What You Will Need
So, you’ve decided to go through with a USDA Home Loan. You’ve found the home of your dreams, and it resides within the eligibility criteria set forth by the USDA. What should you expect to have to make this process as easy and seamless as possible? Are you worried about what documents you’ll need to submit or how many paystubs you’ll need? In this blog, we’ll give some tips to help you go through the mortgage process as effortlessly as possible. While the mortgage loan process may seem daunting at first glance, we promise that it’s not as intimidating as you might think when it comes to USDA Home Loan Documents!
Asset Documentation: Overview And Bank Statements
In order to submit your file to the underwriter, you will need to provide the following USDA Home Loan Asset Documents: Bank statements and 401K or IRA statements. For bank statements, the underwriter requires the most recent 2 months or 60 days of bank statements to get an idea of money-spending practices and to identify any additional sources of income. Specifically for USDA, if there are any large deposits or several deposits, these will need to be sourced and explained with a large deposit letter of explanation and a copy of the source of the deposits. An example of a source for a large deposit can be a check copy, an invoice for work done, or a pay stub from work. The large deposit letter of explanation will need to explain exactly where the deposit came from, the date it was deposited as well as a clear indication as to whether or not it’s a source of income or a one-time deposit. This letter will also need to be signed and dated in pen by you.
Asset Documentation: What if I have 401K and IRA Statements?
For 401K and IRA Statements, these are typically only needed to show total assets and the possibility of reserves. If you’re submitting these documents, the underwriter will also require you to provide all pages of your terms and conditions of withdrawal. This information is usually found in the Plan Summary sent to you by your 401K or IRA account provider and the underwriter will need all pages of this document. While 401K or IRA accounts are optional, most borrowers will provide these accounts to show they can withdraw money during hardships to have reserves or to show a down payment for the home.
Income Documentation: Pay Stubs, Invoices, W2s and 1099s!
The primary way of showing the source of income is through pay stubs, invoices, W-2 forms and 1099 forms. The underwriter requires at least 30 days of pay stubs for multiple reasons: to confirm income reported by the borrower as well as to confirm the deductions. If you provide pay stubs which shows a deduction for child support, for example, the underwriter will need you to provide full documentation to support this. This includes divorce decrees that outline the terms of child support. If you are receiving child support, the underwriter will need the above and a year’s proof that you’re receiving child support to count it as income. You can typically request your divorce decree from your attorney, and the proof of income can come from the specific website from the state that shows child support payments. While there are some other one-off situations, where sourcing may be impossible, these can usually be overlooked with a proper letter of explanation. An example of this can be deposits from tips from working in a restaurant-type setting. If you have your own business, the underwriter will cross-reference the following items to show income: your 2 most recent tax returns, profit and loss statements, balance sheets, and 1099s.
While it may seem like a lot to acquire these USDA Home Loan Income Documents, most of this information is easily obtained from your employer. We recommend being prepared to explain most deposits that are not shown as payroll, and any extenuating situations as soon as you can, as this will prevent many additional stipulations from the underwriter on a conditional approval!