It can be a rather intimidating process.... Its funny the number of people who object to revealing their financial information.... even silly stuff, like blacking out the account numbers on their bank statements.... I mean, seriously.... They'll have no problem handing a personal check, which has the account number printed right along the bottom, to the clerk at the grocery store, but they'll go and black it out on the bank statements they're giving to the lender they're asking to lend them a quarter of a million dollars. (For the record, we cannot accept any redacted or altered documents). On top of all that, we have to make sure we're compliant with a chaotic maze of government rules, regulations, and federal laws.
But, as much as it is intimidating to you, do keep that in mind.... You're asking the lender to lend you a substantial amount of money..... And the underwriter who approves your loan is signing their name to the document saying "Yes, I evaluated this borrower and they're a good credit risk", so if we get it wrong, and haven't dotted all our i's and crossed all our t's, its our neck on the chopping block..... We're putting our professional reputation on the line, so forgive us if we seem a bit prying.... I assure you we won't ask for anything that we don't absolutely need to meet the agency documentation requirements. (I know it seems like we just come up with stuff that you don't need, but FannieMae and FreddieMac have pretty specific guidelines and specifications as far as how things have to be documented in the file.
Generally speaking, you want to provide paystubs showing at least 30 days of income, 2 yrs W2's, 2 consecutive monthly bank statements (and document the source of any large deposits in excess of 50% of your monthly income, with a complete paper trail.)..... i.e. if you say you cashed money out of your 401k, we can't just take your word for it, we need to see the 401k statement and see the same amount coming out of the 401k as the large deposit to your checking account. You can't just say "I had $5000 cash stuffed in a mattress"... Because there's anti money laundering laws that we're held accountable to.... We need to document you didn't deposit $5000 cash because you sold a pound of cocaine........ As far as your credit, we understand that sometimes bad things happen to good people.... If you've got a few dings on your credit, (minor stuff within the last 2 yrs) be prepared to explain what happened.... for anything more major, be prepared to explain what happened, and possibly provide supporting documentation.... ie if you had a foreclosure 4 years ago because you got in a car wreck and couldn't work for 6 months.... Be prepared to prove you were out of work for 6 months due to a car wreck.... The truth is always the best answer.... Nothing pisses an underwriter off more than being lied to. We're very intelligent people, and its honestly insulting the lies some people tell us, and think we're stupid enough to believe. Had one guy who worked part time 20 hrs a week as a sky cap at the airport, tried to claim he made over $10,000 in tips in one week (to explain a large deposit).... yeah, I don't know about you, but I tip the guy who takes my bags out of the trunk of the cab at the airport a couple bucks at best.... He'd have to pull in $500/hour in tips to make that kind of money... So of course that set off my "bullcrap detector".
The other thing oddly enough that I always run into.... For some reason when people apply for a mortgage, they get itchy to get a new car.... DO NOT do anything to your credit until your mortgage loan closes.... and I mean ANYTHING... Don't apply for a charge card at Kohl's to get 20% off, most definitely don't go new car shopping, don't get furniture or appliances on credit.... There's nothing you need that can't wait until your mortgage CLOSES (Lenders utilize undisclosed debt monitoring now.... If anyone pulls your credit during the loan process, rest assured, we're going to be alerted to it, and will then need you to explain and document any new accounts)... I can't tell you how many times we've had a loan ready to close, and got alerted that the guy went out and bought a new car, or bought new furniture and appliances for his new house, and now a week before he's supposed to close, no longer qualifies.
As for the bank statement thing..... His bank printed year to date overdraft fees on his statements.... So we get the June 2015 statement and it shows "Overdraft Fees YTD: $3,990.00".... game over, thank you for playing.
So, hope that helps you out.... Underwriters are nobody to be terrified of.... We're just ordinary people who have an extraordinarily difficult job to do.
As far a bank overdrafts.... Again, we're not unreasonable.... We understand that sometimes you mess up and overdraw your bank account.... So long as its not excessive, its not typically an issue.... Heck, I'm guilty of it myself.... I tend to be very busy, and I forget to write stuff down in my register all the time.... So I draw $20 at the ATM or forget to write down the groceries... and next thing you know, I've overdrawn my account.... I honestly came to the realization that I have no business having a checking account, because I forget to write things down... For that reason, I have a prepaid debit card that my paycheck is direct deposited to.... It offers an online bill pay feature, I don't have to write anything down and I can never overdraw the account.... I keep a checking account with a minimal balance in it, and if I have a situation that I NEED to write a check, I draw the cash off my prepaid debit card and deposit just enough to cover the check I need to write.... Its been a tremendous financial management tool for me..... Paycheck goes in, my bills are on auto pay and come out right on payday, and whatever's left is my spending money.... I can't overspend, I can't overdraw, I'm never late with my bills, I never carry cash, and I've got a record of everything I spend.
Dang! I am upset that I didn't know about that! Now I feel like applying for my next mortage in March next year lol but I will be homeless! One less LOE the better. I hate UW!!!
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