Mortgage Document Checklist For Buying A House
https://www.youtube.com/watch?v=ClzVzDmEpi0
Summary
What documents do I need to get ready for pre-approval? Okay, so that was a question that I got today that I thought was a really good one. It's one that we don't talk about enough because I'm just like, I've done that video before, so I feel like everyone knows. But here we go.
What documents do you need to get pre-approved? Well, okay, the basics are this: If you are a W-2 employee, we're going to want two years' worth of W-2s and we're going to want one month's worth of your most recent pay stubs. Okay, that's if you're salary, W-2, you know, not hourly. Now, if you're hourly, we're gonna want two years' W-2s as well as your two most recent pay stubs.
Now, if you're hourly, generally, you get overtime, so I'm also going to be looking for the last pay stub from the prior year. Okay, and the last pay stub from the year prior. I know, so you don't have to get this to us, but whenever you're an hourly employee, we're going to be doing a verification of income. We do that with all loans, anyways, but it's really important on hourly. But if I'm trying to figure out your income quickly, if I get those pay stubs from the end of the last two years, it will show me how much overtime you had because most pay stubs have year to date. So, if I'm looking at the pay stub that goes through the end of December, I can see, okay, this is how much overtime they got in 2021, this is how much overtime they got from 2020. So then when I'm trying to calculate your income, I can do it a little bit quicker than waiting to get that verification of income from your employer.
So if you have easy access and you're an hourly employee, I would suggest that beyond the pay stubs and W-2s, you get those extra steps. Okay, if you can't get it, no worries, we're going to do a verification of income anyways because we fully underwrite every file. But guys, if you're working with a lender that's not going to do a full underwrite, you need to be a little bit concerned if you've got variable income. Okay, and that's what it is.
Now, if you are part-time, same thing, you know, same thing as an hourly employee. I've got to try to figure out how many hours you're working on average. I need a two-year history in order to average. If you're like, well, I was only working like 20 hours a week in 2021 and 10 hours a week in 2020, and now I'm more like 15 to 20, I'm gonna be doing a two-year average. I don't care where you are this month; it doesn't matter unless it's lower than the average. So if I do your two-year average and it's lower, then that's a problem. Okay, so definitely pay stubs are going to be important. Do I want you to send me two full years of pay stubs? God, no, please don't. No, the end of your pay stubs will show us what we need to do that average. Okay, but once again, if you can't get it, we will get a verification of employment and ask your employer to break it down.
Okay, so that's important. Now, let's go to other types of income: self-employed. So, self-employed, I'm gonna want two years' most recent of your personal tax returns. If you filed a tax extension for 2022, I'm going to need that tax extension as well. So two years personal, plus the tax extension. If your business has separate returns, I'm going to want two years of business statements as well. So really important that you guys know that. Sometimes, I'll hear people go, well, I own the business, but I W-2 myself, so don't you just need W-2s? No, you own the business, so if you own the business, those business tax returns are coming to the party, period. I don't care if you W-2 yourself. I don't care how you structure it; they're gonna end up at the party. So, unless you're a very small owner in the business, at that point, they may not, but if you're 100% owner, if you're over 25%, we're going to be asking for those business tax returns. Very important.
Now, that's the main documents that we need when it comes to income. Now, of course, it can get there. There can be more documentation that we need based on your specific, uh, situation. So, some people get what's known as K-1 income. So, in that situation, we're going to need the K-1s, we're going to need additional information. We don't expect you guys to have this already, ever, really. What I like to do is I like to have a basic conversation with someone, have them fill out our online application, run it through the system, and then see what documents are required. Because sometimes, I don't need two years' W-2s; I might just need one year. Sometimes, I don't need two years' tax returns; I might just need one year. A lot of the way that underwriting of loans is done now is electronic, and sometimes we will get documentation breaks.
Okay, but if you guys want to be super prepared, just have this stuff stacked up and ready to go. However, do not send it to us unless we ask for it. If I only need one year's W-2, that's all I want. Do not try to get extra credit by sending me two; it can actually hurt you sometimes. So always make sure the lender, you are only giving us what we need. Do not give us extra because the extra is just something else the underwriter has to analyze, and it can affect your ability to qualify sometimes. So please, just give us what we ask for specifically.
Okay, assets, okay, assets. Let's talk about that. Um, sometimes I'll get pushback; people will be like, well, I'm like, we'll have files where I'm looking at it, and I'm like, they don't have any money. Like, how are we gonna do this? And my team's like, yeah, I like, I asked them if they had more assets, and they said no, and I'm like, okay, like, how are they gonna put down 20% if I only have a bank account with 5K? And then I call the borrower, and I'm like, hey, like, what's going on? What accounts are you not telling me about? And they're like, oh, I didn't want you to know about all my money. Okay, guys, I have to know about your money. I don't care about all your money, like, but if you're putting down 20%, I have to be able to show that you have 20%. Um, if you're, you know, going to be paying for your closing costs, I have to show that you have money to pay your closing costs. Now, do I need every single bank account you've ever had? Absolutely not. Like, when I apply for a loan, I have one account that I use, one account, one account. That's not fair; I have two. I have one account that I use where my down payment's coming from. Okay, generally, it's gonna be a savings account that doesn't have a lot of transactions. It's gonna be very clean. So I've got my savings account for my down payment and then for my reserves, right? And not all loans require reserves; certain loans require reserves, meaning extra money in the bank. So I know that the loan that I'm gonna, I live in California, like, if you live in California, you're most likely getting a jumbo loan. With a jumbo loan, I need reserves. So I have ready to go, my 401k, right? That shows that there's money in there, and another savings account. So I've got that lined up and ready to go. Do I include other accounts? No, no, no. Like, do I include my Capital One account with three hundred dollars? No, I don't. Okay, so that's what you guys want to think about. Because sometimes, people are like, well, I gave them everything, and I'm like, okay, you guys just gave me an account that shows that you're overdrawn. And they're like, well, I don't really use the account; that's why it's overdrawn. I don't pay attention to it. I'm like, don't send it to me, then. Like, if you guys are not going to use the account in the transaction, if it's not something where I'm saying you need reserves, or I need more money, don't give it to us. But at the same point, make sure you show us enough so that we can say, like, yeah, they got the money for 20% down.
Okay, so when it comes to assets, we're going to be looking at doing it two different ways. So, our application, our digital mortgage, has the ability to pull your assets electronically. Yeah, it's kind of cool. So, basically, you can fill out your app, and then it asks you for your passwords, and you're like, "Oh my God, what in the world?" Like, I know, trust me, when I first did that years ago, I was like, "Oh my God, I'm gonna get hacked. This is terrible." No, it's done through a third-party company. It's totally securitized. Guaranteed Rate, like, I don't have access to your passwords. I mean, figure, I would never, but I don't have access. My company doesn't have access. It's done through a third party, which is totally securitized.
Anyway, they can electronically verify your assets. That's what all major mortgage companies are doing now. It's very common. I don't know if ours is through Plaid, um, but I think it's something similar to Plaid, if it's not Plaid, if that means anything to you guys. So, we can verify electronically, but then if you're like, "Oh well, my credit union doesn't," or "I'm not comfortable with that," which is okay. Like, if you're not comfortable with something, we will do everything we can to make you comfortable. Sometimes new technology can feel really uncomfortable. Like, I've been there.
Like, I remember when I first was like, I don't want to put in my palette. I feel you so much. So, you also have the ability to give us two of your most recent statements. So let's say you're using a Schwab account and you're using Bank of America. Okay, I just need your two most recent statements, all pages. You can easily download those online as PDFs and upload them. Um, easy peasy. Like, and sometimes people are like, well, I don't understand tech. Guys, if you don't understand tech, my team can walk you through how to do it. Okay? And I have had people who really don't deal with tech at all, and by the end of the transaction, they're so cute because they're helping their friends. They're like, no, no, you just go to this page. Chrissy showed me, right? Chrissy always is the one that has to show PDF, you know. So, it's really easy to learn. We're happy to help you guys if you get stuck. Like, we never want you to feel like tech is a barrier.
Um, so yeah, two most recent statements, all pages, and if you're old school, you can fax it to us too. Yeah. Um, okay, so let's see here. If you guys own a house, I'm going to need your most recent mortgage statement. I'm also going to need your homeowner's insurance deck page, which shows what you pay, and I'm going to need your property tax bill. Okay? So that's if you own a house that you're not renting. If you own properties that are rental properties, I'm going to need all of that. I'm also going to need a copy of the rental agreement.
Okay, so you're like, oh my God, it's so much documentation. Guys, it's really not. Here's what I'm looking for as a lender. What I'm looking for is, I have to be able to prove your income is what you've stated, and if it's not what you've stated, we just fix it to show you, like, hey, this is how we look at it. Um, and then I have to be able to prove that your liabilities, so, you know, you're saying the house on XYZ road costs you two thousand dollars a month, well, then I have to show that it costs you two thousand dollars a month. So we're just compiling all the evidence so that everything you've said is accurate.
Okay, um, what else would I do? Okay, so one thing I tell people to do a lot is, sometimes people will, they'll have work situations where, like, maybe they've jumped through a couple of jobs in the last two years, and I'll have them do a letter of explanation that just says, hey, you know, I was working at XYZ for three years. I got this great opportunity from this other company, but then they weren't what I expected, so I ended up at this company, and then I ended up at this company. Now I'm at this company where I'm very happy.
Okay, so a lot of times people go, oh, I jump too much, I'm in trouble. It's not an issue of being in trouble, we're just trying to show some level of job stability. And what we see a lot of is we see that an employer will dangle a carrot for someone to come work there, and then they'll go there, and they'll find out it's a pack of lies. We see it in mortgages all the time, like, that is actually a huge thing in the mortgage industry. You guys should see the carrots they dangle at us. Oh my God, they're glorious, but then, you know, bite into the carrot, it's rotten, it's right into the core. So anyway, that can happen, and we understand that. So, doing a letter of explanation can make sense, you know, if you're, um, self-employed, there's a lot of situations where a letter of explanation can make sense.
And if you're wondering, like, well, I'm not gonna know that. Yeah, I don't expect you guys to know. Um, so if you're concerned about something, you know, call me and be like, hey, Jen, here's my situation. I'd be like, yeah, I'd write a letter, like, here are the questions I would be curious about if I was looking at your files as an underwriter. And the key is, you just want to make sure that anyone who looks at your file, if there's something unusual or it doesn't quite make sense, that you have a letter that explains it. That's it. So really, there's not a lot of documentation.
Um, what I'll hear sometimes is like, oh well, you know, the list didn't say this. Well, guys, sometimes, like, look, you could get all this stuff together, I could still ask you for more because I could look at some of your documents and go, like, for instance, with your bank statements, I could say, hey, what's this $10,000 deposit on XYZ date, right? Large deposits, we have to get additional information on. There's a lot of guidelines that can lead to us asking for more documents, but that's part of the reason I love the full underwrite process that we do so much is because we do all of this before you're in contract, before you're stressed out. We jump through all the hoops together, you know, we make sure your file is bulletproof. Um, and we do that so that you're not in a position where you're in contract and, oh my God, I have to get it, and they're asking me for more paper. Oh.
Um, it is rare that we see those situations where we have to get more and more and more, but I have to say, there are files where it's like an onion, and you just keep on peeling back the layers, the layers, and like, you get one document, and then you need another one, and you look at that when you're like, oh God, I need another one to explain that one that explains that one, and it is a little bit like, you know, peeling back that onion. So, that is the exception, I would not say that you should expect that in your mortgage journey. What I see more often of is there's a lot of stuff that can be done electronically, and we do as much as possible electronically. Our company's goal is to bother you as little as possible, okay? If there's something we can verify electronically and not bug you, we're going to do it, okay? But a lot of times, we need your participation, and we do need documents.
So those are the documents I'd get ready. If you're self-employed, definitely have your taxes ready. With the rental properties, I'm going to want taxes too because I've got to see how you're treating that rental income, you know, if you're like, oh, I have a lease, but it doesn't show on my taxes and I've been renting it for five years, that lease means nothing to me. So, remember, we're using all these documents to verify your claims.
So, I hope this was helpful. As always, questions or comments, please, please reach out. I am licensed in 48 states to do mortgages, and I am happy to help you. Thanks.