Too Much Documentation, You Say?

By Richard Pisnoy

People tend to be surprised by the amount of information that’s needed from a potential borrower.

But when you think about it, it makes sense. Lenders want to make sure that the borrower will be able to pay back the loan.

I was speaking with someone last weekend and we were discussing the documentation requirements and he asked “Isn’t the collateral enough for the bank?”

The easy answer is no. Lenders are not in the real estate business and don’t want to be. They are in the lending business, period. They want to make sure that the borrower has enough income to pay for the loan along with all of their other liabilities.

They also want to see that you have enough asset reserves should you stop working or have a decline in income. From the lender perspective, this would give the borrower enough time either to sell their home or find another job.

The list of required documentation for a standard loan typically includes:

​ 30 days of pay stubs

​ Last two years federal tax returns (1040s)

​ Last two years of W2s (a self-employed borrower may not have these, but may supply 1120s, 1065s)

​ Last two months of assets statements

​ Identification

​ Copy of homeowners insurance and real estate tax bill (if applicable)

​ Existing mortgage statement if a refinance

​ Purchase contract

​ A smile

I know it’s seems like a lot. But keep in mind that if you were lending someone money, you probably would want to make sure that had the ability to pay it back.

During the process the lender will most likely want additional documentation. Don’t fret. These items will help you get the loan.

The best approach is simply to take a deep breath. The process does have an end. And it usually ends with you getting a new home or a lower rate.