You’ve read my blog answering the question, “Why does my lender keep asking for so much paperwork?” So, you know you will be asked for a lot of documentation when you apply for a mortgage. Since we’ve already established the “why,” now we need to address the “how.”
Follow the Paper Trail
The best rule of thumb is to follow the paper trail. What do I mean?
Let’s say you are getting a gift from a family member for the money needed to close on the purchase of your new home. Mom and dad cannot simply write you a check and call it a day. Your lender will need to see the paper trail. You will be asked to provide things like a gift letter from your parents stating the money is being given as a gift with no expectation of repayment, proof from them that they have the funds available to offer such a gift (e.g., their latest bank statement), and proof you have received the money, it has cleared your bank account, and is now on deposit and available to use (e.g., your most recent transaction history). If you are providing an online statement, it must show the URL on the top or bottom of each page and include at least a partial account number and your name. It makes sense, right? There must be identifying information tying the transaction history you have provided back to you and your bank account. Otherwise, I could provide a copy of my own bank activity and submit it on your behalf. See how the requirements prevent fraud?
Here’s another example. Let’s say you are asked for copies of your last two months’ bank statements. You provide screen shots from your bank’s phone app, showing your transaction history for the past two months. Nope. Not acceptable! You will be asked to provide all pages of your last two bank statements – front and back – even if some of those pages are blank. If there are any large deposits shown on your bank statements, you will be asked to prove where they came from and – you guessed it – provide that paper trail, too.
It’s worth mentioning that you cannot black out or redact any information you don’t want us to see. Trust me, I’m not looking at the places you’ve used your debit card. I don’t care where you had lunch or how many times you eat there during the week. Nor do I care if your ex-boyfriend is still on your bank account and you don’t want me to see his name. This is a judgment-free zone here, I promise. But you cannot black out information. Doing so is tantamount to tampering with “evidence.” You will be asked to provide clear and clean copies of documentation. (By the way, if your ex-boyfriend is still on your bank account, we will ask for an equal access letter signed by him stating you have full and equal access to the funds in the jointly held bank account and you may use them in connection with your mortgage loan application. Are we having fun yet?!)
Set Yourself – And Everyone Else – Up for Success
Quality loan officers will ask for everything that is needed upfront and smart borrowers will deliver exactly what they’ve been asked for quickly. Yes, there are some loan officers who make the process look easier than others by asking for very little upfront. But in the end, they – or their assistants or their processors – will come back and ask for the full package. It is what it is. Either you give everything to us early in the process or you give it to us later, either way we’re going to need it if you want your loan to close. The longer you wait, the less likely you will close on time. Personally, I prefer to ask for everything in advance. I’ve learned the hard way when you wait “until” or “if” something is needed, you run into trouble. Better for me to look at everything early and ward off any issues we may have downstream.
DON’T HOLD BACK INFO OR LIE. IF YOU SAY SOMETHING, YOU NEED TO BE ABLE TO PROVE IT
Keep in mind your closing package is prepared days in advance of loan closing. You don’t have up until the day of closing to provide something that’s been asked for. You need to submit it sooner rather than later, giving everyone time to process and underwrite the loan documentation. Waiting until the ninth hour is stressful for everyone: the lender, real estate agents, title companies, and you. You play a key role in creating a stress-free transaction and you can do it by providing any paperwork required in full and as early as possible.
Need financing?
Call 1-844-RENO-GAL or visit TheRenoGal.com.
Jennifer Goldsby, NMLS #591226
VP, Renovation Lending
Diamond Residential Mortgage Corporation NMLS #186805
Equal Housing Opportunity
Disclaimer: The postings here reflect my personal opinion. They do not necessarily represent the opinions of Diamond Residential Mortgage Corporation and its management.
