Handle these 4 things now and prevent a headache later.
In nearly any business when there’s a delay, the blame is placed on paperwork. Cumbersome and confusing at times, the documentation that helps you secure and eventually close your loan is paramount, and by giving it the attention it deserves you can save yourself significant time not only hunting down files, but getting into your new property.
A loan file that has all the right documents from the beginning can close in two to three weeks, while a loan without sufficient documentation can take 30-45 days or more…or never close at all! Make sure you track down the following items so you can close your loan fast!
The first aspect of your loan that you will need to document extensively is your income. If you are a W-2 employee, make a copy of your most recent pay stub and your W-2s and filed tax returns from the past two years. Make sure to copy all pages of your federal tax returns and not just the first two pages.
If you are self-employed, two years of personal tax returns are required along with two years of your business returns. In addition, you will need to make copies of all K-1s or 1099s that you have received.
The second aspect of your loan that you will need to document is assets. Make a copy of your most recent bank statement from your checking account and one other account (i.e. savings, money market, or retirement).
Common mistakes when documenting a bank statement are only copying the first page or printing out an online transaction summary – this will not work with today’s underwriters. A complete statement with all pages (even if the last page is blank) is needed. If you do not receive paper statements in the mail, you still should be able to download a PDF version of a monthly statement from your online account.
It is also necessary to source all non-payroll deposits and/or transfers into the account. This means that you should write and sign a short explanation of where the deposit came from and show a paper trail by copying a statement from the account where the money was transferred from, or a copy of the cancelled check that was deposited. If cash was deposited, then a copy of the deposit slip should be made. Copies of cancelled checks and deposit slips can easily be attained from the bank where the deposit was made.
All borrowers should provide the contact information and policy number for their current homeowner’s insurance. Your coverage will need to be verified, and the mortgagee clause in your policy may need to be changed.
4. Other items of note
If you own a second/vacation home or an investment property, you will need to provide a copy of the most recent tax bill and the insurance declarations page for those properties. If you are a co-signer on student loans with deferred payments, contact the student loan company for a statement showing what the payment will be once the deferred period is over.
As you go through these many documents, ensure that every copy is the full page with no sections cut off. It may sound crazy, but if there are even a few letters cut off on one side of the page, your underwriter will not accept it.
We all lead busy lives and do not have time to waste, so it is absolutely essential to put the time in upfront and gather all the right documents in the beginning of the loan process. In turn you will save yourself a lot of frustration and time, and close your loan more efficiently.