Lender Conundrum - Documentation Requirements - Part 4

After making the decision to own a new home, getting in touch with a mortgage person, finding a Realtor, and maybe even seeing a few homes, it is time to start documenting your current financial situation.  You don't have to decide what is needed for documentation - your lender will provide an initial list for you, but then you might have to provide additional documentation to back up the documentation that you provided for your lender initially.  That's right - you may have to document your documentation!  Here are some thing to look out for so you can be prepared:

1. Bank Statements - This would read better if it said FINANCIAL STATEMENTS.  Plan on giving up all your financial statements - IRAs, 401Ks, Retirement Accounts, Stock Accounts, Savings accounts, and Checking Accounts for everyone who will be involved in the loan.  Also, a statement isn't complete unless you have all the pages - even the pages at the end that you always throw away.  If the pages of your statement say 1 of 5, 2 of 5, etc., you better have 5 pages of statements.
2. Your Current Employment Status - First, let's hope that you have two solid years in with the same employer.  Second, if you have changed employers in the last two years, it needs to be documented.  Did you change for a pay raise?  Did you get a degree and take a better job?  Did your last employer go out of business?  Maybe you changed because this employer was closer to where you live.  Any way you cut it, the reason behind changing jobs should have some positive impact on your life.  If that is the case, you will be ok.  If you changed jobs more than twice, and it wasn't for a promotion, more money or some other convenience, you might have a problem.  This is also where you identify multiple income streams.  For example, if you have child support or alimony and the income from a job.  Both of these incomes can be added together for income.  Of course, you will have to prove that the income from the child support is steady.  Simply providing a divorce decree will not be enough.
3. Your Monthly Payment for the New Mortgage - This is primarily a function for the Lender.  They will check the current taxes, HOA fees, down payment amount, mortgage amount, possible ongoing assessments on the property and the payment for homeowner's insurance to make sure that they have a breakdown of all the items you will be responsible for paying in conjunction with owning the property.  Then, they will come up with a payment that you will be responsible for making.
4. Your Monthly Payment for Any Other Loan or HELOC - Here is where they look at what you are currently paying on your car (if anything), the credit cards, the alimony or child support, the boat loan, the loan for your two ATVs, etc.

We will tackle the other items that your lender checks next time.  Until then, Have a great Day!

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