In our last blog post we discussed how to apply for an FHA loan including issues related to credit and getting pre-approved for the loan. Getting ready for your mortgage loan application takes time-you need to have 12 months of on-time payments for your financial obligations leading up to the application, and you need to check your credit report to make sure you know what the lender will see at application time. But what is required when you actually start to fill out the paperwork for the mortgage?
Credit, Employment, and Tax Data
The lender needs a variety of information to approve your mortgage loan. That includes tax paperwork-anticipate the lender asking for at least two years of tax documents and have them ready at application time.
Your lender will need proof of employment. Some of that will come from you, so be ready to give employer contact names, e-mail addresses, telephone numbers, and the physical address of your work place. Your lender will also pull your credit reports, but those reports cannot be sourced from the borrower, they must come from the three major credit reporting agencies.
Minimum Employment Requirements
FHA loan rules require the lender to verify a minimum of two years of employment for each borrower. That does NOT mean you have to work for the same company for two years. The FHA loan requirement in this area is designed simply to show the borrower has some form of employment that fits FHA loan requirements for two years total.
Borrowers who have changed jobs should be prepared to give the lender the names, addresses, phone numbers and other contact information for their past employers, depending on circumstances. If you have changed jobs several times in the last few years, this will apply to you. The lender may also require additional documentation that explains why the frequent job changes have occurred, but this would be done on a case-by-case basis.
Some borrowers require more paperwork due to the nature of their credit or employment. Small business owners and self-employed borrowers, for example, must be prepared to give the lender profit-and-loss statements, business plans, and other information that will help the lender determine the sustainability and success of the small business or self-employment venture.
Borrowers who have experienced bankruptcy will be required to show the legal documentation surrounding such proceedings, including discharge dates and other information. If you have a divorce decree, you may need to provide this paperwork, especially if there are issues related to previous home loans made during a legal marriage.
For all of these requirements, additional lender standards may apply. State law may also play an important part in how your loan application proceeds, depending on circumstances.