A Complete Mortgage Document Checklist for Employed Applicants
Paperwork is important for a mortgage refinance or home loan application approval or rejection. The lender requires an array of documents to verify the identity and income of the applicant. It is important for the bank to assess the borrower’s ability to repay the loan. Whether you are a real estate investor or you are looking for your first house, you need a mortgage document checklist. Lenders use mortgage document management software. They have dedicated software for your identity-related and income-related document verification and approval.
There are tight regulations in place when it comes to mortgages. The lender must ensure that the applicant can afford the loan. This is the reason why a lender needs to collect a lot of additional documents.
Lenders are now using the latest technologies to automate and streamline their processes. Mortgage document management software and other software applications used by lenders save time and money and help them in closing more deals with low risk. If you are a borrower then you need to provide the following five things:
- Photo ID for mortgage fraud and identity theft prevention.
- Proof of income
- Authorize the lender to pull your credit report.
- Homeowner’s insurance proof
- Down payment sources
Documentation And Underwriting Systems
Lenders use underwriting software programs. However, not all applications are processed using underwriting systems. Many applicants don’t know much about the information on their credit reports. A lot of people have low credit scores because of inaccuracies in their credit reports. This is the reason why manually underwriting an application becomes important in some cases when the underwriting system does not ‘approve’ an application. Underwriting an application manually requires more documentation. At the end of the day, it must be a risk-free loan.
Documentation For A Wage Earner
If you are a wage earner then you need to produce a few documents to apply. As a full-time W-2 employee, you simply need to show that you have sufficient funds and income. You need to provide the following:
- Latest pay stubs
- Copies of the latest bank statements
A pay stub and bank statement are enough if you are on the same job for a couple of years.
Additional Documents for Wages, Commission or Bonus Income
You need to provide more information to the lender if you have a part-time commission or bonus income or you have not worked as an employee for 2 years or longer. You need additional documents if your source of funds shows bounced checks. You also need to provide additional documents if your commissions or bonus earnings are 25% or more of the total income. These additional documents include:
- If you have been on the job for less than two years then you need to produce 2 years of W-2 forms.
- If you are an applicant with commission or bonus income then you need to produce 2 years of tax returns.
- You need to prove that you don’t have prohibited sources for funds. You need letters to explain large deposits.
- Make sure that you can explain bounced checks.