Must Have Documents for Buying or Selling a Home
When it comes to buying or selling a home it can seem as if there is no end to the
amount of documentation you must cope with. Even before you actually begin the process
of buying or selling; however, there are several crucial documents you must make sure
you have on hand in order to speed the process along. Some documents you might expect,
but others could be a surprise to you so it's a good idea to get a head start on making
sure you have those important pieces of paper on hand.
While pay stubs are not a requirement for homeowners looking to sell their home, they
are essential if you are in the market to buy a home and plan to finance your purchase
with the use of a mortgage. Pay stubs are used by the lender to verify your income and
help in determining the price range for your future home. In rare instances, such as in
the case of a short sale, sellers may also be required to produce pay stubs. In this case,
pay stubs can sometimes be used for demonstrating that an economic hardship exists and justifying
the need of a short sale to the bank.
Buyers obtaining financing for their home purchase should be prepared to provide at least
two months' worth of bank account statements. In addition, any seller who is selling their
property through a short sale should also be prepared to provide bank statements. Lenders
have become increasingly more stringent in their requirements, especially when it comes to
documenting income and down payments. For sellers, bank statements can help to establish
that a hardship exists for a short sale.
Once again, any buyer who is trying to finance their mortgage and any seller attempting a
short sale will need to provide tax returns. At a minimum, you should expect to provide
the last two years of tax returns. Tax returns are necessary to establish that buyers have
a stable income over the long-term. For sellers, tax returns can help to further document
your financial status if you need to sell short.
Both buyers as well as sellers will need to produce identification, such
as a driver license, state ID or passport. The reason is so that lenders and the title
insurance company can verify your identity and ensure you have the right to complete the
transaction. In most cases you will not need to provide the identification until you are
actually at the closing table with a notary, although in some instances your real estate
broker or mortgage broker may request your identification earlier.
You may need to provide a copy of your divorce decree if you are a buyer that needs to document
your unmarried status or if you are a seller that needs to document the terms associated with
splitting a property when selling it. The divorce decree can help to establish that you actually
have the right to sell a property.
If you are a buyer that is married, but you are planning to purchase a property as your our own
separate property, you will typically need a quitclaim deed. The same is also true if you are a
seller that is married who is selling property you own separately or if you are a joint owner
that is selling your own separate interests. A quitclaim deed is specifically used for allowing
other owners or spouses to sign over their interests in a property to the owner that is selling.
As a result, the title insurance company can then provide a guarantee that the title being
transferred is clear and undisputed.
If you are using any type of gift money as part of your down payment, you may need to provide a
gift letter so the lender can be certain the funds actually came from a relative and that you didn't
obtain a loan that might affect your total debt load.
If you are a seller with a current mortgage, you will likely need to produce a mortgage statement to
the title company or escrow holder so they can obtain the necessary payoff requirements from the
Keep in mind that throughout the process, especially toward the end as the closing of the transaction
draws near, you will likely need to provide updated copies of all of your documents, just to ensure
that nothing substantial has changed.