Homebuyers often have various questions regarding the loan process, specifically why they have to provide so much paperwork to coincide with their mortgage loan application.
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When you begin the loan process, your lender will ask various questions employment, finances, income, assets, marital status, etc. To complete your loan application, you will be asked to provide documents to verify the information you provided your lender with is accurate.
During the housing collapse of 2008, numerous lending practices were exposed that led to new standards and regulations for mortgage lenders in an effort to protect consumers from entering into loans they simply could not afford to repay. The government now demands that underwriting guidelines require lenders to determine more stringently that borrowers can afford the mortgage.
What You Can Expect to Provide
To complete your loan application, you will be asked to provide documents including but not limited to:
- Last two years W-2's and federal tax returns
- Last 30 days paystubs
- Last two months bank statements for all financial accounts (including investments)
- Evidence of alimony or child support (if applicable)
- Divorce decree (if applicable)
- Two-year residency history
- Drivers license and social security card
These supporting documents will serve to verify several aspects of your home loan, including affordability, employment status, income qualification, assets available for closing, non-traditional credit history, etc.
Your loan processors will review your application and documentation for errors, discrepancies and other items that may be required for your loan to reach full approval before your loan is sent to underwriting. Your loan processor works with your mortgage banker to compile your mortgage application and supporting documents to read like a story before submitting to underwriting.
Supporting documents protect you as a borrower and your lender, to assure you can afford your mortgage payment. While compiling documentation may seem like a hassle, each document required is of use in painting your total financial picture.
For more information about the home buying and financing process, download our free Mortgage 101 Handbook.