Before lenders can give you a mortgage, they need detailed, verifiable information about your financial profile. April’s to-dos are all about getting your application materials in order, so you’ll be fully prepared when you find your home.
Are you aiming to buy a home in 2018? Whether you’ve already started doing your research or aren’t quite sure where to begin, we’re here to help you get home by summer. We’ve taken our best home buying guidance and broken it into bite size, monthly to-dos.
See the January to-dos: Know your numbers
See the February to-dos: Understand financing options
See the March to-dos: Mortgage rates and costs 101
Your April to-do list:
Gather your documents
Why do lenders need so much information?
Lenders are required to be risk-averse. Since a mortgage entails years of payments, we need to be sure your loan is affordable both now and later. While getting a snapshot of your current finances is a start, lenders also do their best to predict your future ability to pay.
For example, lenders will want to know:
- Not only your current salary, but also proof of your earnings
- Not only your overall income, but also the specific components (bonuses, commissions, etc)
- Not only your credit score, but also the type and amount of your other debts
- Not only the size of your down payment, but also the source of your funds
- Potentially sensitive information, like alimony payments (and legal documents to prove they exist)
Getting your documents in order, especially if there are any special circumstances in your financial profile, can help ensure that your application process goes smoothly and quickly – and that there aren’t any surprises regarding how much you’re qualified to borrow.
The documents you’ll need
At Better, the docs we need are pretty standard fare, but what makes Better better is our smart technology, which personalizes document requests based on your situation. We won’t ask you for stuff that doesn’t make sense, which saves everyone a lot of time and headaches. You’ll also have the option to link your bank accounts and upload your documents digitally.
Lenders will typically need:
- 1 or 2 years of personal tax returns
- 1 or 2 years of business tax returns (if you own more than 25% of a business)
- 1 or 2 years of W-2s or 1099s
- 1 or 2 months of bank statements
- Access to your credit score and credit report
- Proof of any alimony or child support payments
I've completed a refinance before through a "traditional" method, and the biggest improvement with Better was being able to see the entire process broken down into individual steps on the website - I'm able to upload individual documents and complete each step by itself, add comments to the documents if necessary, and see what else I'm missing.
- Shawn, Refinance in CA
More about income and your mortgage application
Lenders look at your employment income differently depending on your job’s pay structure. For example, base W-2 income is seen as stable (i.e. it’s the minimum your employer has pledged to give you). On the other hand, less predictable types of income such as commissions, bonuses, overtime pay, self-employment, RSU income, or part-time/seasonal employment are seen as less stable. Here are some resources to help you understand how your employment income will be considered:
- How your job affects your mortgage application
- Application tips if you’re self-employed
- RSU compensation and your mortgage application
- What lenders look for on your tax returns
See the May to-dos: Assemble your home buying team