Mortgage Basics

A mortgage is a type of loan used to purchase or refinance a home. With various mortgage programs available, potential borrowers can select the option that best meets their financial and housing needs. Finding the right mortgage broker is essential, as they facilitate connections with lenders and guide you through the mortgage application process, which begins with filling out an application form.

When applying for a mortgage, several standard documents are required for approval. One of the most critical factors in securing a mortgage is your credit score, along with your income and other financial considerations that lenders evaluate before granting approval.

Mortgage Application Checklist

Below is a comprehensive list of documents typically required when applying for a mortgage. Keep in mind that every situation is unique, and additional documentation may be necessary. Promptly providing any requested information can help expedite the application process.

Your Property

• Copy of the signed sales contract, including all riders
• Verification of the deposit made on the home
• Names, addresses, and phone numbers of all realtors, builders, insurance agents, and attorneys involved
• Copy of the listing sheet and legal description (if applicable; for condominiums, provide the condominium declaration, by-laws, and the most recent budget)

Your Income

• Copies of your pay stubs for the most recent 30-day period and year-to-date
• Copies of your W-2 forms for the past two years
• Names and addresses of all employers for the last two years
• Letter explaining any gaps in employment over the past two years
• Work visa or green card (copy front and back)

If self-employed or receiving commission, bonus, interest/dividends, or rental income:

• Provide full tax returns for the last two years, plus a year-to-date Profit and Loss statement (include all schedules and statements; if you filed an extension, supply a copy of the extension)
• K-1’s for all partnerships and S-Corporations for the last two years
• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) for the last two years (required only if your ownership position is 25% or greater)

If using alimony or child support to qualify:

• Provide divorce decree/court order stating the amount and proof of receipt of funds for the last year

If receiving Social Security income, Disability, or VA benefits:

• Provide award letter from the respective agency or organization

Source of Funds and Down Payment

• Sale of your existing home – provide a copy of the signed sales contract and statement or listing agreement if unsold (at closing, you must also provide a settlement/closing statement)
• Savings, checking, or money market funds – provide copies of bank statements for the last three months
• Stocks and bonds – provide copies of your broker statements or certificates
• Gifts – if part of your cash to close, provide a Gift Affidavit and proof of receipt of funds

Debt or Obligations

• Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts, along with copies of the last three monthly statements
• Include names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
• If paying alimony or child support, include the marital settlement/court order stating the terms of the obligation

Don’t forget to include a check to cover application fees.

Understanding Appraisals

What is an Appraisal?

An appraisal is an estimate of a property’s fair market value, typically required by lenders before loan approval to ensure that the mortgage amount does not exceed the property’s value. An appraisal is performed by a licensed appraiser who provides expert opinions on property values, location, amenities, and physical condition.

Why Get an Appraisal?

While obtaining a loan is the most common reason for ordering an appraisal, there are other scenarios where an appraisal may be beneficial:

• Contesting high property taxes
• Establishing replacement costs for insurance
• Divorce settlements
• Estate settlements
• Negotiating in real estate transactions
• Determining a reasonable selling price
• Protecting rights in eminent domain cases
• Meeting government agency requirements
• Supporting legal actions

Appraisal Methods

Three common appraisal methods are used to establish property value:

• Cost Approach: Calculates property value by adding land value to the cost of reconstructing the building, less any depreciation.
• Sales Comparison Approach: Compares the subject property to 3-4 recently sold comparable properties in the area.
• Income Approach: Capitalizes potential net income to determine property value, suitable for income-generating properties.

Who Owns the Appraisal?

While the borrower pays for the appraisal, the mortgage company owns the report since they order it on the borrower’s behalf. However, borrowers have the right to receive a copy of the appraisal report at the mortgage company’s discretion.

PierPoint Mortgage offers a wide range of products with competitive mortgage rates across the USA. Our mortgage lenders and brokers serve clients in various locations, including Alexandria, Atlanta, Los Angeles, Miami, and more.

Ready to start your mortgage journey? Apply now or call us at (231) 737-9911 for more information.