10 Things your clients need to buy a home

This is from a Blog that was posted on Trulia.com and a must read in my opinion:

Home buyers and -sellers alike often bristle with anticipatory irritation at the mere thought of all the paperwork they expect they’ll have to come up with to do their transaction, above and beyond the basic loan application, contract, disclosures and closing docs. And these worries start way in advance; it’s as though, before they even start visiting open houses, buyers begin to visualize – and dread – spending hours upon hours in the dank catacombs of the Vatican (à la Da Vinci Code) combing through ancient files, seeking some rare and precious artifact documenting their childhood dental history or genealogy.

In some respects, this vision of the experience of obtaining a home loan might not be far off – there are oodles of hoops through which to jump and, occasionally, the loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought – or sold. Here they are:

1. ID (e.g., driver’s license, state-issued ID, passport).  Who must produce it?  Buyers and sellers.  Why?  Uh, hello!?!  Lender wants to know that you are who you say you are, buyers, and the title insurance company wants to make sure, sellers, that you actually have the right to sell the home.  Funny enough, this commonly goes unrequested until you get to the closing table, when the notary requests to see it before signing, but some mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
2. Paycheck Stubs.  Who must produce it?  Any buyer financing their purchase with a mortgage.  Sellers, usually only in the case of a short sale.  Why? Buyers’ purchase price ranges are determined, in part, by their income. And short sellers have to prove an economic hardship.
3. Two months’ bank account statements. Who must produce it?  Buyers getting financing; sellers selling short. Why? Buyers’ lenders now require proof of regular income and proof that the down payment money is your own.  Short sellers?  It’s all about the hardship.
4. Two years’ W-2 forms or tax returns. Who must produce it?  Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
5. Updated everything. Who must produce it? Buyer/mortgage applicants. Why? Because things change, and because the time period between the first loan application and closing can be many months – even years! – on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements, checks stubs, and such – and its quite common for them to call your office the day before closing to request a last minute verification of employment!
6. Quitclaim deed. Who must produce it?  Married buyers purchasing homes they plan to own as separate property.  Married sellers selling homes that they own separately, or joint owners selling their interests separately.  Why? With the Quitclaim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the the selling owner, making it possible for the title insurer to guarantee clear, undisputed title is being transferred in the sale.
7. Divorce decree.  Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. Why? Again, to ensure that the seller has the right to sell.  Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
8. Gift letters.  Who must produce it? Buyers using gift money toward their down payment.  Why? The bank wants to be sure the gift came from a relative, and is their own money to give.  They also want the relative to confirm in writing that it’s a gift, not a loan – a loan would need to be factored into your debt load.
9. Compliance certificates. Who must produce it? Usually sellers, but sometimes buyers, by contract. Why? Some local governments require various condition requirements be met before the property is transferred, like some cities which require a sewer line be video scoped and repaired, cities which require a checklist of items be met before a certificate of occupancy be issued (usually relevant to brand new and really old homes, the latter of which are often subject to lead paint concerns) and energy conservation ordinances which require low-flow toilets and shower heads to be installed. Ask your real estate pro for advice about which, if any, such ordinances apply in your area.
10. Mortgage statements. Who must produce it?  Any seller with a mortgage. Why? the escrow holder or title company will need to use them to order payoff demands from any mortgage holder who has to get paid before the property’s title can be transferred.

By no means is this an exhaustive list.  

http://www.trulia.com/blog/taranelson/2011/03/10_pieces_of_paper_you_must_round_up_to_buy_or_sell_a_home

What You Need To Know About Proving Assets For A Mortgage

I cannot stress the importance of getting pre-qualified for a mortgage in advance.  If I were to give you an exact time frame I would say at least 2 months.  The biggest reason I say that is due to what is involved in proving the assets needed for closing costs, prepaid items, and down payment. 

In most instances we will want your 2 most recent mortgage statements however on a Conventional loan Fannie Mae & Freddie Mac really only need the most recent.  We will ALWAYS need all pages of your statements even if they are blank.  For example, if it shows pages 1 of 6, we will need all 6 pages even if page 6 is blank.  There are no ifs, ands, or buts about it.  This is not difficult. 

We don’t necessarily care about what is going out as much as we doing as to the monies coming in.  The only time we care about what is going out is if we see a debit of a loan or some type of debt that isn’t included on your credit report.

You will need to prove where all monies come from for your deposits if we are not able to determine where the monies came from.  For instance, we can obviously see a direct deposit from your employer or a transfer from one account to the next.   If we cannot determine what is we will need a letter of explanation and show proof of where it came from.  My suggestion is to NOT make any cash deposits or take any monies from someone personally unless it is going to be a gift from a relative.  Also, I highly recommend to NOT make any transfers between accounts until after closing.  It just simplifies the documentation process for everyone. 

Getting a mortgage in today’s environment is not difficult IF you are dealing with a mortgage professional who is going to give you all of the correct information and IF you plan in advance.  Make sure to set aside your most recent paystub, 2 years of tax returns both business and personal if applicable, and your 2 most recent statements statements for all assets.

Your Estimated Mortgage Payment

All too often I see estimates that borrowers get from other mortgage originators that have the taxes and insurance estimated way too low.  I don’t know about you but I don’t want to see the best case scenario.  I don’t necessarily want to see the worst case scenario but shouldn’t the mortgage professional be good at estimating what the payment will be?  You would think so.

In South Florida it is hard to estimate what the taxes will be since the first year or so are based on the seller’s current tax rate however we shouldn’t be concerned so much with what it will be for a short period of time but what it will be going forward.  Right now the tax rates are relatively low because property values have come down.  It is best to use 2% of your purchase price to calculate what your taxes will be once they are reassessed based on your purchase price.  If you want to be more accurate you can use Broward County Property Appraiser’s tax estimator, http://bcpa.net/TaxCalc.asp, but make sure to read the disclaimer because your purchase price may not be market value.  I tell all of my clients to make sure to call or email me with the address of the property that they are looking to purchase so I can put together a new estimate based on the seller’s current tax rate. 

The other tricky estimate is the homeowners insurance because it is going to depend on the age of the property, the age of the roof, if there are shutters, hurricane proof glass, etc.  You will want to make sure to get a wind mitigation inspection which costs around $150 to help reduce your yearly insurance premiums.  It is best to use 1.25% to 1.5% of the loan amount.  Even if you are not in a flood zone it isn’t a bad idea to have flood insurance so I would suggest adding another $400/year to your estimate. 

This shouldn’t be something you as a consumer should ever have to worry about if you are dealing with a mortgage professional but unfortunately sometimes you just don’t know who you are dealing with and if they are trying to make their estimate look good versus their competitors.  Be careful.