Today’s low mortgage rates may cause many to start thinking about refinancing. To keep your loan moving through the potential application traffic, it might be wise to gather the following documentation now for less problems locating this information later. For your convenience, we’ve summarized some of the most requested documents you may need during the loan process.
Proof of Income
Your lender will want to know if you have enough income for your new monthly payments, plus any out-of-pocket closing costs. They can do this by understanding how much money you make. That’s why it’s important to make copies of recent pay stubs from your employer (usually 30 days of pay stubs), as well as up to two years of tax returns and tax forms such as your W-2s and/or 1099s from current and past employers.
Your Total Assets
You will need to document your assets, starting with your checking and savings accounts. This will help verify the source of your down payment and the value of your accounts. Along with those statements, you will also need to provide statement copies for stocks, bonds, mutual funds, CDs, retirement accounts and other real estate.
Your Monthly Debt
Among the debts you will need to document are your current mortgage, credit cards, student loans, home equity lines of credit, vehicle loans and more. This is important information for your lender to determine your debt-to-income ratio, which measures the percentage of your monthly debt payments to your monthly gross income. In other words, will you have enough income to meet your monthly financial obligations?
While you will not be asked to submit paper copies of your credit reports, your lender will need to perform a credit check with your permission. It may be in your best interest to request and review your credit reports in advance of the loan process, that way you have an opportunity to correct any errors and avoid any misunderstandings with your lender. The three main credit reporting agencies are Equifax, Experian and TransUnion.
Your lender may also ask for a current appraisal of your home to help determine your loan-to-value ratio, an important calculation in comparing how much your house is worth versus how much you owe on your existing loan.
There’s always the possibility that your lender may request more (or less) documents that are unique to your situation. For instance, if you’ve been divorced, a divorce decree can indicate child support or alimony obligations. If you’re self-employed, your profit and loss statements for the current year can help establish proof of your income. And if you currently live in a condominium, your lender may want to see the Homeowners Association (HOA) fees you have paid.
You Have Document Copies in Hand … Now What?
If this all sounds too familiar, it’s because it probably is. Ultimately, you will be providing many of the same documents (just updated) as you did during your original home loan. But by preparing your documents early, you will take some of the stress out of refinancing. Once you’ve done that, it’s time to take the first step and contact us at New American Funding so we can help guide you on a path toward achieving your financial goals today.