Online Finance Magazine

When shopping for anything, most people like to seek out the best deals and get the most they can for their money. Whether it’s a holiday, clothes or even groceries, nobody likes to be paying more than they otherwise need to.

But browsing for the best deals is perhaps most prudent when it comes to long-term financial commitments; make a wrong decision, and its possible the repercussions of this decision could last for years.

When looking to buy a house, it’s normal to shop around all the usual mortgage lenders to see who will offer the best deal. But of course, it’s always a good idea to know a little in advance about the different types of mortgages on offer, roughly how much can be borrowed and even which mortgage providers usually offer the best deals; narrowing down the search parameters at the start can save a lot of time and effort in the long-run.

Everyone will have different requirements from their mortgage deal. Many people will simply need a home loan agreement that has the absolute lowest monthly outlay possible in the short-term, and therefore would probably need the lowest rate of interest available and a 40-year mortgage term.

However, other people may need a more flexible mortgage to suit their lifestyle, which may include taking payment holidays and penalty-free repayments. These types of mortgages have huge advantages for people whose income varies throughout the year.

With a flexible or ‘lifestyle’ mortgage, people can make extra payments on certain months if they have more money than usual, or reduce their payments if they have had a bad month; indeed, payments can even be skipped altogether if someone is going on holiday or have been off work sick. However, borrowers will have to build up a reserve first through overpayments before being entitled to do this.

Similarly, people who are planning on buying a house to rent out would probably be looking for a specific buy-to-let mortgage, which usually offers slightly different terms to that of a normal mortgage. One of the immediate intentions of a buy-to-let mortgage is to create a steady stream of extra income from the property; this projected income can then be used as part of the calculation to establish how much can be borrowed in the first place. The one downside to such mortgages is that they often require slightly higher deposits, from anywhere between 15% and 25% of the value of the property.

But whatever type of home loan is required, it’s important to compare mortgages beforehand to ensure the best deal around is found; because once that dotted-line is signed there is no going back.

Indeed, a mortgage should be treated in the same way as any other product; shop around, research the best deals online and know the right questions to ask; after all, why pay more than is necessary?

Disclaimer: Matthew Pressman writes for a wide variety of commercial clients. This article is intended for information purposes only and readers should seek additional information before taking any actions based on its content.

Besides your credit score and the other five qualifications you must meet to finance a real estate mortgage loan, you need to gather papers and documents. Speed up your financing and make your life easier. Organize your papers into a three-ring binder or file system. You won�t need all of the documentation listed below. However, the more information you gather, the more likely you will be to get the best loan rates. Keep in mind that all of these documents may not be needed for all types of loans.

Documentation Required for Real Estate Mortgage Loan

Whether you want to buy your first home or many investment properties to build wealth, this checklist will help you save money on loan costs.

1. Proof of Income

Include copies of your last two pay stubs or other proof of employment and income verification. If you are receiving fixed income like trust income or social security, then include the beneficiary letter stating how much you get.

For self-employed, you will need to prove that you have been in the same line of work or business for two or more years.

If self-employed, show a copy of your business license for two or three years to show you have been in that business for at least two years. If you don�t have these, then show whatever you do have to evidence you have been in business for at least two years in the same line or business field. You may also ask a CPA to amend your income tax returns for the previous two years and then write a letter verifying that you�ve been self-employed for at least two years.

2. Tax returns

Provide tax returns for the last two years or at least the last two years of W2�s and/or 1099s if you don�t want to disclose tax returns.

If you�re self-employed, the mortgage company may require your personal and business tax returns for the previous two years and your company�s year-to-date Profit and Loss Statement. If you own a business, you may need a Financial Business Statement prepared by an accountant.

3. Bank account records

Gather your account numbers, address of your bank branch, along with checking and savings account statements for the previous two-to-twelve months. You only need the last two months� bank statements in most cases. Most lenders will only need twelve months bank statements when you are trying to get a “full doc” loan (with the best rates) instead of stated income for a self-employed individual. Talk to your loan officer about whether twelve months of bank statements will help you get a better rate.

Include all bank accounts, savings accounts, retirement accounts, and investment accounts. Include any account that you sign for, even if your spouse also signs on the account, and even if your spouse does not apply for the loan with you. Financial assets like these are considered important by lenders as a reserve, particularly now that property values are not rising as quickly.

4. Driver’s license and social security card photocopies

5. Proof of housing payments

Whether you own or rent, you must document your housing payments. Credit reporting agencies list mortgage payments. Provide copies of your mortgage statements or a copy of your lease agreement with twelve months� of checks showing rent payments on time.

If you rent your home from a professional management firm, they can verify that you have paid rent on time. If you rent from a private party, most lenders (though not all) will require you to show canceled rent checks for twelve months.

6. Major assets (other real estate owned, automobiles, boats, antiques, stocks, etc.).

You don�t have to include individual stocks if you own shares in a mutual fund or hedge fund. Just provide the latest fund statement. Include vested cash value of whole-life or universal life insurance policy, if any. (Cash value is not the same as the face value. Cash value is what you would get from the insurance company right now, if you surrendered the policy while still alive.) If there are antiques or other collectibles, provide only the total collection value; you don�t have to itemize.

7. List of debts (car loans, furniture loans, student loans, and credit cards)

Even though the debts will be on the credit report, you must be aware of all of your debts so that you can tell if the credit report has mistakes. Include any debts that you have co-signed for, like when you co-sign for a child�s car.

8. Divorce settlement papers, if applicable, no matter how far back in time

9. Delinquent or inaccurate debts or credit report items

If you paid a collection, judgment or lien (especially a tax lien or other lien against your house), include proof of payment.

10. An irrevocable gift letter if you are receiving a monetary gift from a relative.

11. Purchase agreement (for new purchase).

Provide a copy signed by both parties, including all the signed disclosures.

12. Items needed for a refinance

Furnish copies of your note and deed of trust, home insurance declaration page, copy of your last property tax bill.

13. If you own investment real estate in your name, you need rental leases for each of your properties, plus the items listed in #12 for each of your properties.

14. Bankruptcy

Supply all pages and schedules for any bankruptcy filing within the last seven years, and the discharge sheet, for any type of bankruptcy (Ch 7, Ch 11 or Ch 13). Bankruptcy must be discharged before the date of the loan application.

Preparation Leads to Financial Freedom

Talk to your loan officer to see which documents you need to copy and send. Prepare your credit and your real estate mortgage loan documents so you can buy your dream home and even multiple investment properties.