What Documents Are Needed to Buy a House?

Documents for Loan Qualification

Purchasing a home involves a thorough review of a buyer’s financial standing, beginning with the loan qualification phase. Lenders require documents to assess an applicant’s ability to repay a mortgage. This paperwork helps establish credibility and determines the loan amount for which a buyer may qualify.

Homebuyers provide personal identification, such as a government-issued photo ID and Social Security number. If applicable, documents like a divorce decree or bankruptcy discharge papers are also necessary to understand a complete financial history.

Lenders request recent pay stubs, covering the past 30 to 60 days, to show current earnings. W-2 forms from the past two years and federal tax returns for the same period are also required to demonstrate income history. For self-employed individuals, requirements include business tax returns, profit and loss statements, and 1099 forms.

Lenders assess a buyer’s assets to confirm funds for the down payment and closing costs. This includes bank statements for checking, savings, and money market accounts for the most recent 60 days. Investment statements from brokerage or retirement accounts are also reviewed. If any portion of the down payment is a gift, a gift letter from the donor is required, along with documentation showing the fund transfer.

Documentation for debts and liabilities, such as student loan, auto loan, and credit card statements, must be provided. Lenders use this information to calculate the debt-to-income ratio, which indicates a borrower’s capacity to take on additional debt.

Employment verification involves providing employer contact information, allowing the lender to verify employment history and current status. A letter of employment from the employer detailing start date, position, and salary may be requested.

Documents for the Purchase Agreement and Property Due Diligence

Once a homebuyer identifies a property, the next stage involves formalizing the purchase and conducting property assessments. This phase requires documents that solidify transaction terms and uncover property details.

The Purchase Agreement, also known as the sales contract, legally binds the buyer and seller. It outlines the purchase price, financing terms, and closing date. This agreement also details contingencies for a home inspection, property appraisal, and securing financing.

Proof of Earnest Money Deposit confirms the buyer has placed a good-faith deposit, typically held in an escrow account. The earnest money amount is usually a percentage of the purchase price, often ranging from 1% to 3%.

The Property Inspection Report is generated after a home inspection, identifying issues with the property’s structure, systems, and components. The buyer reviews its findings to understand the property’s condition. Significant issues may lead to further negotiations or addendums to the purchase agreement.

An Appraisal Report assesses the property’s fair market value. This document ensures the property’s value supports the loan amount requested by the buyer. The appraisal helps prevent overpaying and ensures the loan is secured by collateral.

Title Search and Title Insurance Documents are important for due diligence. A title search investigates the property’s historical ownership to verify clear title and identify any liens, easements, or other encumbrances. Title insurance protects both the buyer and the lender against future claims or defects in the property’s title.

For properties within a planned community, Homeowners Association (HOA) documents include covenants, conditions, and restrictions (CC&Rs), bylaws, and financial statements. Reviewing these documents helps understand community rules, fees, and the association’s financial health.

Documents for Loan Closing

The loan closing stage is the culmination of the home buying process, where all parties sign documents to transfer ownership and finalize the mortgage. This phase focuses on the execution and review of documents that formalize the financial and ownership transfer.

The Closing Disclosure (CD) is provided by the lender at least three business days prior to closing. This statement itemizes final loan terms, including the interest rate and projected monthly payments, and provides a breakdown of closing costs for both the buyer and seller. Reviewing this document ensures accuracy and understanding of financial obligations.

The Promissory Note is a legal agreement signed by the buyer. It outlines the terms of repayment, including the interest rate, repayment schedule, and any penalties for late payments or default.

The Mortgage, or Deed of Trust depending on the jurisdiction, legally pledges the purchased property as collateral for the loan, granting the lender a lien. It secures the lender’s interest in the property.

Proof of Homeowners Insurance is required at closing. Buyers provide evidence of an active homeowners insurance policy, which protects the property against damage and provides liability coverage. Lenders require this policy.

Funds for closing, including the down payment and remaining closing costs, are tendered at this stage. These funds are typically transferred via wire transfer or certified check. The exact amount required will be detailed in the Closing Disclosure.

Other transaction-specific documents may be signed at closing. These can include affidavits, such as a name affidavit, or disclosures required by state or local regulations.

Documents to Keep Post-Closing

After closing, homebuyers receive documents that should be stored for future reference. These documents serve as proof of ownership, record of financial transactions, and information for property management.

The Recorded Deed officially transfers ownership of the property to the buyer and is recorded with the local government. This document serves as proof of property ownership.

The final Closing Disclosure should be kept, as it summarizes financial aspects of the transaction, including loan terms and costs incurred. This document is valuable for tax preparation, particularly for deducting mortgage interest and property taxes.

Copies of the signed loan documents, including the Promissory Note and the Mortgage or Deed of Trust, detail the terms of the loan agreement and the lien on the property.

The Title Insurance Policy protects against future claims or defects in the property’s title not discovered during the initial title search. This policy provides financial protection against legal challenges to ownership.

Keep the Home Inspection and Appraisal Reports. These reports offer information about the property’s condition at purchase and its assessed value. They are useful for future maintenance planning, renovations, or if a re-appraisal is needed.

Keep an accessible copy of the Homeowners Insurance Policy for reference regarding coverage details and policy renewal. Keep receipts for major home repairs or upgrades, property tax statements, and any relevant HOA documents.