Profit statement (if self-employed)
Self-employed borrowers may have to submit a current-year profit-and-loss statement, especially if the year is more than half over or they haven't filed their prior year's tax return.
In the midst of the housing boom a decade ago, many self-employed borrowers were able to get loans with little or no income documentation, but no more.
"There is no more 'stated income,'" says Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, California.
Proof of rental property income
Borrowers who include rents from investment property in their income need to show the income on their tax return. Canceled rent checks and bank statements showing those deposits might be OK if the property was purchased in the current calendar year.
Homeowners planning to buy a new home and rent out their current residence must provide a rental agreement, canceled rent checks and bank statements. They also must have at least 30 percent equity in their current residence. An appraisal might be required at the borrower's expense.
Proof that a gift isn't a loan
Borrowers who receive a cash gift toward their down payment should be prepared to provide a letter from the giver that declares the gift isn't a loan. A copy of the giver's bank account statement showing the funds, a canceled check and the borrower's own statement showing the funds also may be required.
These guidelines are much stricter than they used to be, especially for borrowers who want to get a loan insured by the Federal Housing Administration, says Metzler.
"It's not that big a deal, except that Mom and Dad don't like to give (their kids) a copy of their bank statement, especially if there is a lot of money in the account," Metzler says.
Other required documents
Renters must supply 12 months of canceled rent checks and bank statements showing the rent was paid on time. Renters without that documentation can provide the landlord's name and contact information for payment verification.
Borrowers also may be required to provide a copy of a divorce decree, proof of a child's age if child support is counted as income, bankruptcy discharge papers and more. Lenders also may demand letters that explain negative items on a credit report or verify the borrower's motivation for the loan, Miller says.
Loan documentation tips
- Bring in documents early. Doing so can speed up the process. Also, never cross out, white-out or alter any information on a document. "If you white-out anything, it's not a valid document for our purposes," Miller says.
- Always provide every page of every document -- even the pages that say "This page is blank." "They want that, too," Ogilvie says. "If it says 'page one of seven,' they want to see all seven pages."
- Finally, remain ready to supply updated documents. "Documents expire after 60 days," Blackwell says. "So if homebuyers take a long time in their house-hunting effort, we won't need the whole thing again, but they will have to bring the most current paycheck and that type of thing."