Many people don’t know this, but the plot of the story “Around the World in 80 Days” was originally a tad different. In the Jules Verne classic, English gentleman Phileas Fogg and his French manservant Passepartout take a 20,000$ bet that they can’t traverse the entirety of the globe in a measly eighty days. In an earlier draft of the story, Jules had Phileas gambling that he could go around the world before his friend went through the tortuous, painstakingly long process of filling out his home loan application.
Okay, I’m completely full of it. Still, I know this is how some of us feel when going through the momentous amount of paperwork involved in filling out a home loan apps. In today’s blog post, I’m not only going to give you a checklist of what you’ll need to make the process go as quickly as possible, but I’m also including a few tips of mine to make the time seem as if it is passing faster. One man’s dream (home) is another’s nightmare; perception is key, after all.
Before you do anything, figure out how long the home loan approval process takes. Depending on who may possibly be providing the loan, this can be anywhere from a day to three months. If you leave it up to random chance, you may blow your chances, especially if you have a mortgage contingency clause. Let your lender know of your specific details in order to meet your deadline.
Be aware that you will have to prove how you got the initial down payment for the home you are attempting to purchase. If you are borrowing, you better believe that debt will factor into you interest rates and approval. If you’ve been saving the money you earn and pinching pennies, be prepared to show that as well. And don’t expect anyone to just take your word for a large sum of cash being a gift; you are going to need proof that Uncle Frank and Aunt Sally aren’t going to want that money back.
In Florida, the state does not allow mortgage prepayment penalties, thankfully. However, if you are interested in a home in another state, do some research to see the particulars of the area. Some lenders would prefer you didn’t get ahead of your mortgage payments and are unhappy if you pay off your loan early. See, this deprives them of interest, therefore making the investment less profitable, even if it paid off more quickly. In some states, if you pay off your debt too early, you’ll have to pay your lender a percentage, if not all, the interest which would have accrued. This is what is known as a mortgage prepayment penalty. Now you understand why I said thankfully we don’t have them in Florida!
Enough chit-chat though, let’s get to the meat and potatoes of this article. Without further ado, ladies and gentlemen, here is what you’ll need to gather for your home loan applications.
For starters, you’ll want bank statements for the previous two to three months. You’re going to want every page, not just the ones you think are necessary. You’ll want statements for all your mutual funds, bonds, stocks and any other financial assets. You’ll also want a copy of your latest 401K statement (or other retirement assets because they can count as reserves). If you’ve got any large deposits, be prepared to explain them as well. If you’ve got a home for sale, regardless if the sale has been completed, you’ll want a copy of your HUD1 Settlement Statement. If a large chunk of your cash comes as a gift from a family member or close personal friend, you’re going to need, at the very least, a gift letter from your financial lifesaver. You may also have to provide a copy of the check as well as the deposit receipt. Sometimes, you’ll even need to provide proof that whomever gifted you the big bucks has an ability to do so. This may seem like a lot, but let me assure you, fraud is sadly rampant in this world, and measures must be taken to verify people’s financial situation.
If you’ve been a good boy or girl throughout your life and have excellent credit, then this part of information gathering is going to be much easier for you. For anyone who may have had a youthful indiscretion or two, you’re going to need to explain away any late payments, credit inquiries in the last 90 days, charge-offs, collections, judgements, liens, or if you’ve filed bankruptcy anytime in the last seven years. If you’re currently renting, you’re going to need to provide your landlord’s name, address and phone number. Keep a copy of both your social security card and your drivers license (or state ID) on hand too.
Your W2 forms from the last two years, in addition to recent pay stubs covering the last 30 days. For those who are self-employed, have considerable income from capital gains or interest, make 25% or more of your income through commissions or bonuses, the past two years of your federal tax returns are going to want to be seen. This is especially true for those in a career with non-reimbursed business expenses. Additionally, self employed folks will need to provide a Year-to-Date Profit & Loss Statement. If you own 25% or more in a business, you’ll need the corporate or partnership tax returns as well. Retired individuals will want their Pension Award Letter and for those on social security, be sure to have a copy of your Social Security Award Letter.
You think I’m done listing off stuff you might need while applying for home loans? Think again, and think right this time. If you have already made an offer, you’ll want a copy of the purchase agreement. If child support is a part of your monthly/weekly income, be sure to include those documents and receipts. If you’ve received, or are paying, a settlement from a divorce, this will need to be disclosed (and proven) as well. If you are a current homeowner, you’ll need a copy of your most recent mortgage bill, a Copy of Note on the existing loan, and a copy of the HUD1 Settlement Statement for any existing loans. If you have a VA loan, you’ll need a copy of your DD214.
Yea, I know; that is a lot of stuff. Huge tracts of stuff. More stuff than you can shake a stick at. But it’s necessary, so let the paperwork hunt commence. Here are a few tips on how to make the process as painless as possible.
1. Don’t do it all in one day!
No matter how much you’ll have a desire to finish up everything as quickly as possible, pace yourself. Slow and steady wins the race, so channel your inner tortoise. Set aside a couplefew hours a day for this, and before you know it, you’ll be done.
2. Background Noise
Give your brain something to enjoy while you’re going through all this tedious work. Whether it’s music, repeat episodes or movies of something you’ve watched a million times (I can picture my daughter with The Office on in the background as I type this), and even podcasts can be great distractions. To me anyway, there’s nothing quite as maddening as having tons and tons of papers to track down while I’m in utter silence.
3. Healthy snacks!
The worst thing you can do to yourself is deprive your mind and body of proper nourishment while undergoing this most horrific of tasks. I suggest having a reward at the end of the rainbow planned, but eating as much fruit, nuts and vegetables during the actual process. Brain food will keep you firing on all cylinders, which will decrease the amount of time spent in labor.
4. Be a chatty Kathy
Catch up on gossip, call your brother in Cleveland you have been meaning to call, or share stories of the old days with good friends; if you can spend your time on the phone while you’re on the hunt, your time is certainly going to go by much faster.
5. Picture your dream house
When putting yourself through hard work, it’s best to imagine the reward of your labors. When everything seems to be too much, just remember how awesome life is going to be in your new home. Take a few minutes to breathe deeply and remember what all this work is going towards, a home for you and your family.
If you’ve got any questions about the home loan process, or real estate in Northwest Florida in general, feel free to contact me anytime, or even reach out to me on social media!