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9 Important Items Lender May Require For Loan Approval in California
Posted by intodoorsblog — December 17, 2020
Shopping for a new home can be exciting and daunting at the same time. Most serious home buyers look for a way to stay ahead of the competition by starting the process at the lender’s office, rather than an open house.
Prospective homebuyers who have a pre-approval from the lenders benefit in a variety of ways. For instance, they come in a position to discuss loan options and budgeting with the lending authority. Similarly, they get to fix issues that come across when the lender checks their credit history. They get to know the maximum amount they can spend on the house and spend it strategically.
As a homebuyer, you need to carefully plan the amount you’ll be spending on the purchase. Lastly, sellers expect homebuyers to show up with pre-approval letters. It not only shows your seriousness but also tells them that you are financially ready for the purchase.
But if you are serious about it, you need to make sure you follow the formalities in the right order. Every legal procedure starts with documentation.

To get pre-approved, you need to prepare the following items and send them over to the lender for loan approval.

1. A Complete Loan Application

The right step towards getting pre-approval is filling out the loan application form. If you are applying for a mortgage, you’ll need to provide all your details on the form. It will include things like your Social Security number to allow the bank to check your credit. Here, you need to know that if you are shopping multiple lenders, the combined credit checks count as a single inquiry. The main sections of the loan application form include the following sections:
  • Type of mortgage and Terms of loan
  • Information of the borrower
  • Employment information
  • Income and Combined housing expenses
  • Property information and Reason for taking out the loan
  • Assets and liabilities
  • Transaction details
  • Declarations
Once you have the application form ready, you need to attach all the necessary documents and send them over to the lender.

2. Borrower’s Authorization Form

The borrower authorization form is required by the lenders to make the process of credit checking smooth. Once you sign the form, you allow the lender to gather information about you using third parties. This form allows the lender to look into your credit information. It involves details about past and present employment earnings, stock holdings, and any other asset balances that are needed to process the mortgage loan application. The lender will use this form in places where the borrower’s signatures are required.

3. A Copy of Valid Driver’s Licenses and Social Security Card

Your driver’s license and social security numbers are relatively crucial to the lenders. The application form asks for these numbers, but you have to attach copies of these cards with it. All these necessary documents enable the lender to pull credit information. The more you cooperate, the smoother this process becomes.

4. Official Paystubs for 30-60 Days

Your paystubs are essential to the lender as they allow them to gauge your monthly income. Your tax returns (to be discussed) give them insights into your overall financial well-being, but the paystubs help them assess your earning. Self-employed people need to show income sources with the help of 1099 forms, direct deposits, and income proofs.

5. Last Two to Three Years W2s & 1040’s/1099s and Federal Tax Returns

Lenders want to wrap their heads around your entire financial situation. Therefore, you’ll need to show them your tax returns for the last two or three years. This makes sure that your income is consistent with the reported earnings through pay stubs, and there aren’t any huge irregularities from year to year. Form 4506-T enables the lender to request data from the IRS. However, if your profits are complicated, you would need a 1040 form. Similarly, if you receive income other than employment, you will need 1099s. While on the other hand, a W2 form is for people who are employees.

6. Official Statements of ALL Assets

The lenders start looking at your asset profile while assessing the risks. During this phase, they will need to see your bank statements and other assets. It includes checking account balance, insurance, investment assets, savings, 401K/IRA. Lenders generally require these documents to make sure you have reserve mortgage payments worth several months in your account in case of an emergency. They also examine that the down payment has been sitting in your account for several months and did not just appear overnight. Remember that this phase so vital that you shouldn’t leave behind any pages even if they are blank! Make sure to provide official statements as screenshots or browser prints might not work.

7. Forms for Veterans

If you are a veteran, you would need to attach documents of proof. For that, you’ll need the DD214 form. This form enlists all the details of your services. From reasons and dates of discharge to current classification. Similarly, as a veteran, you would also need to attach a Certificate of Eligibility (COE). This certificate verifies that as a veteran, you are eligible for a VA-backed loan.

8. Renting History

For first-time homebuyers, lenders ask for renting history to make sure you can pay on time. This mainly includes information about your past rental arrangements. Such as information about late payments, evictions as well as criminal history. You must provide rental history because they sometimes ask the landlord to provide documentation that you paid your rent, on time. If your credit history is not extensive, your rental history becomes fundamentally essential in that case.

9. Gift letters

Many times, your family or friends also help you buy your house by lending you money. In that case, you will be required to provide a document stating how you got the money, and the money is indeed a gift and not a loan. This document should include their relationship to you as well as the amount of the gift.

Other Important Documents You Might Need

All the documents mentioned above are necessary to get the lenders going for the pre-approval. On the other hand, there are some documents that you might need. For instance, if you are refinancing or you already own a rental, you will require you to attach your mortgage statement. Similarly, further information or records may be requested or needed to complete the loan process. There will be additional items required though-out the processing of your loan.
As a potential homebuyer, please make sure you provide all documentation promptly to avoid any delays with closing. If you are having trouble wrapping your head around the process, consider reaching out to Dream Home Finder! We’ll take care of things for you and guide you through each step of the process.
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About Author:
Anthony Haulcy

Award-Winning, Multi-Million Dollar Producing Real Estate Broker and Mentor to the Masses. 
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