The Paperwork needed to buy a home!

If you don’t know it already, one of the first things you’ll learn when buying a home is you will need to supply a ton of documentation to make sure you’re a good risk. Here’s a look at what those documents are and what you’ll need to give lenders.

Credit report
Technically, you won’t give a lender your credit report, but you’ll need to allow them access to it, most likely in writing by signing a release form.

If you want to be proactive, pull a copy of your own credit report beforehand and take a good close look at it. If you find any blemishes or errors, you can take steps to dispute or explain those marks before you start your homebuying process. You are allowed to write a statement and attach it to your credit file that explains your side of any negatives showing on your report.

If you have too many late payments, charge-offs, accounts in collections, short sales or foreclosures, it’s going to have an impact on your FICO score.

You are entitled to receive a free annual credit report from each of the three credit reporting agencies, and this might be a good place for you to start.

Current outstanding credit information

If you have current credit card debt, car loans, student loans or other debt you’re paying on a monthly basis, lenders will probably also want details on those accounts, including payment history, monthly amount and total amount of your debt. They will use this to measure your debt-to-income ratio.

As a rule of thumb, lenders like to see that your housing debt and other recurring debts add up to less than 41% of your gross monthly income.

Tax returns

Lenders will want to see your full recent financial and earnings history, so you will also need to supply copies of at least the last two years of your Federal tax returns. Most of the time, lenders will ask you to sign a Form 4506-T that allows the lender to request a copy of your returns directly from the IRS. You may be asked to provide a signed and photocopied return instead.

Lenders will be checking to make sure your reported earnings on your paystubs are consistent with what you report to the IRS, as well as making sure there are not huge income fluctuations from year to year.