In 2014, the Qualified Mortgage guidelines went into effect, requiring lenders to collect more paperwork to ensure that borrowers will be able to make their mortgage payments on time every month. Those who haven’t gone through the mortgage application process since 2008 may be surprised at the new amount of paperwork that is required. The good news is that most of this paperwork is fairly routine and common sense; much of it is in place to make sure that lenders are looking at the long-term financial stability of their borrowers, rather than simply making a quick profit upfront only for borrowers to default several years down the line.
The changes mostly have to do with the amount of financial paperwork needed. Here is a breakdown of what is now required to apply for a mortgage:
- Tax returns from the last two years. This shows that the borrower’s income is consistent.
- The two latest pay stubs from the current employer.
- The past two month’s financial statements – savings, checking account, etc.
- Written proof of the borrower’s employment and salary.
- Proof of insurance on the property.
- A signed contract stating the borrower is purchasing the property.
- A canceled utility or rent check if the borrower is a first-time buyer.
- A letter from anyone who is providing the borrower financial assistance with the down payment or closing costs stating that the funds are a gift.
- Any 1099 forms that the borrower has received from being self-employed.