Documents Needed When Applying for a Home Loan
….be prepared for a few strange ones and/or multiple requests for the same paperwork!
Real estate professionals are not doctors. Yet they can diagnose — at a glance — one syndrome in particular better than any other expert.
The disease? It’s a syndrome I’ve come to know as suscribiendo impatienza irritablus, from the old Latin for “impatience and irritability caused by excessive requests for documentation during the loan underwriting process.” Symptoms include teeth clenching, anxiety, panic attacks and leaving your checking account statement on the fax machine glass at work.
The best cure for mortgage underwriting anxiety is a 2-part remedy.
Accept that he or she who doles out the cash makes the rules, and that you simply have to play the game their way if you want the lender’s mortgage money to buy your new Atlanta home. Simple, but not always easy.
Get educated about what requests may come from your loan officer and the underwriters so that you’re not caught totally off guard and thrown into a panic when a request comes in that seems strange to you. Part one is simple, but not always easy, and it’s entirely up to you to be OK with the short-term inconvenience and minor irritations that come with getting a home loan.
But let’s tackle part two together — here are a few of the weirdest things that lenders regularly ask borrowers to provide:
1. Your driver’s license and pay stubs — five times. Buyers and homeowners who are trying to refinance their home are often rendered apoplectic by repeat requests for the same documentation. If you house hunt for a year or your short sale transaction takes five months to close, it’s really not that bizarre for the bank to ask for updated versions of checking account statements or pay stubs. The need for an update, the need to make sure that you still have the same income you did at the start of your house hunt adventure — that’s what lies beneath the need for updates on these sorts of ever-changing documents.
But, why oh why, many a borrower has bemoaned, must they ask me for my driver’s license what seems like 17 times? There are lots of answers to the question why: Your mortgage broker is drowning in paper and/or has shredded your sensitive materials since you first sent them; your target lender has switched several times, or it’s simply easier and less time consuming to get you to send it than to dig it out.
But asking “why” will not stop this from happening, nor will it manage your stress around it. Best practice is to understand that repeat requests, even for the same documents, are a law of nature in the mortgage industry. Like gravity, they just happen – and like gravity, life gets a whole lot easier if you stop fighting it and just serve the documents up, as requested.
2. Sourcing your deposits. Lender requests for documentation of the source of every single deposit over about $500 that shows up on your checking account statements for the two months prior to underwriting are the single most pervasive and impactful documentation change of the post-recession lending era.
- Did you sell a home? They want to know that and see the check or closing/settlement statement.
- Did you write yourself a check from one account to another? They want to see that, too.
- Did someone give you a gift? Not only do they want to see a letter from that individual stating that the cash was a gift, they might also want to see the statements from the gift giver’s account that issued the check or deposit to your account.
Mortgage loan underwriters in Atlanta want to ensure that neither you nor your benefactor is taking out loans that you’ll have to repay after closing and that no other sort of shady business is afoot at any point along the chain of your income or other cash you’ll need to bring to close. There are potentially ways to minimize the burden on your gift giver, and on yourself, of this sort of requirement, if you plan ahead; sometimes, these requests can come in late and add unnecessary delay to your closing. Talk with your loan officer about where all your money will be coming from at the very beginning of your work together, and ask her to help you understand and plan for deposit documentation requests.
3. Letters of explanation. Letters of explanation can seem silly. Yes, you need to type out a letter explaining why you were late making a credit card payment or the facts that gave rise to some other derogatory line item on your credit report. And there’s no trick to it, really — you just tell the truth, ideally running it past your loan officer while it’s still in draft form. It might seem weird to just write up what happened into a plain old letter, but loan underwriting is a process of i-dotting, t-crossing and paper trail building. So just do it!
If you are buying your first home in Metro Atlanta and have questions about the loan process or need some help getting started, please call the UrbanNest Atlanta team anytime at 404.205.8800.
All of our Atlanta buyer’s agents specialize in different sections of town, so you will always have someone by your side that is knowledgeable about the home buying process.
All information contained in this blog is deemed to be reliable but not guaranteed. If you need real estate assistance, the Urban Nest Atlanta team is always available to assist you with your residential real estate needs!