First Time Home Buyer’s Guide – Recommended Tips Before Applying A Loan: Part 2

For this second part of the blog, we will be talking about very commonly requested documents that can be gotten ahead of time. We’re hoping this blog post will speed up the process of the loan as well as to prepare first time home buyers for additional items that may be requested upon review of other documents. Some of these additional items the first time home buyer will need to request either from their employer or from other third parties.

Pay stubs are one of the few items that the underwriter may require to close a loan

Additional Income Documentation

As mentioned before, the first time home buyer may be required to attain some additional information from third parties. These can be pay stubs, W-2 forms, 1099 forms, award letters, and award continuance letters. As mentioned before, pay stubs are needed to source any large deposits on bank statements. However, the lender will still need the first time home buyer to send in the most recent thirty days of pay stubs. The underwriter will also be looking for additional information on those pay stubs. If there are any garnishments, for example, this will trigger the lender to ask for supporting documentation.

For example, if the garnishments mention tax or IRS, the lender will need the IRS documentation that illustrates the details of the tax lien in question. This letter will include how much is owed, the total balance, and how much each payment will be. Another garnishment example is child support. This takes a step into more legal documentation. The underwriter needs to know exactly where the first time home buyer’s income is coming from, and also exactly how much of that income needs to go to another third party. The underwriter will also need to know for how long this percentage of the first time home buyer’s income is garnished for as well, and will adjust the debt-to-income ratio accordingly. 

The underwriter will also need third party documents such as Social Security Administration Award letters, Social Security Disability Award letters, and Pension Letters to show that there is an income from a third party. These letters must be accompanied by, OR include the continuance of those benefits. The usual length of continuance that the underwriter is looking for is three years. The Social Security Administration award letters usually indicate that these benefits will continue for a lifetime

Garnishments on pay stubs will need to be sourced and explained.

Additional Legal Documentation That May Be Needed

There are several court-ordered documents that will need to be submitted with the first time home buyer’s file, if applicable. These documents are needed to properly source  any court-ordered agreements, child support and other possible sources of income or garnishment. For example, if a first time home buyer is receiving child support, the underwriter will need the following documentation: The full court-ordered Child Support Order, evidence of 12 months of child support payments, and proof that the child support will continue. The Child Support Order can be received from the attorney that helped with the filing. The attorney will also be in possession of the first time home buyer’s full divorce decree and separation agreement, if those items are also applicable.

 

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