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Home Buying 101

Securing a Loan

Getting Organized and Securing a Loan

You worked hard to prepare yourself financially, and now you’re ready to buy a new home. Your next step: applying for a mortgage. And that means talking to a lender and submitting a significant amount of documentation. Sure, it can be time-consuming. But if you follow the necessary steps, you can avoid unnecessary frustration and possible roadblocks in the loan process.

After the housing bubble burst in 2008, many borrowers were unable to pay their mortgages. Many of them had secured “low-doc” or “no-doc” mortgage loans that required little or no documentation, which in turn meant that lenders were unable to verify their ability to repay the loan. This led to millions of foreclosures and a nationwide crisis.

Lenders have since overhauled their vetting process, tightening their standards and increasing their documentation requirements. These changes are all part of an effort to ensure that borrowers are fully qualified to borrow money without a high risk of defaulting on their loan. These days, it’s typical for a lender to require a borrower to have excellent credit, a substantial down payment, and two years of employment history.

When qualifying for a loan, you will need to provide proof of all assets you own, as well as information about any financial obligations you may have. Your lender will ask about auto loans, student loans, and even your credit card accounts—not because they are nosey, but because it shows what you, as a borrower, can comfortably afford to spend on your mortgage.

But don’t get discouraged by the tougher lending standards. Instead, get organized! While the required documentation differs from lender to lender, it’s likely that you might have to provide:

Income:

  • Two years of W-2 (wage) forms
  • A recent pay stub with year-to-date pay information
  • Contact information for all employers over the past two years
  • If you are self-employed, you may need to submit two years of tax returns and profit-and-loss statements.
  • You may need more documentation if your income is irregular or you receive government benefits, child support, or alimony.

Assets:

  • Non‐Navy Federal asset statements for the period covering the most recent past two months (or recent quarterly statement) for all assets you plan to use to qualify, including Checking, Savings, CDs, 401(k), TSPs, IRAs, stocks, bonds or other securities.

Liabilities:

  • Account, balance, and payment information for all obligations, including auto loans, student loans, mortgage loans, and credit card accounts

Special circumstances:
Additional disclosures may be required if you’ve filed for bankruptcy, sold your home in a short sale (or lost it in a foreclosure), or intend to keep your current home as an investment property.

Underwriting guidelines change over time, so don’t assume you won’t qualify for a loan even if you have a complex credit or homeownership history. For example, it’s still possible for many people to obtain home loans even if they had a poor credit rating or filed for bankruptcy in the past.

In these cases, disclose your financial history in detail to your lender and strive to provide the exact documents your lender requires. It may seem repetitive at times, but a failure to comply with your lender’s requests for documentation in a timely matter could lead to the delay or rejection of your loan application. Meanwhile, your favorite home could slip off the selling block.

Remember, it’s not just “paperwork”—it’s a vital step to getting you into that new home.