Ultimate Pre-Approval Cheat Sheet Part 3: Paper Trails

Co-Authored by Allan Salter and The Sherman Team 

When it comes to helping you guys get ready to buy a house, that’s where we really have to make sure the proverbial ducks are in a row, and that we’re on the same page with the financing side if you’re getting a home loan to make that happen. This is where Allan Salter has been giving us a tour behind the curtain to shed some light on how we can make that process easier from the onset. From a paper trail standpoint, there are documents that will need to be collected from the time that you first apply for a loan, through the time that you go under contract and then eventually when you close on your home. There are also certain do’s and don’ts to be aware of as well. 

When first starting out, the papers that you and anybody else who might be applying for a home loan along with you are: 

At least 1 months of paystubs 

At least 1 year of W2’s 

(only need 2 years if jobs changes or commission-bonus-mileage-etc income ) 

2 years worth of tax returns 

(only needed if there is income other than W-2 type jobs) 

At least 2 months of bank statements 

A copy of a valid Drivers License/ID 

(Any questions on these at all, just ask us) 

Those are needed by Allan in order to accurately determine just how much of a purchase price you can qualify for so he can supply us with a pre-approval letter and we can start shopping for homes. They are also needed for him to determine how much time you might need for instance if he looks at your papers and determines you’re not ready for pre-approval right now but can be later (stay tuned for our next topic: How to make a 1 month, 3 month, 6 month, 12 month plan to be approvable). 

And now for the down and dirty part, Paper Trails to remember for when you’re under contract on a home. 

The Golden Earnest Money Rule: In short, Earnest Money is a part of your down payment that you’ll put down shortly after you go under contract on a home, but the most important thing to remember is Earnest Money MUST be able to be verified, meaning it MUST be in the form of a check and not cash. Cash cannot be tracked but a check can. 

Down Payment Money: Just like with Earnest Money, additional down payment money also needs to be verified, which is where the bank statements that we mentioned earlier come into play. One thing to note is if you make odd large deposits into your bank account, those may need to be verified where those came from as well. 

So the big rule of thumb while under contract on a home is any money that is coming from accounts that you will be using will need to be verified. 

Paper Trails Continued: Alternative Credit 

We touched on this in the last post, but if something happens that if you need help getting pre-approved through some alternative lines of credit, here’s where keeping a good paper trail will help immensely. If you have been consistently paying monthly bills that are in your name and if you can show it via a paper trail, then it is entirely possible that Allan could use that in building alternative credit should you need to go that route. 

Everybody’s financial situation is going to be different, so as always if you have questions about any of this, bring them to Allan and us and we’ll be happy to help. We also shot a video touching on all of these subjects that you can check out below: