Mortgage lenders are required to follow the guidelines set up by the Federal Government, particularly the CFPB. The new regulations requiring additional paperwork and verification came about in direct response to the housing crash in 2008. Too many borrowers got loans for which they didn’t qualify. Many of them struggled to make their mortgage payments, sold their homes for a loss in a short sale, or worse went into foreclosure. While it may seem like a hassle to produce this documentation, it is required as a protection for the borrower as well as the lender so that we don’t have another housing crash.
In the wake of the mortgage crisis, millions of homeowners were forced to go into foreclosure. As a result, the banks had to take back ownership of their properties, which were often in disrepair. Lenders don’t like this! They want borrowers to pay their mortgages on time every month.
The paperwork verifies, as accurately as possible, that borrowers can afford the loan amount for which they are applying, pay their other expenses AND still be able to go out and have fun with a little bit of spending money left over, too!
Some of the documentation you may be asked for when applying for a mortgage includes:
- Legible copies of Drivers License or passport
- Paystubs covering the last 30 days
- Last two years of W2’s or 1099’s
- Last two years Federal Tax Returns
- Most recent two-months checking/savings statements
- Copy of divorce decree, alimony/child support order, bankruptcy documents (if applicable)
If you are planning to purchase a home, keep copies of these documents to make the process easier down the road. And, when you are within a few months of purchasing you should take the documentation to your lender and get a pre-approval this way when you do find your home, you will be half-way there with your mortgage!
Reach out today for more information or to start the pre-approval process.