You’re ready to purchase a home of your very own, but it seems like you’re being asked to provide an awful lot of personal information to your lender. Is this really necessary? Short answer? Yes. Even if you’re already an established member of USALLIANCE and we have your information, there are still some documents you’ll need to provide and questions you’ll need to answer in order to be approved for your loan. And, it’s not just USALLIANCE that will ask so many questions; every home lender will request similar information to process a home loan.
But why do they need so much information? Well, when you apply for a mortgage loan, there’s a lot of money on the line. In 2014, the Consumer Financial Protection Bureau (CFPB) adopted what is called the Qualified Mortgage, or QM, rule. Most lenders, even smaller ones with assets under $2B, use the QM rule to protect themselves in the event that a mortgage goes into default.
However, it is also in your best interest to be sure that you will be able to pay back your loan. Requesting the following documents helps to ensure you have the financial stability to pay back your mortgage so you are not at risk of losing your home in the future. You will be protected from the obligation of a mortgage you can’t really handle.
Important documents to gather:
- Financial account statements from the last two months
- Tax returns from the last two years to determine your financial standing
- A list of your assets to verify you have money you can fall back on in the event of an emergency
- Your landlord’s contact information (if you’re a renter) to learn about your reliability
- A gift letter from anyone who gave you money to help cover down payment and closing costs
- Your credit report for your full credit history
- Recent pay stubs to prove employment status
- Photo identification to prove you are who you say you are.
Will I need to provide any additional information on top of these documents?
Yes. Lenders will need to look beyond the paper, and while these questions might seem intrusive, each one of them can substantially affect your financial standing and is something the lender needs to know.
Here are some questions you can expect:
- Are you obligated to pay alimony, child support, or separate maintenance?
- Have you ever been involved in a lawsuit—on either side of the bench?
- Have you ever sold a home through a short sale?
- How long have you been employed at your current job?
It might seem like a hassle to collect all these documents and prepare to answer these questions, but in the long run, you’ll be protected and rewarded for your efforts by the security of a home loan at a trusted financial institution that’s ultimately working to make sure you don’t get in over your head. Plus, now that you’re prepared, you can get your documents in order beforehand, making for a much smoother, and quicker, mortgage process!