your home | documents needed
for Buying and/or Refinancing
If you're like most people, purchasing a home
is the biggest investment and one of the most
stressful endeavors you will ever make. Because
of the numerous factors to consider when purchasing
a home, it's important to prepare as best you
can. You will find a list below of suggested steps
to follow in purchasing or refinancing your home.
By trying to follow these steps it can help create
a successful and more enjoyable experience. Since
your home could cost you 20 to 50 percent of your
gross income, it's important to do your homework,
do research, and above all ask questions so that
you understand the process carefully.
Purchasing Your Home
1. Looking for a home. As a potential buyer
competing for a property, you'll have a better
chance of getting your offer accepted by being
as prepared as possible. It helps to put yourself
in the mind set of the seller when exploring these
Neither pre-qualified nor pre-approved
Imagine you're a seller in receipt of multiple
offers to purchase your property. A complete stranger
(buyer) is going to put an offer on the table
and is asking you to take your property off the
market for at least the next two to three weeks
while they apply for a mortgage. Now if you were
the seller, what type of buyer would you be more
inclined to want to deal with?
nor pre-approved Buyer
This buyer has no evidence that they can afford
to purchase your property. You may wonder how
serious can they be since they have not at least
been pre-qualified. Are they just tire kickers?
Are they just wishful thinkers?
This buyer has met with a mortgage broker (or
lender) and discussed their situation. The buyer
has told the broker gross income figures, monthly
expenses, and any assets or liabilities they currently
have. The broker may or may not have seen their
credit report. This buyer would then provide you
with a letter from the broker stating that based
on verbal income and expense numbers, given by
the buyer(s), this is the amount they would be
able to afford.
This buyer has either sat down or talked with
a broker and filled out a complete application,
provided a broker with current pay stubs, w-2's
to verify income, shown bank statements to verify
assets, and signed an authorization form to allow
their credit to be pulled. At this time the broker
is able to submit an application to a Lender for
a pre-approval letter, or commitment letter. This
process already gives the Lender much of the paperwork
they will need to complete the mortgage. This
buyer will probably be able to close quickly.
This buyer would then be able to provide you with
a letter (pre-approval certificate) from the lender.
As a seller this is as close as you can come to
being certain that this buyer can close.
am sure from the above scenarios; you can see
that being pre-approved affords you the best chance
of getting your offer accepted. This can be very
critical in a situation where a seller may have
Making verbal agreements. If you're asked
to sign a document containing instructions contrary
to your verbal agreements--don't! For example,
the seller verbally agrees to include the washer
and dryer, or the lawn mower, or snow blower,
into the sale, but the Purchase and Sale contract
excludes it. The written contract will override
the verbal contract. Some states require that
contracts for the sale of real property be in
writing. Do not expect oral agreements to be enforceable.
3. Choosing a lender just for the lowest rate.
While the rate is important, consider the total
cost of your loan including, loan fees, discount
and origination points. When receiving a quote
from a lender or broker, insist that discount
points (charged by the lender to reduce the interest
rate) be separate from origination points (charged
for services rendered in originating the loan).
The cost of the mortgage shouldn't be your only
consideration. Have confidence that the company
you select is reputable and will deliver the loan
with the terms and costs they promised. If in
the final hours of the transaction you determine
that the lender has suddenly increased their profit
margin at your expense, you won't have time to
start again with a different lender. Ask family
and friends for referrals. Interview prospective
Ask for a Good Faith Estimate. Within 3
business days after the broker or lender receives
your loan application, you must receive a written
statement of fees associated with the transaction.
This is both the law and the best way to determine
what you'll pay for your loan. Bring the Good
Faith Estimate (GFE) with you when you sign loan
documents. You should not be expected to pay fees
which are substantially different from those contained
in your GFE.
5. Obtain a rate lock in writing. When
a mortgage company tells you they have locked
your rate, get a written statement detailing the
interest rate, the length of the rate lock, and
6. Professional inspections. It is very
important that you get property, roof and termite
inspections. All this is usually done by a professional
Home Inspector. Inspection reports are great negotiating
tools when asking the seller to make needed repairs.
When a professional inspector recommends that
certain repairs be done, the seller is more likely
to agree to do them. If the seller agrees to make
repairs, have the repairs inspected prior to close
of escrow. DO NOT ASSUME that everything was done
7. Home insurance. Start shopping for insurance
as soon as you have an accepted offer. Most Lenders
require 12 months of pre paid insurance. Do not
wait until the last minute to get insurance as
you may run out of time.
8. Signing documents. Whenever possible,
review in advance the documents you'll be signing.
It's unlikely that you'll have sufficient time
to read all the documents during the closing appointment.
9. Allow and expect delays in the transaction.
In a perfect world, all real estate transactions
close on time. In the world we live in, transactions
are often delayed a week or more.
Refinancing your home
1. Refinancing with your existing lender?
Your current lender may not have the best rates
and programs. There is a general misconception
that it is easier to work with your current lender.
In most cases, your current lender will require
all the same documentation as any other company.
This is because most loans are sold on the secondary
market and have to be approved independently.
Even if you have made all your mortgage payments
on time, your existing lender will still have
to verify your assets, liabilities, income, employment,
etc. all over again. They will also require a
whole new appraisal, just like a new company will.
2. Do a break-even analysis. Determine
the total cost to refinance, and then calculate
how much you will save every month. Divide the
total cost by the monthly savings to find the
number of months you will have to stay in the
property to break even. Example: if your transaction
costs $2000 and you save $100/month, divide 2000/100
= 20 months. In this case you'd refinance if you
planned to stay in your home for at least 20 months.
If you are switching from an adjustable to a fixed
loan or from a 30-year loan to a 15-year loan,
the analysis becomes much more complex.
Get a written good-faith estimate of closing
4. Paying for an appraisal when you think your
home value may be too low. Most brokers and
Lenders require that you pay the appraiser directly.
Do not waste your money on a full appraisal if
you are not sure of the value of your home.
5. Using the tax-assessor's value as the market
value of your home. Mortgage companies do
not use a tax-assessor's value to determine the
value of property. They use an appraisal which
may be very different from the assessed value.
The appraisal is based on like property that has
sold in your neighborhood over the last 6 months
to a year.
6. Signing your loan documents without reviewing
them. Unlike a purchase which funds the same
day you close, a refinance has a cooling off period.
This normally lasts 3 business days and affords
you the opportunity to look over and read all
the documents you signed and ask any questions
that may come up. You also have the right to cancel
your mortgage before the 3 day deadline.
7. Provide documents to your mortgage company
in a timely manner. When your mortgage company
asks you for additional documents, provide them
immediately. They are doing what's necessary to
get your loan approved and closed. Delays in providing
documents can result in delays which may cost
you to lose your rate lock.
8. Get a rate lock in writing. When a mortgage
company tells you they have locked your rate,
ask them for a copy. The rate lock letter should
include the interest rate, the length of the rate
lock and details about the program.
9. Getting a second mortgage before you refinance
your first mortgage. Many mortgage companies
look at the combined loan amounts (i.e., the first
loan plus the second) when refinancing the first
mortgage. If you plan on refinancing your first
loan, check with your mortgage company to find
out if getting a second will cause your refinance
transaction to be turned down.
Needed for Your Loan
Buying or Refinancing
1. If you are salaried: provide two years W-2
and one month of pay stubs, OR if you are self-employed:
provide two years tax returns and a YTD profit
and loss statement.
2. If you own rental property, please provide
rental agreements and two years tax returns.
3. If you wish to speed up the approval process,
please also provide three months bank statements
for each bank, stock and mutual fund account.
4. Provide recent copies of any stock brokerage
or IRA/401K accounts that you may have.
5. If you are requesting a cash out refinance
please provide a letter explaining what you plan
to do with the proceeds.
6. If you are consolidating debt, please provide
copies of most recent statements for correct payoff
7. Provide copy of Homeowners Insurance, (declaration
8. Provide a copy of divorce decree if applicable.
9. If you are NOT a US citizen, provide us with
a copy of your green card (front & back),
or if you are NOT a permanent resident provide
us with your H-1 or L-1 visa.