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Posted by Chris Burk on July 18, 2018
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Comprehensive List of Preapproval Needs

The smartest thing you can do before shopping for a home is get preapproved.  It is so important to work with a knowledgeable team of both realtor, lender and title.  This team guides you through the process to ensure a smooth, timely closing.  We thought it would be helpful to know what you will need to have available for your lender ahead of time. Chris Burk’s team would like to take the headache and unknown factors out of the preapproval and final approval process of purchasing a home or investment property by providing you, our friends, followers, and clients, with this comprehensive list of needs for the lending process. Preapprovals are good for a six-month period, so we request all our buyers to complete this process before we even start trying to find a home for them. This saves us time and our clients frustration from looking for a home that is not within their financial means.

Our team is mindful of the fact that all real estate transactions are controlled by “time is of the essence.”  So, after mutual acceptance of the purchase and sale agreement (PSA), we distribute copies to all pertinent parties to initiate the loan process. At this point you will be responsible for funding the earnest money, home inspection and appraisal. After submitting the earnest money check to title after the PSA is signed around, a home inspection will be completed. The following items should be known or in place before scheduling it:

  • Is the property on a well?
  • Are there HOA dues, and is there a transfer fee?
  • Is the property ready for appraisal (i.e., smoke detectors, carbon monoxide detectors, earthquake straps on the hot water heater, other)?
  • Are there any improperly permitted additions on the property?
  • Is the access a private road? If so does it have a road maintenance agreement in force?
  • Are there any special detail(s) about the sale?

The loan process is determined mostly by government guidelines, but it takes serious participation on your part.  Please keep in mind most loans close in about 30 to 40 days if you respond quickly with items needed. Appraisals are taking extra time (10-20 days) due to market conditions, so make sure the appraisal is ordered immediately after mutual acceptance to expedite closing. Below is a basic list of data your lender will need to begin the pre/final approval process.

  • Disclosures (sent to you by email) mostly completed by e-signature, although about 10 forms will need to be printed, signed and sent back to the lender immediately
  • W2s for last 2 tax years 2016 and 2015 (send 2014 if you have not yet received 2016); please include for all places you worked during these tax years and do not substitute tax returns for    W2’s
  • 1040 tax returns for last 2 tax years 2016 and 2015 (send 2014 if you have not yet filed your 2016 taxes) and Include all forms and schedules if any of the following applies:

-Unreimbursed business expenses reported on form 2106 or Schedule A

-Schedule C, self-employment

-Schedule E, rental Income (also include copies of mortgage statement(s) and evidence of insurance)

-Your income is commission based

-Your earnings, commissions, etc. are reported on 1099MISC (provide copies for the previous 2 years)

-You are employed by your family (also include copies of business tax returns if you also have an ownership interest in the business)

**If you owed money to the IRS or you are making payments, please provide proof of payment and/or agreed upon payment plan with the IRS.**

  • Business tax returns for the last 2 years 2016 and 2015 (send 2014 if you have not yet filed your 2016 taxes) with all forms & schedules (K-1s); please note that year to date profit and loss statements may be requested for all Schedule C and business tax returns
  • Paystubs covering 30 days from date of application (1 if paid monthly, 2 for semi-monthly, 3 for bi-weekly)
  • Two month’s assets (bank statements–all pages, even if they are blank or contain no pertinent information–for all parties’ accounts in the transaction)  Bank statements for most recent two months for all accounts or parties listed in the application (please include ALL pages as numbered on the statement(s)); additional documentation may be needed for the following:

-Large or unspecific deposits appearing on the statements

-Details of any insufficient funds charges appearing on statement(s)

  • Retirement statements (401ks, IRAs, etc.) for most recent quarter or prior 2 months for all accounts listed on your application (please include all pages as numbered on the statement(s)If you are using funds from retirement accounts for your down payment or closing costs); we will also need the following:

-Plan summary/terms of withdrawal

-401k loan request paperwork

  • Copy of ID’s

Your lender’s processing team will ask you where the money is coming from that you need for closing on your loan, so this guideline is extremely critical if you want to save time:

  • Verifiable tracking of all your deposits via checking or other accounts, especially large deposits (generally any amount exceeding 50% of your monthly income)

During this entire process, from obtaining preapproval through final funding of the loan on a mutually accepted PSA, DO NOT:

  • Purchase any large item that has to be financed, thereby influencing your credit score or flagging activity against your credit score
  • Quit a job or change positions that have been used to determine the preapproved financing amount

Finally and most importantly, you can only bring funds to close from the specified account that you provide information on during the loan transaction. Therefore, DO NOT:

  • Move money in and out of accounts that are being used to provide funds for the transaction, instead plan in advance and use only one account during the process Investors need to provide even more documentation, including but not limited to:
  • Copies of all monthly mortgage invoices
  • Copies of all insurance coverage for each investment property
  • Copies all leases for each unit within the investment property (income can only be calculated where leases are in place)

Depending on the timeline between preapproval and final lending disclosure, it will be necessary to keep the data provided up-to-date. Also each transaction is individual to the buyer, so the lender may ask for information not contained in this list.  Alternately, some of these items may not be pertinent to your situation, therefore, it will not be necessary for you to provide everything listed here.  Remember home ownership is an investment leading to the foundation of wealth building or financial stability.

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