Frequently Asked Questions What documentation will the lender require to process my loan? In most cases, the lender will require the following information: W2 for the previous two years Pay stubs for the last four payments Bank statements for the last two months (all pages) Employment history for the last two years. (Company name, address, dates of employment, income, position, etc.) If you are self-employed, you need to present: Tax returns and all schedules for the last two years Income statement for the current year If you receive Social Security benefit, you need to present: Annual Award letter Copy of check Bank statement showing deposit for the last two months If you receive Child Support, you need to present: Domestic Relations print out for the last twelve months Legal Agreement If you receive Alimony, you need to present: Legal Description Bank statements showing deposit for the last twelve months What if I am unable to find my W2 forms? You can contact the Human Resources office in your company. They keep copies of the W2 forms in their files. You may also contact the local IRS office in your hometown. What if I don’t have my Bank Statements? You can go to your local bank, and personally request a print out of your statement. This print out MUST include a bank stamp, and an authorized signature with employees’ title. What if I don’t have any money but I will be getting a gift from a relative? Most lenders need proof that money transferred to your account is truly a gift, and not a loan. In order for lenders to consider any money as a gift, they require the following documentation: Donor’s withdrawal slip Copy of certified check Deposit slip Gift letter from the donor What if I filed bankruptcy in the past? Lenders require the bankruptcy to be approved and discharged. You should have documentation, the Petition Summary and Discharge Letter, to prove that the bankruptcy was filed, and finalized. Most lenders require you to have re-established credit for at least two years after the bankruptcy was discharged. This means, that there should not be any late payments, collections, etc. after the bankruptcy. What if I never had credit before? Many times is better to not have credit than to have a bad one. Several lenders have special programs allowing individuals to obtain a mortgage loan even when no prior credit history is available. How much money do I need to purchase a home? There are many factors affecting the amount of money needed to purchase a home. For instance, are you using a conventional, VA, or FHA loan? Each one of these loans requires different down payments. Another factor is the lender’s fees. Some lenders charge some fees, others don’t. Some lenders charge slightly more for the same service than other lenders. Taxes also affect your closing costs. How much taxes are paid for the property? How much tax money will the lender escrow? As you can see, it is very difficult to give a precise amount without asking many questions. However, here it is a simple rule of thumb to remember. Generally, you need about 6% of the cost of the house for closing costs. To that, you need to add a 5% down payment if you are applying for a conventional loan, or a 2.25% if you are applying for an FHA loan. Let’s assume you are purchasing a house for $100,000, this is an estimate of how much money you need.                                        Conventional                               FHA Closing Costs:             $6,000 (6% of 100,000)               $6,000 (6% of 100,000) Down Payment:           $5,000 (5% of 100,000)               $2,250 (2.25% of 100,000) Total                              $11,000                                         $8,250 What if I don’t have enough money for the closing costs? Sometimes it is possible to finance some of the closing costs as part of the loan. You need to keep in mind that this possibility varies from case to case, and it is not guaranteed. This is a simple explanation of how it works. Let’s assume a house is listed for $100,000, and you are getting an FHA loan. Roughly, you will need about $6,000 for closing costs on a house that costs $100,000. When applying for an FHA loan, you can finance a maximum of 6% of the value of the house for closing costs. In our example, that means that you can finance up to $6,000. Let’s assume we present an offer for $100,000 and ask for $6,000 for closing costs. In this case, the owner is only getting $94,000. If the owner agrees, the lender will finance the entire $100,000, and MOST of your closing money will be covered this way. Let’s assume the owner does not agree, and he asks for $96,000 net to his/her pocket instead. In this case, we can proceed in two ways. First, we can keep the offer for $100,000 and ask for $4,000 for closing costs, and you bring the additional $2,000. The other option, in case you don’t have the $2,000, is to increase the offer to $102,000 and ask for $6000 for closing costs. Either option gives the owner the $96,000 that he/she wants. In any of these cases, however, the house MUST appraise for the loan amount. The lender does not lend more money than the value of the property. So, if the house only appraises for $100,000, that is the maximum the lender will consider. Even if you get to finance most of your closing costs, there are still some expenses that need to be paid up front, and therefore, you still need to bring some closing money to the table. Is help available for first time homebuyer? There are some programs sponsored by the city that provide economical incentives for the first time homebuyer. Many of these programs cover up to 100% of the closing costs. The agencies providing these services screen and qualify the potential homebuyers. Back to service list