Why Does My Lender Need to Document Everything?
“What’s with all the documentation?” or “Aren’t my pay stubs enough? I make plenty of money and have more than enough assets!” Are common questions I hear from borrowers. You show us your paystubs, and then you get a mortgage, how great would that be?! We like to call it the “document drama” of today’s mortgage industry. It starts with just a general list of what to provide to your lender like a bank statement and a few paystubs, but in most cases it escalates to a much longer list of items needed such as a baby unicorn hair from England. Ok, ok, no we don’t really ask for a baby unicorn hair, but sometimes it can feel like we have asked for everything BUT that elusive hair. It may especially seem like an over-kill if you refinanced prior to 2008 when it was easier to get a loan.
A big reason lenders are stricter in today’s market, is because of the recent trend in the housing market. Many borrowers entered into loans they could not afford and the homes unfortunately went into foreclosure, which cost Fannie Mae, Freddie Mac, and other private lenders millions of dollars. Had documentation been reviewed prior to funding these loans, many of short-sales or foreclosures could have been avoided. This has led to stricter guidelines to ensure we have truthful borrowers who qualify for, and can pay back a loan. Not only is the lender protecting themselves, but it is also protecting borrowers from being stretched too thin. Now days you can expect a lender to ask for a lot of things from you throughout the process of the loan, the best thing to do is to provide exactly what is requested from you, as quickly as you can. If providing documents is something you don’t want to do, then you can more than likely expect to not get a loan. Below is a common list of what a Lender might request from you:
- Two most recent pay-stubs from your employer: they will need to have your employers name listed as well as your name and company address
- Recent bank statements: all pages of the statement will be required, and will need to reflect a full 30 day history. The full statement will be preferred over a screenshot. If a screenshot is provided, there is a higher chance of needing additional information.
- Tax returns: not always but often borrowers will need to provide these depending on certain criteria, it would be better to at least have these prepared and ready to send over if needed.
- W-2’s from most recent 2 years
- If you own any other property, either as a 2nd home, or a rental: we will need property tax, homeowners insurance and a mortgage statement, and HOA statements if applicable for ANY other properties you own other than your primary residence, not disclosing a property to your loan officer can create a delay in closing you on time.
- Drivers licenses
- Hand signed disclosures that will be provided by your Lender
- Purchase agreement (if purchasing)
- Homeowners insurance information
There are other conditions that may be requested subject to the information provided on your application or that arise after reviewing the initial documentation. As frustrating as it can be, just remember a Lender is requesting it for a reason. That reason may seem silly or unnecessary to you, but here at Box Home Loans we promise not to ask you for more documentation than we need. If we ask, then we really do need it. Our investors, Fannie Mae, Freddie Mac are requiring it from us. Rest assured that it annoys us as much as it does you! Keep in mind that by meeting the requirements to work with Box Home Loans, you are the cream of the crop, which means we will require less documentation from you than someone who has less than stellar credit.
And that’s just one of your rewards for great credit!