What will you need to buy your first home? Although most people arrive with a down payment, a pen, and a few paystubs, your mortgage broker might need a little more to lend you thousands of dollars. Here are two types of documents your mortgage broker might ask you for, and why they matter to your lender:
1: College Transcripts
The entire purpose of a mortgage approval is for your lender to understand your ability to pay back your loan. To gauge whether or not giving you money is a good idea, your lender will look at several different aspects of your life, but mostly at your job history. Unfortunately, if you have recently graduated from college, your first few years in the job market might look a little different than they do these days.
For example, if you didn't work full time during your last year of school, you might not have made as much that year. To show that you weren't just missing work to hang out at home and play video games, your lender might ask for copies of your college transcripts. These documents can be used to show that you were enrolled full time and that you were making good academic progress while you were in school.
Your college transcripts can also be used to help a lender estimate your ability to get a different job in the future, should you find yourself unemployed. For example, if you work as a mechanical engineer and you had excellent grades from a stellar university, your lender might be more willing to give you money, since your track record represents a highly intelligent, reliable person. On the other hand, if you took seven years to graduate with that Art History degree and you work as a grocery store clerk, your transcript might not work in your favor.
When you apply for a mortgage, understand that your college transcripts are fair game. To get a copy of these documents, contact your university registrar's office. By referencing your social security number and dates of attendance, you can get the documents you need ahead of time.
2: Letters of Explanation
Have you ever been the victim of an extenuating circumstance? Although life can get messy, your mortgage broker might have a tough time dealing with the fact that you took four months off of work, unless you can explain why. To account for difficult or unusual circumstances, your mortgage broker might ask for letters of explanation. These simple documents are essentially letters to your broker that clearly outline unique situations, so that they can make an educated, thoughtful decision.
Here are a few instances when you might need to provide a letter of explanation:
- Name Changes: If you have changed your name due to a recent marriage or personal choice, your credit report might list information for a few different aliases. To show your mortgage broker that you are who you say you are, and that the financial data is yours, you might need to write a letter of explanation regarding your name change.
- Rent: Have you been living with your parents to save money or do you work in exchange for rent? If you don't pay rent, you will probably be required to write a letter explaining why.
- Mistakes: Everyone makes mistakes, but a misdemeanor for stealing that college mascot uniform might make you look irresponsible. If you have prior criminal charges, be prepared to explain them to your lender.
As you write letters of explanation, keep your tone polite and professional. Don't be afraid to go into too much detail. When underwriters have a clearer picture of your life and journey, they might be more willing to lend you the money you need.
If you are looking for a home, do yourself a favor and track down your documents beforehand. Mortgages can be complicated, but by going into mortgage meetings prepared, you can speed things along while protecting your ability to qualify.Share