Every lender must research and document three things to determine your eligibility and interest rate. Income, credit and collateral. Your identity must also be verified according to the Patriot Act. Every docuement required falls into those three categories so lets break it down.
Income. How do you get paid? Every lender needs to prove that you have a two year History of recieveing that type of income AND that the income is likely to continue for the next Three Years. If your income doesn’t fall into any of the specific categories below then that is what you must prove.
If your get paid a salary or hourly wage you will need
1. Your Most Recent paystubs (4 weeks) and
2. Your W-2
If you are commissioned, self employed or collect dividend or other 1099 income you will need
1. 2 Years of IRS Form 1040 Tax Returns – NOT your state returns
2. Year to Date Profit and Loss Statement and/or
3. Last two years of 1099’s
If your income is all retirement or pension income, including disability income, you’ll need to bring
1. Most recent year’s Award Letter(s) – this includes social security income
2. Most recent two months of Bank Statements to show direct deposit into your account 3. For disability income you may need to prove that it will continue for at least 3 years.
Credit. Every lender will pull a credit report from the three credit bureaus, Experian, Transunion and Equifax. The score will help determine what loan programs you are eligible for AND will help the lender determine your debt to income ratio since all your liabilities will be on the credit report. What you will need to bring is
1. A Letter of Explanation for any credit deliquency you have had in the past 12 months. A letter of explanation stating the outcome of every credit inquiry you have had in the past 90 days and any new debt you have aquired that is not on your credit report.
Collateral. Once a lender is satisfied that you have a suitable credit history and the ability to repay the loan they will assess the collateral. This is done with an appraisal. You will pay the lender or an appraisal management company (AMC) that will order an independant appraisal of your home to determing the value and condition of the home you are purchasing or refinancing. An analysis of the market conditions surrounding your property is also now included on the report as well. Included in the collateral analysis is your asset verification. The amount of assets required depends upon the specific loan program and is a major risk factor for the lender.
1. When liquid assets are required you will need to show the most recent one or two months of bank statements. RED FLAG If you have ANY deposits in your account that cannot be readily identified as income, like a direct deposited paycheck, the lender will require documentation to prove where that money came from. This recent requirement is part of a new Anti-Money-Laundering policy that every lender is required to adhere to. It can make your simple refinance a nighmare, so plan ahead and don’t move cash around in your accounts that you cannot document.
2. Reserves – If other assets are required you will need to bring your most recent asset statements like your 401K statement or IRA statement or Stock account statement.
3. Any money you move from one account to the next must be documented in both accounts. you will need account statements from both accounts. Any statement you provide MUST include ALL pages of the statement. If you provide a print out from the bank it MUST be stamped and signed by the bank in order to be valid.
4. Home owner’s insurance declaration page or the contract to purchase the property will be required to verify that you are the owner of the property. You must pay for title insurance as well, which will further document the current ownership of the property as well as any liens that are on the property currently.
Identity. Usually all you need to bring is your driver’s license.
So, here’s the short list;
- Copy of your drivers licence
- Most recent paystubs (2)
- Last two years of w-2 (FHA)
- Last two years of IRS 1040’s (Self Employed, Commissioned or Dividend income)
- Year to date Profit and loss (Self Employed)
- Award letter(s) (Retirement, pension or disability Income)
- Most recent two months of bank statements
- Documentation of any deposits other than pay
- Home Owner’s Insurance declaration page (for refinance)
- Purchase contract – fully executed including all adendums
- Letters of explanation for all credit inquiries and any deliquencies
- Letter stating you have not acquired any debt that is not fully disclosed on your application.
As always, make sure you speak to your originator about any specific items you will need that are particular to your situation. Call Victory Funding! We make it easy!
