If you’re like most buyers, you’ll need to obtain financing to purchase your next condo. Whether you’re buying a single family house or a condominium, your lender will need many of the same documents, however, there is extra documentation required when purchasing a condominium.
- W-2 FORMS – if you have a conventional job you’ll need to provide W-2 forms from your employer for 2 years
- PAY STUBS – you’ll likely need to provide pay stubs to cover the last 30-60 days
- BANK STATEMENTS – at least your last two months of bank statements (all pages, not just the summary page)
- TAX RETURNS – at least the latest year’s tax return, with all schedules included. If you’re self-employed, have a side business or own rental property, be prepared to provide two years of tax returns, both business and personal
- IDENTIFICATION – a driver’s license, passport or state-issued ID card
- PROOF OF LEGAL U.S. RESIDENCY IF YOU’RE NOT A U.S. CITIZEN – for permanent residents that means a green card. If you’re in the U.S. on another type of visa additional documentation may be requested.
- PROOF OF MILITARY SERVICE – if you’re a veteran and applying for a VA loan you’ll need your DD Form 214, Certificate of Release or Discharge from Active Duty
- BUSINESS TAX RETURNS – if you own a business or are self-employed you will need to document all the income you claim on your loan application and you may need to provide a profit-and-loss statement for the current year
- SOURCES OF FUNDS – if your bank statements include any large or unusual deposits you’ll need to verify where you received the money. If you sold stock or other assets, for example, you’ll need to provide copies of all the documents required to verify the sale and the proceeds received
- GIFT LETTER – If you received money to help with your home purchase, you’ll need to document it. Many first-time buyers receive gifts from family members. The lender will want a gift letter that will include information about the donor’s relationship to you, amount of the gift, date and purpose.
- ALIMONY OR CHILD SUPPORT – if you want to use those funds to qualify for the loan you may be asked for your divorce settlement as proof that your former spouse is paying regularly and verification that the payments continue for 2-3 more years.
- PROOF OF RESERVES – your lender will want to be sure you can afford to make payments once you’ve closed. Most will want to see enough cash to cover at least three months of payments.
- CANCELLED RENT CHECKS – If you don’t own another home you will be asked to prove you’ve paid your rent on time. That can usually be done with a verification form completed by a landlord or 12 months of cancelled rent checks.
If you are buying a condominium, your lender will also need to see a copy of the homeowner association resale certificate, perhaps some of the financials and a copy of the community’s master insurance policy.
The foreclosure crisis and recession brought about a number of changes in how mortgages are granted. The Ability to Pay Rule went into effect in January 2014. Borrowers now need to provide more documentation of income and assets so lenders can verify that you can, indeed, afford the house you are buying with the mortgage you want. Before you start your home search its recommended that you meet with a lender and be pre-approved for a mortgage loan. You’ll know exactly what type of loan program works best for your circumstances, what your interest rate will be and how much home you can afford to buy. If you get the paperwork out of the way before you find the perfect home, the process will go more smoothly and be far less stressful.