Getting a loan often takes more work that you think. When you think that you have submitted everything necessary, there is often something that you missed. In many cases, the item that you missed is the most difficult to obtain. Over the last decade, lending guidelines have changed a great deal. Lenders are making sure that they dot their “I’s” and cross their “T’s” If they are going to approve your loan, there can be no question of how strong the application is. Even if you want don’t agree with the requests, the loan won’t move forward until you have all of the information that the lender is looking for. If you are planning to apply for a new loan, there are several items that you need to have in place before you get too far into the process. It is a good idea to know the most scrutinized items when applying for a loan in today’s market. You should know the 5 most scrutinized items for any loan approval.
1 Bank Statements
When it comes to having the money for your down payment and closing costs, you need to be able to prove that it was in the bank for a full sixty days before closing. When you send in your loan application, you will also need to send in at least two bank statements. If you have large withdrawals or large deposits, it can make things difficult. If you have any deposits over 500, the lender would need to verify them. You would also need to produce your canceled checks and you may need to write a letter explaining the source of your funds. If you have a bank account for several rental properties or if you combine your business and personal funds, it can create problems. When you are sending your bank statements you should consider what else you are going to need so that you can get a head start on gathering them.
2 Rental Properties
For every rental property that you own, there are several items that you will have to give the lender. Just a few years ago, you could simply supply a copy of the lease or a few rent checks. Today, you will need both of these items as well as a copy of your homeowner’s insurance statement and a copy of your tax bills. If your tenants pay in case, it can also create a problem. Many lenders would need to verify the rental income in order to count it as income. If there is a pattern of deposits, some lenders will accept this. If the amounts are staggered, however, it would be up to the underwriter to determine what can be used and what cannot. This varies from lender to lender, therefore, if you send your loan to three different lenders, you will likely get three different answers. The amount of rental income that can be counted also differs. Years ago, the standard number was 75 percent of the rent received. Today, some lenders will only count 70 percent while others will accept 80 percent. Before you get too deep into the application, you should get all of this information from the lender.
3 Tax Returns
It is good if you have leases on your rental property, however, you need to make sure that they match up with your tax returns. For every loan submission that you submit for investment property, you need to supply a complete tax return. Depending on your situation, this can mean that you need to send in 40 or more pages for just one year. If your tax returns don’t include all sections of your application, it will not be reviewed. The lender will likely use you adjusted gross income on your return as your annual income amount. If you are self-employed or if you have several rental properties, providing the necessary information can be a great deal of work.
There are many things that you cannot control that can create problems with your loan process. One of the major changes that have been made in the loan process is with the appraisal process. Also, how the appraisals are being ordered has changed. If you are going to be working with a mortgage broker, they will send your payment information to whatever lender they plan to use. The lender will order an appraisal and the broker will have no communication. This can be done with an out of area appraiser, which can lead to a dispute regarding the value. Today, the property appraisal is scrutinized more often than ever. If there is a discrepancy, you would need to pay for the appraiser to come back out to the property. It is very common to have appraisal issues drag out for weeks.
5 Closing Costs
Not every change that has been made in the loan process is negative. One positive change is how the closing costs are verified. Before a loan can be submitted, you would first receive and very receipt of the fee worksheet. You would need to be sure that the fees listed match with the final closing paperwork. This rule is in place to protect you from being charged any additional fees at the closing. If the fees don’t match up, the necessary changes would need to be made and you would need to wait an additional three days before you can close. You can now be confident that the deal that you originally agreed to is going to be the same deal that is put in front of you during the closing.
Rather than getting frustrated with all of the delays that not adhering to the loan requirements can create, you should be more proactive. You may think that these steps are unnecessary, however, they are important if you are gong to close your loan without any delays.