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COMMON DOCUMENTATION NEEDED TO COMPLETE YOUR MORTGAGE APPLICATION The mission of FirstSource Capital is to help make the financing aspect of your home an enjoyable one. As such, we will advise you of the necessary items required to achieve loan approval. While the mortgage application process can sometimes be trying, being prepared is the best way to make the process easy. All documentation supporting your income and the available funds to close must be current (within 30 days) at time of approval and then again when preparing for closing. Depending on the construction period of your new home, we may need to request updated information 30 days prior to the closing. Therefore, please retain all supporting documentation during your home's construction period so that you will be able to provide it to the Processor or Mortgage Loan Counselor when requested. The supporting documentation requested from you is essential to properly validate all sources of income, employment history, credit issues and sources of funds that will be used to close on your new home. The following is a very general description of the type of information that may be needed in your particular situation.
THE DOWN PAYMENT GIFT FUNDS FROM BLOOD RELATIVE If you are applying for a HUD/FHA/VA loan, then the funds needed to close all may come from a gift. The gift must be from a blood relative only (i.e., mother, father, brother, sister, grandmother or grandfather). You must obtain a copy of the donor's bank statement and check from the donor's bank account and then retain a copy of the deposit slip into your bank account. This documentation will be needed 30 days prior to closing in order to verify the source of the funds used for closing and which accounts they come from. If you have applied for a conventional loan and over 20% of your down payment is a gift, we will need to document the gift funds in the same manner as mentioned above. If your down payment will be less than 20% of the purchase price of your new home, we must verify that the down payment is comprised of at least 5% of your own funds (e.g. savings). The remaining amount may be gift as from a blood relative and must be documented in the same manner as mentioned above. GIFT LETTER The donor of the gift funds must sign a GIFT LETTER (FirstSource Capital will provide the Gift Letter form), indicating that the donor does not expect repayment of the gift. IDENTIFYING AVAILABILITY OF YOUR OWN FUNDS AND THE SOURCE OF FUNDS THAT YOU WILL USE AT CLOSING: It is important that you list information regarding the availability and source of your own savings that will be used for closing the transaction. If you presently have documentation that will support all the funds needed, please enclose such documentation when completing the loan application (i.e., if you have bank statements indicating that all funds to close are available today, please provide a copy of your bank statements for the most recent 2 months. Note: all pages of the bank statements must be included). Note: If any increases in your account balance reflected in the bank statements you are providing are greater than the amount of one regular paycheck, please provide documentation to indicate the source of such funds. We will need to document unusual increases to your account balance in order to assure that any such increase did not result from an undocumented loan. Even though, at the time of application, you may not have all the money required for closing in your account, we will still need to receive copies of your most recent 2 month bank statements at time of application. In addition, you must provide an explanation of how you intend to accumulate the necessary funds to close since we will need to finalize this aspect of the transaction at least 30-days prior to the completion of your home. The following is a listing of the most commonly used down payment approaches. Please identify which one you plan to use. Notice that for several of these options you will be required to retain copies of documentation that will be necessary in order to validate this segment of the transaction later on in the process. SAVINGS MONEY FROM WEEKLY PAYCHECKS You must retain a copy of your bank statements indicating deposits for every month building up to the final amount needed to close. Please ensure that you properly calculate the timing of your deposits to achieve total funds needed by no later than 30 days prior to the anticipated delivery date of your home, since we will need to verify the final amounts by no later than 15 days prior to your scheduled closing. LIQUIDATION FROM RETIREMENT FUNDS You must provide information regarding your retirement account including the policy and procedure involved in retrieving these funds. Please provide a copy of statements indicating availability of funds. Note: you will need to liquidate these funds by no later than 30 days prior to closing and provide proof of liquidation to the Mortgage Loan Processor (copy of liquidation check or wire and deposit slip into your bank account will be required). SALE OF EXISTING HOME If monies for closing will come from the sale of an existing home, you must indicate on the formal loan application whether the home to be sold is under contract. If so, please provide a copy of the sales contract. If you become aware that amount you will receive from the sale of your existing home will be less than that which you indicated on your loan application, you must notify your Mortgage Loan Processor. The documentation that will be required either prior to closing (once you close on your existing home) or at the closing (if you close on your existing home the same day as on your new home) will be a HUD-1 Settlement Statement of that transaction, showing net funds due to you (as seller) and indicating sufficient funds available for the purchase of your new home. OTHER SOURCES OF DOWNPAYENT There are many other allowable sources of down payment that can be used. Listed above are just a few. We strongly recommend that you discuss the source of down payment that you intend to use for this transaction with your Mortgage Loan Counselor, since documenting this aspect of the transaction (at least 30 days prior to the anticipated delivery of your home) will be necessary in order to close on your loan.
INCOME DOCUMENTING YOUR INCOME (SALARIED INCOME) If you are a salaried employee, you must provide your most recent 2 pay stubs at this time, indicating your year-to-date earnings (pay stub must be most recent within 30 days of your application). Notice: If your pay stub indicates any deduction other than your social security, pension and/or tax deduction, you must provide documentation indicating the source of the deduction, such as, loans or other unusual deductions. Loans and other deductions reflected on your pay stub must be counted as debt against your income when determining your ability to qualify for a loan. COMMISSION, BONUSES, ETC. If 25% or more of your total salary is derived from commissions and/or bonuses we will need to calculate the average of both your total year-to-date earnings (as stated on your pay stub) and amounts earned in previous years (as shown on your income tax returns). We will need copies of your complete tax returns including all schedules, W-2s and/or 1099 statements, for the last 2 years in order to develop a monthly average of income. SELF-EMPLOYED If you filed as a self-employed individual, we will need complete tax returns with all schedules for the last 2 years. If you filed separate corporate returns, as well, we will need complete tax returns of corporation filing for the last 2 years. In addition we will need a complete audited year-to-date profit & loss statement from your accountant indicating the most recent financial condition of your business. OTHER SOURCES OF INCOME Any other source of income that is used for qualification purposes must be documented and show a trend of stability for the most recent 2 years. Proof of such income must be verified (please discuss any other form of income not specified here with your Mortgage Loan Counselor and prepare to provide supporting documentation that may be necessary). HISTORY, STABILITY & PROOF OF CONTINUED EMPLOYMENT AND INCOME We must document that your history of employment has been consistent for at least 2 years prior to your loan application. In order to do so, you must provide W-2s for the previous 2 years and/or tax returns if other sources are used for qualifying purposes. We must also establish that the income that was used to qualify is likely to continue for 3 years or more after the date of closing on your loan.
CREDIT EXPLANATION AND SUPPORTING DOCUMENTATION REGARDING CREDIT ISSUES AND/OR OPEN ACCOUNTS LISTED ON YOUR CREDIT REPORT We will order a full factual credit report on you from a credit-reporting agency. The credit bureau may contact you for an interview. The credit report will reflect your complete credit history. This report will be used to determine your ability to handle credit obligations. Depending on the information reflected on the report, you will have to assist us to document all inconsistencies and/or derogatory items listed, if applicable. If there are any recent credit inquiries from other credit companies you will need to address these as well by providing us with written status of these accounts. Note: The above should be used as a guide. The specific items needed for your loan transaction will be provided to you. We will need all documentation and information listed so that our Mortgage Loan Processors can package and submit your loan application in the most positive light to our underwriters.
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