When you talk about a loan application, you get babbled. Different lenders require all sorts of documents needed to begin the loan process.
While one lender may differ from another in terms of verification documents, it helps to know that there are certain papers that are common to each. Preparing these ahead will not just save you time, but money and effort.
Gather these necessary documents before you apply for a loan:
Proofs of Income
Most lenders will require the most recent W-2 form together with your tax statements. However, some may ask for W-2 copies of the most recent two years.
If you are receiving a paycheck from your company, a W-2 will show how much your income is and the portion of it that went to tax. If you have a business and are employed at the same time, expect to provide copies of your 1099. This will report the different incomes you receive in a year other than your salary. More importantly, these verify the earnings that you have declared upon applying for a loan and reflects your income trends. These figures will then be calculated by lenders to determine if they should approve the loan or not.
Federal Tax Returns
The recent two years of your tax returns will also be reviewed. You will have to expect to include all the schedules and K-1’s if it applies. This is important for self-employed borrowers who cannot provide W-2s.
In a stated income loan, it may not be required that you provide proof of your income such a tax return. Providing these, though, if you have them, will strongly suggest to a lender that you are ready to have your income and assets be examined. This may likely increase your chances of approval especially if they find out that you have more than enough reserves.
Most loans require that you submit a copy of your credit report. Even if lenders may perform their own credit checks and each one has its own minimum credit score requirement, it is beneficial to know your credit score in advance.
By doing so, you will be able to detect any areas that need credit repair before your lender scrutinizes it. You may need to pay off some missed payments, get current on your existing loans, or trace up some fraudulent transactions done under your name. These extra steps may mean the difference once your loan provider takes a look at your credit report.
Anyone applying for a stated income loan needs to have stellar credit scores. If you provide one that’s already blemish-free (thank yourself for doing the necessary repairs in advance!), these lenders will likely approve your application.
Your lender would want to know your reserves. Expect them to ask for a copy of your bank statements; the most recent and, possibly your old ones too.
Prepare copies of savings accounts, retirement accounts and deposit transactions among others. This will not only show how much money you have in the bank. It can also prove that your down payment was not a gift from non-borrowing household members.
List of Other Assets
Aside from your bank statements, you should prepare a list of your other assets as well.
This will serve as evidence that you have enough savings and investments to keep you afloat after paying for any down payment, monthly premiums and closing costs. QM or stated income loans alike, the more money you have, the better chances that a lender will be willing to lend. If you will be able to provide these documents, you will have proof that you have other sources of income aside from your loan. If you are an investor with a huge asset, this will work to your advantage.
True, paperwork takes so much time to do and, sometimes, it gets frustrating. It may sound silly, but these records will help not just the lenders but you in many ways. For one, it helps determine if you would be able to afford the loan or otherwise.
QM lenders may require you more documents but it is for sure that the ones listed above will be part of it. In a stated income loan, however, an income verification is not necessary as this loan is what it is known for. You will only have to declare how much your income is and will be taken for your word. Although submitting this document may increase your chances for a loan approval but it is never required. The one most important thing you will have to work on is to make your credit report as excellent as possible. This, together with a large down payment and a huge cash reserve, will have loan providers consider your application.
Shop for lenders and ask each for a rundown of all the documents they need. Take them down and compare them. See which ones are easier to comply and which works for you best. Start shopping for lenders today!