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<h1>How to Document Your Finances When Buying a Home</h1><br />by johnbutler5678<br /><p>It is necessary to document, or prove, your income to a lending institution before obtaining most loans but especially when you are applying for a first mortgage. This process can be extremely stressful because of the huge amount of information necessary that the lender wants to see. By knowing what to expect you will find it easier to put together your financial documentation package. </p>
<p>Because your income is important to determine how much home you can afford, the lender will want to see tax returns from the previous two years, as well as W-2s and a recent pay stub. Do you have any source of income other than your job? Income from social security, alimony, child support, overtime and commissions can all help you qualify for a loan, and should be documented. If you have worked at your current employer for less than two years, the lender may request pay stubs for more pay periods or proof of income from your previous employer.</p>
<p>Your lender will also need to determine your debt to income ratio, so bring along a recent copy of all credit card statements and payment books on any other loans. The lender wants to know your debt to income ratio so that they can have a better idea if you will be able to comfortably cover the monthly mortgage costs. In simple terms, the debt to income ratio is the percentage of the borrower 's  monthly income that is used to pay down existing debt. Most lenders are comfortable with a debt to income ratio of around 30%.</p>
<p>Lenders like to know what assets you have so if you have a clear title to your car, bring it along. Also include any statements from brokerage houses, retirement savings account statements and life insurance policies. While you will not be expected to cash out retirement funds or sell stocks to pay for your home, the fact that you have accrued these assets is a plus as far as the lender is concerned. This documentation improves your financial picture in the eyes of the lender.</p>
<p>To prove to the lender that you have sufficient control over your cash flow, bring copies of your bank account statements. While some lenders barely glance at these, others may be curious about how you spend your money. Bank statements are particularly important if you have a decent amount of variable income such as earned commissions. A look at your spending habits can help reassure the lender that you can handle a few up or down months without losing your head (and possibly your home).</p>
<p>If your employer is offering relocation assistance, provide this information as well. If you are renting currently, include copies of canceled checks proving that you always paid in a timely manner. If you own another home, and are selling it, bring along the sales contract. Declared bankruptcy? The lender will want to see that paperwork. Basically, any paperwork that you have in your possession that offers any insight into your financial picture is something that your lender will want to see.</p>
<p>If you are self employed, be aware that the lender will look much more closely at your finances, and will expect to see the tax return information from your business and proof that you are current on all of your tax obligations. What if you own a relatively new business? This may not be the best time to qualify for a loan. The best way to qualify for a mortgage as a self employed individual is to have excellent credit, maintain scrupulous records and have a low debt to income ratio. A large down payment also increases your attractiveness for each lender.</p>
<p>How far back do your financial records need to extend? While lenders vary somewhat in what they want to see, a general rule of thumb for annual paperwork such as tax filings is two to three years of records. For monthly paperwork such as bank statements you should bring two to three months worth of records. You will need to bring a copy of all of the above documents to the lender, but you can make the financial analysis much easier by putting together an overview. On a sheet of paper list your monthly income and expenses and your assets and debt. Include a list of all creditors, with the balance owed as well as the monthly payment. While the lender will undoubtedly check all of your figures against the paperwork that you provide, a simple financial sheet will allow them to give you a general idea about your possibilities for a loan and what amount you would qualify for.</p>
<p>All of this may seem a daunting task, particularly if you have not kept up on your financial records. The process is necessary, however, and ultimately you will emerge with a solid view of your true financial position and hopefully, a budget road map for the future.</p>
<br /><h2>About the Author</h2><p>Shawn Thomas is a freelance writer who writes about topics and financial products pertaining to the mortgage industry such an adjustable rate mortgage available from a <a href="http://www.absolutemortgageco.com/">mortgage lender</a>.</p>
<br /><h3><a href="http://www.content4reprint.com/finance/real-estate/buying/how-to-document-your-finances-when-buying-a-home.htm" title="How to Document Your Finances When Buying a Home">Article Source:</a> <a href="http://www.content4reprint.com" title="Free high quality articles">Content for Reprint</a></h3>

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<body><h1>How to Document Your Finances When Buying a Home</h1><br />by johnbutler5678<br /><p>It is necessary to document, or prove, your income to a lending institution before obtaining most loans but especially when you are applying for a first mortgage. This process can be extremely stressful because of the huge amount of information necessary that the lender wants to see. By knowing what to expect you will find it easier to put together your financial documentation package. </p>
<p>Because your income is important to determine how much home you can afford, the lender will want to see tax returns from the previous two years, as well as W-2s and a recent pay stub. Do you have any source of income other than your job? Income from social security, alimony, child support, overtime and commissions can all help you qualify for a loan, and should be documented. If you have worked at your current employer for less than two years, the lender may request pay stubs for more pay periods or proof of income from your previous employer.</p>
<p>Your lender will also need to determine your debt to income ratio, so bring along a recent copy of all credit card statements and payment books on any other loans. The lender wants to know your debt to income ratio so that they can have a better idea if you will be able to comfortably cover the monthly mortgage costs. In simple terms, the debt to income ratio is the percentage of the borrower 's  monthly income that is used to pay down existing debt. Most lenders are comfortable with a debt to income ratio of around 30%.</p>
<p>Lenders like to know what assets you have so if you have a clear title to your car, bring it along. Also include any statements from brokerage houses, retirement savings account statements and life insurance policies. While you will not be expected to cash out retirement funds or sell stocks to pay for your home, the fact that you have accrued these assets is a plus as far as the lender is concerned. This documentation improves your financial picture in the eyes of the lender.</p>
<p>To prove to the lender that you have sufficient control over your cash flow, bring copies of your bank account statements. While some lenders barely glance at these, others may be curious about how you spend your money. Bank statements are particularly important if you have a decent amount of variable income such as earned commissions. A look at your spending habits can help reassure the lender that you can handle a few up or down months without losing your head (and possibly your home).</p>
<p>If your employer is offering relocation assistance, provide this information as well. If you are renting currently, include copies of canceled checks proving that you always paid in a timely manner. If you own another home, and are selling it, bring along the sales contract. Declared bankruptcy? The lender will want to see that paperwork. Basically, any paperwork that you have in your possession that offers any insight into your financial picture is something that your lender will want to see.</p>
<p>If you are self employed, be aware that the lender will look much more closely at your finances, and will expect to see the tax return information from your business and proof that you are current on all of your tax obligations. What if you own a relatively new business? This may not be the best time to qualify for a loan. The best way to qualify for a mortgage as a self employed individual is to have excellent credit, maintain scrupulous records and have a low debt to income ratio. A large down payment also increases your attractiveness for each lender.</p>
<p>How far back do your financial records need to extend? While lenders vary somewhat in what they want to see, a general rule of thumb for annual paperwork such as tax filings is two to three years of records. For monthly paperwork such as bank statements you should bring two to three months worth of records. You will need to bring a copy of all of the above documents to the lender, but you can make the financial analysis much easier by putting together an overview. On a sheet of paper list your monthly income and expenses and your assets and debt. Include a list of all creditors, with the balance owed as well as the monthly payment. While the lender will undoubtedly check all of your figures against the paperwork that you provide, a simple financial sheet will allow them to give you a general idea about your possibilities for a loan and what amount you would qualify for.</p>
<p>All of this may seem a daunting task, particularly if you have not kept up on your financial records. The process is necessary, however, and ultimately you will emerge with a solid view of your true financial position and hopefully, a budget road map for the future.</p>
<br /><h2>About the Author</h2><p>Shawn Thomas is a freelance writer who writes about topics and financial products pertaining to the mortgage industry such an adjustable rate mortgage available from a <a href="http://www.absolutemortgageco.com/">mortgage lender</a>.</p>
<br /><h3><a href="http://www.content4reprint.com/finance/real-estate/buying/how-to-document-your-finances-when-buying-a-home.htm" title="How to Document Your Finances When Buying a Home">Article Source:</a> <a href="http://www.content4reprint.com" title="Free high quality articles">Content for Reprint</a></h3></body></html>