Assembling a loan package with all of the required documents is the most time-consuming step in the application process. All the key statements that you have made on your loan application must be verified and documented (see Figure 1.6). After you have sub-

FIGURE 1.6 Step 4: Verification of Documents

Step 4: Verification of Documents

mitted an application, the lender's loan processor assigned to your case:

• Orders a credit report and appraisal

• Mails letters to your employers asking them to verily your salary and commissions

• Mails letters to your banks asking them to verify your account balances

• Gathers and prepares the other documents necessary to complete the loan package

Some requested documents are returned quickly; others must be requested a second or even a third time. When you are asked to provide a document, do so as quickly as possible. Your failure to give lenders what they need promptly can give them cause to cancel your lock-in agreement or even deny you credit.

Alternative Documentation

Fortunately, most lenders offer loan programs that shorten the time-consuming process of gathering written verifications from your employers, creditors, and banks. Instead of requiring all the letters listed previously, they accept substitute documents that provide them with sufficient proof of your income and assets. In place of a written verification of your salary, they require copies of two or three of your most recent paycheck stubs with year-to-date earnings, two years' W-2s, and 1099s. In place of a verification of your assets, they require copies of two or three of your most recent bank statements and investment account statements. With respect to both income and assets, you do not need to provide information that is not necessary to qualify. If your salary is sufficient to meet income requirements, you do not need to disclose investment income. If your bank accounts show that you have enough money, you do not have to disclose other assets.

The loan officer who takes your application and the loan processor who assembles the necessary documentation generally do not have the authority to approve your loan. They simply gather information for others who will make the yes-or-no decision.

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