The Loan Process
How to speed up your loan
The best way to get to closing faster is to have all your documentation ready even BEFORE you start looking for a house. In order to compete for a home in California, you want to be sure you are ready, willing and able to pay. It could mean the difference between you or someone else getting the keys to the house. Sellers are being offered cash deals, and real estate agents don’t want to lose sales because they bring in buyers that can’t compete.
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Review the following to understand what lenders may ask for. Then let us pre-approve a loan for you.
Employment History
You'll need two-years of W2s. Years on the job translates to bonus points from lenders. They want to see at least two years of steady income in order to authorize most mortgages. While changing jobs may not hurt you, it's best not to have gaps in employment during that time.
Proof of Income (W2 Earners)
Regular W-2 wage earners may just need a bank statement and a pay stub. If you have other sources of income (e.g. child support), you may need to show 1099 forms, direct deposits, or other documentation.
Other Income
If you are self-employed or can't qualify for a loan based on on standard W2 earnings, lenders may also ask to see income from other sources, such as rental property, residuals, social security or income from other retirement programs.
Tax Returns
Two years of tax returns verify that your annual income is consistent with your reported earnings. Unlike pay stubs and W-2s, tax returns help to explain the entire story about your income, including what you write off. The general rule is if you're not paying taxes on it, the lender isn't going to allow you to use it as income.
Self-Employment Income
In addition to two years of personal tax returns, you may need to provide two years of 1099s; plus, if you own a business, two years of business tax returns including schedules K-1, 1120, 1120S, your business license, a year-to-date profit and loss statement (P&L), and balance sheet.
Government Issued Photo ID
This is an easy one. Just like with any other bank transaction, you'll need to provide proof you are who you say you are with a current passport or drivers license.
Cash Flow / Bank Statements
You''ll need bank statements for the past two months. Lenders are looking for any unusual activity that might red-flag recent loans or borrowed money in order to be able to qualify for a mortgage. Two is often the magic number because loans you take out beyond that period will have already shown up on your credit report.
Explanation of Cash Gifts
If you’re receiving the down payment as a gift, you’ll be asked to provide a gift letter as well as evidence of withdrawal and deposit. If it’s an FHA loan, the donor will also have to provide a bank statement showing the funds have been in their account for at least 30 days.
Equity Assets Documentation
Be ready to show verification of income from retirement accounts, stocks or mutual funds. If you are self-employed, proof of assets such as real estate holdings, and other investments will also be required. Valuables (cars, boats and jewelry, etc.) may also be considered.
Legal Documents
Do you have past bankruptcies, judgments, foreclosures, old tax liens or divorces? If lenders have questions about your finances, they may request additional documentation sometime during the loan process.
Rental History
If you don’t already own a home, many lenders will request proof that you can pay on time. They may ask for a year’s canceled rent checks (check that your landlord has cashed). Or, they might ask your landlord to provide documentation showing that you paid your rent on time.
Recurring Expenses
These include HOA/maint. fees, credit card debt, car payments or other debt with more than ten months left to pay (not including utilities). They also want to know about alimony and child support (for VA and FHA loans, these may be deducted from your income rather than being used in your debt-to-income ratio).