Thursday, February 25, 2021 / by Sam Gerardi
Home buyers and -sellers alike often bristle with anticipatory irritation at the mere thought of all the paperwork they expect they’ll have to come up with to do their transaction, above and beyond the basic loan application, contract, disclosures and closing docs. And these worries start way in advance; it’s as though, before they even start visiting open houses, buyers begin to visualize - and dread - spending hours upon hours in the dank catacombs of the Vatican (à la Da Vinci Code) combing through ancient files, seeking some rare and precious artifact documenting their childhood dental history or genealogy.
In some respects, this vision of the experience of obtaining a home loan might not be far off - there are oodles of hoops through which to jump and, occasionally, the loan underwriter requests something sort of bizarre. But more commonly, there’s a pretty finite universe of documents you’ll really need to scrounge up to get your home bought - or sold. Here they are:
- ID (e.g., driver’s license, state-issued ID, passport). Who must produce it? Buyers and sellers. Why? Uh, hello!?! Lender wants to know that you are who you say you are, buyers, and the title insurance company wants to make sure, sellers, that you actually have the right to sell the home. Funny enough, this commonly goes unrequested until you get to the closing table, when the notary requests to see it before signing, but some mortgage brokers and even some real estate brokers and agents may ask to see it earlier on.
- Paycheck Stubs. Who must produce it? Any buyer financing their purchase with a mortgage. Sellers, usually only in the case of a short sale. Why? Buyers’ purchase price ranges are determined, in part, by their income. And short sellers have to prove an economic hardship.
- Two months’ bank account statements. Who must produce it? Buyers getting financing; sellers selling short. Why? Buyers’ lenders now require proof of regular income and proof that the down payment money is your own. Short sellers? It’s all about the hardship.
- Two years’ W-2 forms or tax returns. Who must produce it? Mortgage-seeking buyers and short selling sellers. Why? Banks want to see a stable, long-term income. They also limit you to claiming as income the amount on which you pay taxes (attn: all business owners!). And in short sales, again, they want documentation of every single facet of your finances.
- Updated everything. Who must produce it? Buyer/mortgage applicants. Why? Because things change, and because the time period between the first loan application and closing can be many months - even years! - on today’s market. During the time between contract and closing it’s not at all unusual for underwriters to demand buyers produce updated mortgage statements, checks stubs, and such - and its quite common for them to call your office the day before closing to request a last minute verification of employment!
- Quitclaim deed. Who must produce it? Married buyers purchasing homes they plan to own as separate property. Married sellers selling homes that they own separately, or joint owners selling their interests separately. Why? With the Quitclaim Deed, the other spouse or owner signs any and all interests they even might have had in the property over the selling owner, making it possible for the title insurer to guarantee clear, undisputed title is being transferred in the sale.
- Divorce decree. Who must produce it? Buyers and sellers who need to document their solo status or the property-splitting terms of their divorce. Why? Again, to ensure that the seller has the right to sell. Recently single buyers might need to prove that they shouldn’t be held to account for their ex’s separate debts or credit report dings.
- Gift letters. Who must produce it? Buyers using gift money toward their down payment. Why? The bank wants to be sure the gift came from a relative, and is their own money to give. They also want the relative to confirm in writing that it’s a gift, not a loan - a loan would need to be factored into your debt load.
- Compliance certificates. Who must produce it? Usually sellers, but sometimes buyers, by contract. Why? Some local governments require various condition requirements be met before the property is transferred, like some cities which require a sewer line be video scoped and repaired, cities which require a checklist of items be met before a certificate of occupancy be issued (usually relevant to brand new and really old homes, the latter of which are often subject to lead paint concerns) and energy conservation ordinances which require low-flow toilets and shower heads to be installed. Ask your real estate pro for advice about which, if any, such ordinances apply in your area.
- Mortgage statements. Who must produce it? Any seller with a mortgage. Why? the escrow holder or title company will need to use them to order payoff demands from any mortgage holder who has to get paid before the property’s title can be transferred.
By no means is this an exhaustive list. Agents: what documents do you see buyers and sellers struggle to scrounge up during their home buying transactions?