The documents listed below are required when applying for a mortgage. However, each case is different, and you may be required to provide additional documentation. So, if you are asked for additional information, be cooperative and provide it as soon as possible. It will aid in the application process.

Your Residence

a copy of the signed sales contract with all riders
Verification of the home deposit you made
All realtors, builders, insurance agents, and attorneys involved’ names, addresses, and phone numbers
If available, a copy of the Listing Sheet and the legal description (if the property is a condominium please provide condominium declaration, by-laws and most recent budget).

Your Earnings

Copies of your most recent 30-day pay stubs and year-to-date pay stubs
Copies of your last two years’ W-2 forms
Employer names and addresses for the last two years
Letter explaining any employment gaps in the last two years
Green card or work visa (copy front & back)
If you work for yourself or receive a commission or bonus, interest/dividends, or rental income:

1. Please provide complete tax returns for the last two years, as well as a year-to-date profit and loss statement (please provide complete tax returns, including all attached schedules and statements). Please provide a copy of your extension if you have filed one.)
2. K-1 forms for all partnerships and S-Corporations for the previous two years (please double-check your return). The majority of K-1s are not linked to the 1040.)
3. Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) for the previous two years, including all schedules, statements, and addenda. (Only required if you own 25% or more of the company.)

4. If you intend to qualify for alimony or child support:

   Provide a divorce decree or court order stating the amount, as well as proof of receipt of funds for the previous year.
   If you receive Social Security, Disability, or Veterans Administration benefits:

Provide a letter of award from the agency or organization.

Funding Sources and Down Payment

• Sale of your current residence – provide a copy of the signed sales contract on your current residence, as well as a statement or listing agreement if unsold (you must also provide a settlement/Closing Statement at closing).
• Savings, checking, or money market funds – provide copies of recent bank statements.
• Stocks and bonds: provide copies of your broker’s statement or certificates.
• Gifts – Provide a Gift Affidavit and proof of receipt of funds if part of your cash to close.
• You may be required to submit additional documentation based on the information on your application and/or credit report.

What exactly is an appraisal?
An appraisal is an estimate of the fair market value of a property. It is a document that is generally required (depending on the loan program) by a lender prior to loan approval to ensure that the mortgage loan amount is not greater than the property’s value. An “Appraiser” typically a state-licensed professional who is trained to render expert opinions concerning property values, location, amenities, and physical conditions performs the appraisal.

Why get an appraisal?

The most common reason for ordering an appraisal is to obtain a loan, but there are other reasons to do so as well:

• Dispute over high property taxes
• calculating replacement cost for insurance purposes
• Settlement of the divorce
• Estate administration
• Real estate transactions require the use of a negotiating tool.
• Setting a reasonable selling price for real estate
• Defending your rights in an eminent domain proceeding
• A requirement of a government agency
• A court challenge

What exactly are appraisal methods?
Appraisers use three common approaches, or Appraisal Methods, to determine property value. A final value estimate is correlated after thorough exercise of all three. An appraiser heavily weights the Sales Comparison Approach when evaluating single-family, owner-occupied properties.

• The cost approach is used to determine the property value: land value (vacant) plus the cost to reconstruct the appraised building as new on the date of value, less accrued depreciation the building suffers in comparison to a new building.
• Sales Comparison Approach – The appraiser identifies 3 to 4 comparable comps, recently sold properties in the neighborhood, preferably within 12 miles of the subject property. The recently sold properties and the subject property are compared in terms of square footage, number of bedrooms and bathrooms, property age, lot size, view, and property condition.

The income approach capitalizes the property’s potential net income to arrive at a property value. The process of converting a future income stream into a present value is known as capitalization. This method is appropriate for income-generating properties and is used in conjunction with other valuation methods.

Who is the owner of the appraisal?
Even though the borrower paid for the appraisal, the mortgage company owns it. This is due to the fact that the mortgage company orders the appraisal on the borrower’s behalf, and the Appraiser names the mortgage company on the report. The borrower has the right to receive a copy; however, it is at the discretion of the mortgage company to provide the borrower with the original appraisal report.

Can another mortgage company be used after the appraisal is completed?
Yes. In most cases, if you change mortgage companies, you will not have to pay for another appraisal, and depending on the loan program, the first lender may be able to transfer it to the new lender. An “Appraisal Retype Fee” is charged by some appraisal firms because additional clerical work is required to reflect the new mortgage company. The original mortgage company may refuse to transfer the appraisal to another lender. A new appraisal is required in this case.

Who determines the property’s market value?
The property seller, not the appraiser, determines the price, especially for residential property. Sellers typically do not order an appraisal because they want to get the best price for their home and do not want to be bound by the Appraiser’s assessment.

How can I help my appraiser?

It is in your best interest to assist the Appraiser with the assessment by providing additional information:

• What is the appraisal’s purpose?
  Is the property on the market, and if so, at what price and with whom?
• Is there a home loan? And, if so, with whom, when placed, for how much and what type of financing (FHA, VA, etc.), at what interest rate, or other type?
• Are there any personal belongings or appliances in the property?
  What is the income breakdown and expense breakdown for an income-producing property over the last year or two? A lease copy may be required.
• Please include a copy: of the deed, survey, purchase agreement, or other property papers.
  Provide a copy of the most: recent real estate tax bill, special assessment statement, or balance owed on anything, such as sewer, water, and so on.

What happend at closing?

Closing or funding is the legal transfer of ownership of a property from the Seller to you. It officially concludes your purchasing journey!

Please keep in mind that the closing meeting involves a large number of people, including sellers, real estate agents, and attorneys. If the seller lives out of state, an attorney can represent them. Closing times range from one hour to several hours, depending on the number of contingencies or accounts that must be established.

Prior to closing, you should conduct a final inspection, also known as a “walk-through,” to ensure that all requested repairs have been completed and that items agreed to remain with the house, such as drapes and lighting fixtures, are still present.

What is the cost of a mandatory closing?
Even if you paid cash for your home and did not need a mortgage, you must pay the following fees to state and local governments: 

Transfer taxes are levied by some municipalities in order to transfer title and deed from the seller to the buyer.

Fees for Deed Recording – To pay the County Clerk to record the deed and mortgage, as well as to change the property tax billing.

Pro-Rated Taxes – Because property taxes are due at different times of the year, they may need to be split between the buyer and seller. For example, if your taxes are due in October and you close in August, you will owe taxes for two months and the seller will owe taxes for the remaining ten months. Taxes are typically pro-rated based on the number of days, not months, of ownership. Some lenders may require you to open an escrow account to cover these expenses. If not, you should consider creating one to ensure that funds are set aside for these important expenses.

State and local taxes – Other mortgage taxes and fees imposed by the state and local governments may apply.

Is there a third-party cost?
Even if you paid cash for the property, you may have incurred expenses from others such as agents, attorneys, inspectors, or insurance companies:

Attorney Fees – When buying a home, you may want to hire an attorney. They typically charge a percentage of the selling price up to 1%, but some work on an hourly or flat fee basis.

Title Search Fees – Typically, your attorney will conduct or arrange for a title search to ensure that there are no obstacles such as liens or lawsuits against the property. You could also work with a title company to ensure a clear property title.

Homeowner’s Insurance – Most lenders require you to pay the first year’s premium for homeowners insurance, also known as hazard insurance, in advance and show proof of payment at the closing. This guarantees that the investment will be protected even if the property is destroyed.

Real Estate Agent’s Sales Commission – The commission is paid by the seller, and if one agent lists the property and another sells it, the commission is usually split. The seller and the agent can agree on a commission.

Any lenders fees?

Origination Fee – A flat fee or a percentage of the mortgage loan may be charged for processing the mortgage application.

Credit Report – Most lenders will ask for a credit report on you and your spouse or equity partner. This fee is frequently included in the origination fee.

Points – One point equals 1% of the loan amount and is payable when the loan is approved, either before or after closing. Points can be shared with the seller as part of the purchase offer. Some lenders will allow you to finance points, which will increase the cost of your mortgage. If you pay the points in advance, they are tax deductible in the year paid. Second home loans have different deductibility rules.

Attorney’s Fees for the Lender – For your attorney to prepare documents and ensure that the title is clear, as well as to represent you at the closing.

Document Preparation Fees – From the application to the closing, several documents and papers must be prepared during the home-buying process. This may be charged by lenders, or it may be included in the application and/or attorney’s fees.

Amortization Schedule Preparation – Some lenders will prepare a detailed amortization schedule for the entire term of your mortgage. This is usually done with fixed or adjustable mortgages.

Land Survey – Lenders may require that the property be surveyed to ensure that it has not been encroached upon and to verify the property’s buildings and improvements.

Appraisals – Professional appraisers can compare the value of the property to other recently sold properties in the neighborhood. Lenders want to know that the property is worth the loan amount.

Lender’s Mortgage Insurance – If you put down less than 20%, many lenders will require you to purchase (PMI) for the loan amount. If you fail to repay your loan, the lender will recover their money. These insurance premiums will be paid until your principal payments plus the down payment equal 20% of the purchase price, and they may be paid for the life of the loan.

Lender’s Title Insurance – Even if a title search has been performed to look for any property obstacles, liens, or lawsuits, many lenders require insurance to protect their mortgage investment. This is a one-time insurance premium that is typically paid at closing and is only for the lender, not the homebuyer.

Fees to Release a Lien – If the seller worked with a contractor who placed a lien on the house and is expecting payment from the sale proceeds, there may be fees to release the lien. These fees are usually paid by the seller and can be negotiated in the purchase offer.

Lender Inspections – If you apply for an FHA or VA mortgage loan, the lender may require a termite inspection. A water test may be required in many rural areas to ensure that the well and water system will provide an adequate water supply to the house; quantity, not quality. Additional inspections may be required depending on the sales contract and the type of property.

Prepaid Interest – Although the first regular mortgage payment is usually due 6-8 weeks after closing, interest costs begin immediately. The lender will calculate the interest owed for that time period, and that fraction of interest may be due at closing.

Escrow – Lenders frequently require you to set up an Escrow Account, where you will make monthly payments for taxes, homeowner’s insurance, and sometimes PMI (Private Mortgage Insurance). The amount placed in this account at closing is determined by the due date of the property taxes and the timing of the settlement transaction. During the mortgage loan application process, the lender can provide you with a cost estimate.

Other upfront costs?
The deposit or binder you make at the time of the purchase offer, the remaining cash down payment you make at closing, or other up-front expenses can include:

Lenders may require inspections, and you can condition your purchase offer on the successful completion of other inspections such as structural, water quality tests, septic, termite, roof, and radon tests. These inspection fees are negotiable between you and the seller.

Owner’s Title Insurance – You should consider purchasing title insurance in case of unforeseen problems, so you don’t end up owing a mortgage on property you no longer own. A thorough title search ensures that the title is clear.

Appraisal Fees – You may want to hire an appraiser before signing a purchase agreement or after reviewing the lender’s appraisal report.

Money to the Seller – You will need to pay for items in the house you want that were not negotiated in the purchase offer, such as appliances, light fixtures, drapes, lawn furniture, or fuel oil and propane tanks that were left in tanks.

Moving Expenses – If you are changing jobs, your new employer may pay for your relocation; otherwise, you must account for moving expenses such as truck rentals, professional movers, cash for utility deposits such as telephone, cable, and electricity, and so on.

Repair Expenses – You can request that the seller set up an Escrow Account in the purchase offer to cover any costs for major cleanup, radon mitigation procedures, house painting, appliance repairs, and so on. You may discover that you have expenses upon moving in, depending on the purchase offer contract and contingency clauses.

Time Investment – Major upfront costs in purchasing a home are frequently overlooked. The time and money spent on house hunting, which can take up to four months, plus the time spent looking for the best mortgage for you, the right real estate agent, an attorney, and other time-consuming activities.

What is the Real Estate Settlement Procedures Act?

The Real Estate Settlement Procedures Act (RESPA) contains information on the likely settlement or closing costs. Your lender is required to provide you with a “Loan Estimate” within three business days of receiving your mortgage application, which is an estimate of settlement or closing costs based on their understanding of your purchase contract. This estimate will show how much money you’ll need at closing to cover prorated taxes, the first month’s interest, and other settlement costs.

Whats a credit report?

A file or report contains information about your credit payment history. “Consumer reporting agencies” maintain and sell these files or reports (CRAs). A credit bureau is the most common type of CRA. If you have ever applied for a credit or charge account, a personal loan, insurance, or a job, you have a credit record on file with a credit bureau. Your credit history includes details about your income, debts, and credit payment history. It also shows whether you have been sued, arrested, or declared bankrupt.

Do I have the right to know what information is on my credit report?
Yes, if you request it. The CRA is required to tell you everything in your report, including medical information, as well as the sources of the information in most cases. In addition, the CRA must provide you with a list of everyone who has requested your report in the previous year-two years for employment-related requests.

What kind of data does the credit company collect and sell?
Credit bureaus gather and sell four types of basic information:

• Identification and employment data
  Your name, date of birth, Social Security number, employer, and spouse’s name are all routinely recorded. If a creditor requests it, the CRA may also provide information about your employment history, home ownership, income, and previous address.
• Payment record
  Your accounts with various creditors are listed, along with the amount of credit extended and whether you’ve paid on time. Related events may also be recorded, such as the referral of an overdue account to a collection agency.

• Inquiries
  CRAs must keep a record of all creditors who have requested your credit history in the last year, as well as those individuals or businesses who have requested your credit history for employment purposes in the last two years.

• Information from the public domain

            Bankruptcies, foreclosures, and tax liens are examples of public record events that may appear in               your report.

What is credit scoring?

Credit scoring is a system that creditors use to determine whether or not to extend credit to you. Your credit application and credit report collect information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts. Creditors compare this information to the credit performance of consumers with similar profiles using a statistical program. A credit scoring system assigns points to each factor that helps predict who will repay a debt. A total number of points — a credit score predicts your creditworthiness, or how likely you are to repay a loan and make the payments.

(800) 685-1111 Equifax
Experian (formerly TRW) can be reached at (888) EXPERIAN (397-3742)
Trans Union can be reached at (800) 916-8800.
For your credit report, these agencies may charge you up to $9.00.

Every 12 months, you are entitled to one free credit report from each of the three nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion. This free credit report, which may or may not include your credit score, can be obtained from the following website: https://www.annualcreditreport.com

What is the purpose of a credit score?

Credit scoring is based on real-world data and statistics, making it more reliable than subjective or judgmental methods. It treats all applicants fairly. Judgmental methods typically rely on criteria that have not been rigorously tested and can differ when applied by different people.

What can I do to raise my credit score?

Credit scoring models are complex, and they frequently differ between creditors and for different types of credit. If one factor changes, your score may change; however, improvement is usually determined by how that factor interacts with the other factors considered by the model. Only the creditor can explain what might raise your score under the specific model used to assess your credit application.

Nonetheless, credit scoring models generally assess the following types of information in your credit report:

Have you kept up with your bill payments? Payment history is usually an important consideration.

What if you were denied credit or didn’t get the terms you wanted?
If you were denied credit or did not receive the rate or credit terms you desired, inquire with the creditor whether a credit scoring system was used. If so, inquire about the characteristics or factors used in that system, as well as the best ways to improve your application. If you obtain credit, inquire as to whether you are receiving the best rate and terms available, and if not, why not. If you are not offered the best available rate due to errors in your credit report, be sure to dispute the incorrect information.

If you are denied credit, the Equal Credit Opportunity Act requires the creditor to provide you with a notice that explains why your application was denied or that you have the right to learn the reasons if you ask within 60 days. Indefinite and ambiguous reasons for denial are illegal, so request specifics from the creditor. Acceptable explanations include “your income was low” or “you haven’t worked long enough.” Reasons such as “you did not meet our minimum standards” or “you did not receive enough points on our credit scoring system” are unacceptable.

The Fair Credit Reporting Act

(FCRA) is intended to help ensure that CRAs provide businesses with accurate and complete information to use when evaluating your application.

Your rights under the Fair Credit Reporting Act are as follows:

You are entitled to a copy of your credit report. The report copy must include all of the information in your file at the time of your request.
You have the right to know who received your credit report in the previous year for most purposes, or in the previous two years for employment purposes.
If a company denies your application, it must provide the name and address of the CRA it contacted, if the denial was based on information provided by the CRA.

What exactly is foreclosure?
It occurs when a homeowner is unable to make mortgage principal and/or interest payments. The lender, a bank or building society, has the right to seize and sell the property in accordance with the terms of the mortgage contract.

What happens if you fail to make a mortgage payment?
Unfortunately, foreclosure is a possibility. If you fail to make a mortgage payment, your lender has the legal right to repossess your home and force you to leave. A Deficiency Judgment may be pursued if the value of your property is less than the total amount owed on your loan. Both a foreclosure and a deficiency judgment can have an impact on your ability to obtain credit in the future. As a result, you should try to avoid foreclosure if at all possible.

How can you avoid foreclosure?
First and foremost, if you are having difficulty making your payments, contact your lender’s Loss Mitigation Department as soon as possible. Explain your situation and be prepared to provide financial details such as your monthly income and expenses. Simply follow these three simple rules:

• As soon as you realize your payment will be late, notify your lender.
• Never ignore letters or phone calls from the lender.
• Don’t think your situation is hopeless.

What other options are there for avoiding “long-term” problems like foreclosure?
Your lender will determine whether you are eligible for the alternative solutions listed below. A housing counseling agency can also assist you with your options and communicate with your lender on your behalf:

Mortgage Modification – If you are currently able to make your regular payment but are unable to catch up on the past due amount, your lender may agree to modify your mortgage. One option is to roll the past-due amount into your existing loan and finance it over time. If you are no longer able to make your payments at the previous level, mortgage modification may be an option. The lender may modify your mortgage and extend the term of the loan, or it may take steps to reduce your current payments.

Pre-Foreclosure Sale – You can avoid foreclosure by selling your property for less than the amount required to pay off your mortgage loan. You may be eligible if:

• The loan is at least two months past due.
• Within 3 to 5 months, the house is sold.
• The lender will obtain a new appraisal, which will show that the home value meets program guidelines.

Deed in Lieu of Foreclosure – When the lender allows you to return your property while forgiving the debt. It has a negative impact on your credit report, but it is better than foreclosure. Before agreeing, the lender may require that the house be “For Sale” for a certain period of time. This option may be unavailable if there are other liens against the property.

For FHA loans, the lender may be able to help you obtain a one-time payment from the FHA Insurance Fund. Other conditions apply, including the homeowner’s ability to resume making full mortgage payments on time.

• A Promissory Note allowing HUD to place a lien on your property for the amount received from the FHA Insurance Fund must be signed.
• The note bears no interest but must be repaid at some point.
• When you pay off the loan, transfer title, or sell the property, the note becomes due.

For Veterans Administration Loans – The Veteran’s Administration Loan Centers provide financial services to help homeowners avoid foreclosure, as well as options tailored to your specific situation.

What other options exist for avoiding “temporary” issues such as foreclosure?

Reinstatement is an option if you are behind on payments but can promise to pay a lump sum of money to bring your regular payments up to date by a certain date.

Forbearance – Payments may be delayed for a short period of time with the understanding that another option will be used later to bring the account current.

Repayment Plan – If your account is past due but you are now able to make regular payments, the lender may allow you to catch up by adding a portion of the overdue amount to a certain number of monthly payments until your account is current.

Partial Claim – If you qualify, your lender may be able to assist you in obtaining a one-time payment from the FHA Insurance Fund to bring your mortgage current:

You may be eligible if you are able to resume making full mortgage payments.
When your lender files a Partial Claim on your behalf, the US Department of Housing and Urban Development will pay your lender the amount required to bring your mortgage up to date. A Promissory Note must be executed, and a Lien will be placed on your property until the note is fully paid. The note is interest-free and is due when the first mortgage is paid off or the property is sold.

What is PMI?

When your down payment on a conventional mortgage is less than 20% of the purchase price of the home, lenders typically require you to obtain Private Mortgage Insurance (PMI) to protect them in the event you default on your mortgage. At closing, you may be required to pay up to a year’s worth of PMI premiums, which can cost several hundred dollars. The best way to avoid this extra cost is to put down 20% or inquire about other loan programs.

How does PMI function?
PMI companies write insurance policies to protect the top 20% of mortgages from default. This is determined by the requirements of the lender and investor, the loan-to-value ratio, and the type of loan program involved. In the event of a default, the lender will sell the property to liquidate the debt, and the PMI company will reimburse the lender for any remaining amount up to the policy value.

Could obtaining PMI aid in obtaining a larger loan amount?
Yes, it will help you get a bigger loan, and here’s why. Assume you have a $42,000 annual gross income, $800 in monthly revolving debts for car payments and credit cards, and $10,000 for a down payment and closing costs on a 7%-interest mortgage. The maximum price you can afford without PMI is $44,600, but with PMI covering the lender’s risk, you can now afford a $62,300 house. PMI has allowed you to buy 39% more house.

What is the cost of a PMI?
The cost of PMI varies depending on the insurer and the plan. In order to obtain coverage under a highly leveraged adjustable-rate mortgage, the borrower must pay a higher premium. Buyers who put down 5% can expect to pay a premium of about 0.78% times the annual loan amount, or $92.67 per month for a $150,000 purchase price. If a 10% down payment is made, the PMI premium drops to 0.52% of the annual amount, or $58.50 per month.

How does a PMI get paid?
Borrowers can pay the first year’s premium at closing, and then an annual renewal premium is collected monthly as part of the mortgage payment.
Borrowers have the option of paying no premium at closing but adding a slightly higher monthly premium to the principal, interest, tax, and insurance payment.
Borrowers who do not want to pay PMI at closing but do not want to increase their monthly mortgage payment can finance a lump-sum PMI premium into their loan. If the PMI is canceled before the loan term expires due to refinancing, paying off the loan, or removal by the loan provider, the borrower may be eligible for a premium rebate.

How does a purchaser apply for PMI?
Typically, the buyer pays for PMI, but the lender is the PMI company’s client and shops for insurance on the borrower’s behalf. Lenders typically deal with only a few PMI companies because they are familiar with their policies. This can be an issue if one of the lender’s prime companies declines a loan because the borrower does not meet its risk parameters. A lender may follow suit and deny the loan application without consulting with a second PMI company, putting all parties in an awkward position. The lender must be fair to the borrower while looking for the most effective way to reduce liability.

When did PMI begin?
The first large carrier, Mortgage Guaranty Insurance Corporation, launched the private mortgage insurance industry in the 1950s (MGIC). These early PMI methods were dubbed “magic” because they were thought to “magically” assist in obtaining lender approval on otherwise unacceptable loan packages. There are currently eight PMI underwriting companies in the United States.

Can I cancel my PMI?
The Homeowners Protection Act of 1998 established rules for automatic termination and borrower cancellation of home mortgage Private Mortgage Insurance (PMI). These safeguards apply to certain home mortgages signed on or after July 29, 1999, for the purchase, construction, or refinancing of a single-family home. It does not apply to FHA or VA loans insured by the government, or to loans with lender-paid PMI.

With certain exceptions (home mortgages signed on or after July 29, 1999), your PMI must be automatically terminated when you reach 22% equity in your home based on the original property value and your mortgage payments are current. If your mortgage payments are current, it can also be canceled at your request if you reach 20% equity, again based on the original property value.

Exceptions:

1. If your loan is classified as “high risk,”
2. You have not been current on your payments in the year preceding the termination or cancellation date.
3. If your property is subject to other liens.

Inquire with your lender or mortgage servicer about these requirements. If you signed your mortgage before July 29, 1999, you can request that the PMI be removed once your home equity has reached 20%. However, under federal law, your lender or mortgage servicer is not required to cancel the insurance.

What is FCRA?

The Fair Credit Reporting Act (FCRA) is intended to help ensure that CRAs provide businesses with accurate and complete information to use when evaluating your application.

Your rights under the Fair Credit Reporting Act are as follows:

• You are entitled to a copy of your credit report. The report copy must include all of the information in your file at the time of your request.
•  You have the right to know who received your credit report in the previous year for most purposes, or in the previous two years for employment purposes.
• If a company denies your application, it must provide the name and address of the CRA it contacted, if the denial was based on information provided by the CRA.
• When your application is denied due to information provided by the CRA, you have the right to a free copy of your credit report. You must make your request within 60 days of receiving your denial notice.
• If you disagree with the completeness or accuracy of the information in your report, you should file a dispute with the CRA as well as the company that provided the information to the CRA.
• Both the CRA and the information provider are legally required to reinvestigate your complaint.
• If your dispute is not resolved to your satisfaction, you have the right to have a summary explanation added to your credit report.