recognize that the lender can verify the information provided. To ensure a smooth process when applying for a mortgage, it's important to gather all necessary documents and information ahead of time. This includes recent paystubs, bank statements, W-2 forms, tax returns, Form 4506-T, payment receipts from the last month or so, 1099 forms (if applicable), proof of repayment ability (if applicable), and details of the transaction.