What to Bring to Your Appointment and Why

Here’s what we need to review for a typical loan pre-qualification:

  • The two most recent federal tax returns you’ve filed. Please include any W-2, K-1 and/or 1099 forms and all schedules related to the filing. We do not need your state filings.
  • Most recent month’s paystubs (We need a complete 30 days)
  • Most recent two months of bank statements and retirement statements(if applicable)
  • Copy of driver’s license and Social Security card.
  • Any applicable bankruptcy filings, divorce filings and VA eligibility paperwork.
  • For a refinance we’ll also need your most recent mortgage statement and homeowner’s insurance policy information

 

Why do we need all this documentation?

The tax returns verify that the income you are showing is being reported to the IRS and on the up and up.  We also look any losses you might be reporting, whether it be unreimbursed employment expenses on Form 2106, rental losses on Schedule E or self-employment losses on Schedule C. It also shows if you currently own a home, which is relevant to both your first time homebuyer status and to your debt-to-income ratios. The tax returns will also show your history of income so that we can determine the consistentcy and stablity of your income.

The paystubs will show how much you are making now, in case you are making more due to a raise or a promotion. They also show you are still employed!

The bank and retirement statements show where the down payment is coming from on a home purchase. On both a purchase and refinance it can help to show “reserves” – money saved up to cover the housing expense in the event of a emergency. One month’s housing expense (mortgage payment, taxes, insurance, HOA) in a savings account is considered one month’s reserve. The more months you have in reserve the stronger of borrower you are. Some programs require reserves, so knowing what is available can help me tailor the loan program to your situation.

The driver’s license allows us to verify your identity in these days of identity theft and corroborate your personal details.

The Social Security card shows us your legal name. When we run a credit report it has to match the Social Security card exactly; nicknames and missing additional surnames can provide incorrect returns on your credit profile.

The bankruptcy (BK) and divorce filings are not always necessary but when they exist we need to see them in order to anticipate any possible underwriting challenges. We need to see how property was disposed in the BK and which debtors were discharged. From divorce decrees we can see if you are responsible for child support or spousal support, both of which are factored into your debt-to-income ratios. If you are a veteran then Veteran’s Administration (VA) paperwork will let us confirm your VA loan eligibility and the terms thereof.

On a refinance we need the mortgage statement to verify your escrow impounds, your address, the current balance of your loan and the terms thereof. Similarly your homeowner’s insurance lets us verify the coverage and the cost of your insurance (which, you guessed it, factors into your debt-to-income ratio).

How NOT to Shop a Lender

Look, I understand that people want to shop around for a “good deal” and that I don’t have the lowest rates in the market. I deliver excellent service and solid advice and I like to think that I’m worth a little bit more than some nameless drone at some internet bank that doesn’t know what he is doing, doesn’t care about his client and will take 3 months to close a perfectly clean loan. Still, I recognize that it is natural for people to want to know their options and I encourage it. Frankly, comparing me to most other lenders makes me look good!

Normally this shopping process happens at the beginning of the process, before anyone has committed to anything. On a home purchase this normally happens during the pre-qualification process. Typically that means that by the time a buyer finds a home he likes and gets an offer accepted that buyer has settled on a lender (hopefully with my office). This is because once they are in contract the buyers have a deposit on the line and they will be spending money upfront for things like a home inspection and an appraisal.

There are some people that go off the reservation and go about “shopping” the wrong way… and end up hurting themselves because of promises made by a less-than-scrupulous lender. We have a situation like that in the office right now. We’ve been helping this borrower shop for a home for about six months now and he finally got an offer accepted at the beginning of December on the purchase of a short sale. In fact, our office was integral in getting the short sale approved! We got his loan approved very quickly. obtained an appraisal and then, at the beginning of this month, we produced final loan documents for him to sign and close his deal. Through out this whole time we spoke to him regularly and emailed him multiple times a week. Never did he tell us that he was also applying with a different lender. Now that we have documents ready to go and a lock about to expire (I feel it is important to mention that the loan is the exact terms we disclosed/discussed in November, so it’s not like we jacked up the rate or the costs) and we get a call from the listing agent that a new appraiser is trying to see the property. Turns out the other lender has been sitting around for a couple of weeks and is now trying to get the property looked at. The scheduled close is this Friday. The short sale approval is up this Friday. Our lock is up on Monday.

We call the borrower to find out what is going on. He doesn’t answer any calls. Emails to him go unanswered.

Now he is going to lose the sale, his deposit, what he paid for the appraisal, what he paid for the inspection and what he paid for the HOA cert. I think that’s about $6500.00. The sellers won’t grant him an extension since there are loan docs sitting at escrow ready to sign and a lender that performed exactly as promised.

All this could have been prevented if he had simply been straightforward with us. We would have bowed out gracefully and spent our time, energy and money on clients who want to work with us.

I don’t get it… why mislead us about this? I’m sure he expected honesty from us, why wouldn’t he return the same? Why not return our calls? Why not tell us directly?

Happy New Year!

Driving on an empty road towards the setting sun to upcoming 2016 and leaving behind old 2015.

Welcome to 2016!

This year I intend to eat/drink a little healthier and work out a little more regularly. I also intend to continue working on educating people about their financial options; including, but not limited to, their options concerning their home mortgage. What are your New Year resolutions?