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Introduction to Loan Paperwork

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If you had a nickel for every piece of paperwork associated with your mortgage, you might not even need the mortgage in the first place. What is all that documentation actually for? And is it really necessary? From the lender's point of view, it is necessary. After all, the bank is loaning you thousands of dollars, so it's understandable that they want to know a little bit about you.

First, the lender wants to correctly identify you, so you'll need to provide photo identification, your social security number, and your current address and employer. Then, the lender will look into your finances, comparing your income and other assets with your debt. You need to prove that you will be able to pay back the loan.

You and the lender will decide together whether to verify this information through full, alternative, or stated verification. Under full verification, the lender actually contacts your employers and creditors for information regarding your financial history. More common, however, is alternative verification, in which lenders accept your documentation (e.g. W-2 forms) as proof of your finances. Stated verification, on the other hand, takes you at your word; you only need to state the source of your income and don't need to provide the paperwork.

In general, however, loan documentation is a good thing. Assuming you have good credit, more documentation will result in a better loan because the lender will see you as less of a risk. You'll have the option of a bigger loan and a slightly better interest rate than you would otherwise receive.

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