Common Documents Required For A Mortgage Pre-Approval for Home Buyers

Even though many lenders are still quoting quick 10 minute pre-qualifications over the phone or online, a true mortgage approval that holds any weight is one that has been issued by an underwriter who has had an opportunity to review all of the necessary documents.

With a constant stream of new lending guidelines, volatile mortgage rates and tightening regulation from Washington, very few real estate agents will show new homes to a First-Time Home Buyer without at least a pre-qualification letter.

A Pre-Approval Letter will help you in three ways:

• It lets you know how much mortgage you can qualify for
• It gives you an estimate of what your total housing payment would be
• Submitting a strong “Pre-Approval” letter with a purchase offer will give the seller more confidence about your ability to complete your end of the agreement

It’s obviously a good idea to get your paperwork prepared ahead of time so that the pre-approval process is as thorough as possible.

In order to get a pre-approval letter, you’ll start by filling out a loan application and submitting a few documents for the loan officer and / or underwriter to review.

Common Loan Pre-Approval Documents:

Income / Assets for Wage Earner:

• Last 2 year W2s and Tax Returns
• 2 most recent Pay Stubs
• 2 most recent Bank Statements, 401(K), Liquid Assets, Investment Accounts

Income / Assets for Self-Employed:

• Last 2 year Tax Returns – Business and Personal
• Last Quarter P&L Statement

Letter of Explanation For:

• Employment Gap or New Line of Work
• Late Payments / Judgments / Bankruptcy on Credit Report

Other:

• Bankruptcy Discharge
• Child Support Documentation
• Lease Agreements (If own other Rental Properties)
• Mortgage Payment Coupons (If own other Real Estate)

…..

Most borrowers also want an opportunity to learn more about the loan officer before digging up all of these personal documents. Spend 15 minutes on the phone asking the loan officer to explain how mortgage rates work, quizzing them on some basic industry vocab or just to see if they know what to prepare your agent for ahead of time. The Q&A session can be more than just a lender qualifying you, as long as you’re prepared to ask the right questions.

Either way, you’ll definitely want to have the above list of approval documents ready once you’ve decided on the right loan officer that you trust will meet your expectations.

David Sharp

NMLS#280482

123 Mortgage Team

314-260-4360

The Tax Benefits of Home Ownership

Buying a home provides some benefits.
1) Home mortgage interest deduction.  The interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home is deductible as an itemized deduction.  This deduction can reduce the cost of borrowing by one-third or more.

2) Home equity loan deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. The money can be used for any purpose.

3) Property tax deduction:  Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home. This is another itemized deduction that renters don't get.

4) Deductible homebuying expenses: Some closing costs  in a home purchase are also deductible as itemized deductions, including loan origination fees called points, prorated interest on a new loan, and prorated property taxes paid at settlement.

5)  home-sale exclusion:  Profit when you sell - you must have lived in your home for two of the prior five years prior to its sale - you need pay no income tax on a substantial amount of their profit -- $250,000 for single homeowners and $500,000 for married homeowners who file jointly. Can be used once every 24 months.

6) Free rental income:  You can rent your home out for up to 14 days during the year and pay no tax at all on the rental income.
7) Business use of your home:  If you have a home business and have a home office you may qualify for a deduction.

Tax benefits of renting:

The only tax benefit that a renter can qualify for is the home office deduction. This is a business deduction available to renters who own a business and have a home office they use regularly and exclusively for business purposes.

A good rent vs. buy tool can be found on the Smart Money Magazine website: click here

Be sure to consult your tax professional.

Real Estate Tax Ban

Missouri voters have approved a constitutional amendment that bans a real estate tax.

The measure approved Tuesday prohibits the real estate transfer tax that is levied when homes, land and other property is sold. The transfer tax is charged like sales taxes based on the price of the property.

Missouri currently does not levy the tax, but other states do.

Critics of the transfer tax contend people already pay property tax on their homes and land. The state ballot measure was backed by the Missouri Association of Realtors.

Amendment 3 alters the state Constitution “to prevent the state, counties, and other political subdivisions from imposing any new tax, including a sales tax, on the sale or transfer of homes or any other real estate.”

The amendment, backed by the real estate industry, made it to the ballot by a statewide petition. Backers of the amendment say 37 states have such a tax, which, on top of regular property taxes, they argue amounts to double taxation.

“And we want to make sure Missouri properties remain affordable,” Elizebeth Mendenhall, president of the Missouri Association of Realtors, said before the election.

Real Estate Transfer Tax - Double Taxation

I just received an email from the Missouri Association of Realtors:

A real estate transfer tax is a tax paid at the closing of a property. It would be a percentage of the total sales price charged and paid by every seller, buyer or both at closing.



Real estate transfer taxes are nothing more than double taxation. They are often paid by the people who have lived in their home for years and have already paid thousands of dollars in annual property taxes.



While transfer taxes aren’t currently imposed in this state, the Missouri Constitution allows state and local government to impose transfer taxes at any time. With burgeoning government deficits caused by wasteful spending, politicians are looking for new revenue sources. Real estate transfer taxes are happening in other states, including Illinois, Iowa, Kansas and Arkansas.