For the third and final part of this blog, we’ll be discussing some more documents as well as giving additional tips that may help the first time home buyer speed up the mortgage-lending process. In the last blog update, we talked a bit about some additional income documentation that will be needed if the first time home buyer has pay stubs and W-2 forms, as well as sources from third parties like Social Security Administration income, or Pensions. We also spoke about the opposite, when there are garnishments or liens against the borrower. This section will be about other items that will be needed to be resolved, or documented prior to closing.
Identification Documents: What’s Needed?
The first time buyer can be required to send in quite a few documents for submission. These documents include a copy of the first time home buyer’s Driver’s License, Social Security Card, verification of rent, verification of employment, and Consumer Explanation Letters.
For the identification items, a clear copy of the first time home buyer’s Driver’s License and Social Security Card will be needed. Keep in mind that a copy of each identification card will be needed for all borrowers on the loan. The underwriter mainly checks the Driver’s License of the first time home buyer to make sure it’s not expired, but also confirms the name, as well as address listed on the Driver’s License. If the first time home buyer has a different last name than what was put on the loan application, this may prompt the underwriter to ask for confirmation. This confirmation can be a letter of explanation from the first time home buyer, and a copy of the divorce decree, birth certificate, or other proof of name change documentation. These will need to be submitted with the file so the underwriter can confirm that the identification used and the first time home buyer on the loan application are one and the same. Consequently, if the first time home buyer’s driver’s license has a different address than what is listed as their current on the loan application, a letter of explanation will need to be sent to the underwriter as just explaining why there is a difference.
More Documents: Verification Needed
The first time home buyer will need to provide verification of rent and verification of employment. For verification of rent, this is usually for first time home buyer’s who are currently renting from a landlord, either private or through a leasing company. This verification of rent is to confirm that the first time home buyer does not have any late payments in paying rent. If there are difficulties with getting the verification of rent front the landlord, the borrower can provide a copy of the leasing agreement and copies of the last 12 months of rent checks. If the first time home buyer is not currently paying rent, the underwriter will be looking for something called a Rent Free Letter. This letter basically indicates that the first time home buyer is currently living rent free. The underwriter may need to request an additional letter that indicates that the borrower will be fine with “payment shock,” or the introduction of a mortgage into the monthly budget.
For the next section we will be talking about a few more documents, closing out the series.
Rent Free Letter Example
Below is a rent-free letter example. The information that is bolded, you can rewrite and adjust for your ended. At the bottom is an explanation of all the bolded parts.
[YOU]¹
John Doe
123 Main Street Anytown, USA 12345
(555) 555-5555
July 15, 2024
[RECIPIENT]²
Jane Smith
456 Oak Avenue Anytown, USA 67890
(555) 555-6789
Dear Jane Smith³,
I hope this letter finds you well. I am writing to provide detailed clarification regarding my current living situation, specifically concerning the arrangement where I am residing rent-free.
The circumstances leading to this arrangement began on January 1, 2024⁴, a period marked by financial hardship due to unexpected medical expenses⁵. Since then, I have diligently adhered to the terms of this agreement and have taken appropriate steps to uphold my responsibilities within the context of the arrangement.
I have maintained open communication with the property owner, ensuring transparency and mutual understanding regarding the rent-free arrangement. Additionally, I have agreed to maintain the property, cover utility expenses, and contribute to household chores as part of our arrangement⁶.
Attached, please find supporting documentation, including a letter from the property owner confirming the rent-free arrangement and copies of utility bills in my name⁷.
Thank you for taking the time to review this letter and the accompanying documentation. If you require any further information or clarification, please do not hesitate to contact me at (555)⁸ 555-5555 or [email protected]⁹.
Sincerely,
John Doe¹⁰
¹ – Your information.
² – Recipient’s information.
³ – Recipient’s name.
⁴ – Start date.
⁵ – Reason for rent-free agreement.
⁶ – Agreement terms.
⁷ – List of documents provided.
⁸ – Your phone number.
⁹ – Your email.
¹⁰ – Your name.
