Mortgage questions, answered.Mortgage questions, answered.

• A government-issued photo ID
• Your two most recent monthly statements for every bank and investment account you'll use, all pages
• A list of your monthly debts, such as car loans, student loans and credit cards
• For a purchase: the signed purchase contract and your homeowners insurance agent's contact information
• If family is helping with the down payment: a signed gift letter and proof of the transfer
• If it applies: divorce decree, bankruptcy discharge, or details about past foreclosures

Your Social Security number is provided securely during the application, never through a website contact form.

• Pay stubs covering the most recent 30 days
• W-2s from the past two years
• Federal tax returns for the past two years if you earn commission, bonus or overtime, or have rental or other income
• Your employer's name and contact information so your employment can be verified

Changed jobs recently? That's usually fine. Just let me know so we can document it the right way.

• Personal federal tax returns for the past two years, with all schedules
• Business tax returns for the past two years (such as 1120S, 1065 or 1120) and K-1s, if you own 25% or more of the business
• A year-to-date profit and loss statement, if requested
• Recent business bank statements
• Proof the business has been operating for at least two years, such as a business license or a letter from your CPA

Lenders look at the income on your tax returns after write-offs, so let's review your returns early. There may be more than one way to qualify.

If your tax returns don't show the income you actually earn, we also have other programs that don't rely on tax returns:

• Bank statement loans, which use your personal or business bank deposits to calculate income
• P&L loans, which use a profit and loss statement prepared by your CPA or tax preparer
• Asset-based loans, which qualify you based on your savings and investments

These programs have their own requirements, and not all borrowers will qualify.

• Your current Social Security award letter or most recent SSA-1099
• Pension award letters or 1099-R forms
• Recent statements for retirement accounts you draw from, such as an IRA or 401(k)
• Bank statements showing the deposits arriving each month

For some income, like retirement account distributions or annuities, lenders need to see that it will continue for at least three years.

An appraisal is an independent estimate of the home's market value by a licensed appraiser. The lender orders it, and the appraiser inspects the home and compares it with similar homes that sold recently nearby.

The lender uses the appraisal to confirm the home is worth enough to support the loan. If it comes in lower than the price, you can renegotiate with the seller, cover the difference, request a reconsideration of value, or look at other loan options.

An appraisal isn't a home inspection. An inspection checks the home's condition for you, and it's a good idea either way.

A home inspection is a detailed look at the home's condition by a professional inspector you choose and pay for. The inspector checks the roof, foundation, plumbing, electrical, heating and cooling, and more, then gives you a written report.

The two answer different questions:

• An appraisal tells the lender what the home is worth. The lender orders it, and it protects the lender's investment.
• A home inspection tells you what condition the home is in. You order it, and it protects you.

An inspection is usually optional but strongly recommended. Its findings can help you ask the seller for repairs or a credit, or decide whether to move forward, as long as you're still within your contract's inspection period.

Private mortgage insurance (PMI) protects the lender, not you, if a conventional loan isn't repaid. It's usually required when your down payment is less than 20% of the home's value, and it's typically added to your monthly payment.

PMI doesn't last forever on a conventional loan. You can ask to cancel it once your balance reaches 80% of the home's original value, and it ends automatically at 78% as long as your payments are current.

Other loan types work differently: FHA loans have their own mortgage insurance (MIP) with separate rules, and VA loans have no monthly mortgage insurance.

In California, escrow is the neutral third party that handles the closing of a home purchase or refinance. An escrow company or escrow officer holds the money and documents, such as your deposit, the loan funds and the deed, and follows written instructions from the buyer, seller and lender.

Once every condition is met, escrow pays everyone who's owed money, has the deed recorded and "closes escrow." That's the moment the home is officially yours.

Escrow is different from an escrow account. Escrow only lasts from the accepted offer until closing. An escrow account (also called an impound account) is set up by your loan servicer after closing to pay your property taxes and homeowners insurance over the life of the loan.

An escrow account (also called an impound account) is set up by your loan servicer to pay your property taxes and homeowners insurance for you. Each month, part of your payment goes into the account, and the servicer pays those bills when they're due.

You'll fund the account with an initial deposit at closing. Once a year, the servicer reviews it and adjusts your payment if taxes or insurance went up or down.

Escrow accounts are required for some loans and optional for others. Don't confuse an escrow account with escrow, the neutral company that handles your closing (see "What is escrow?" above).

Title is your legal ownership of the home. Before closing, a title company searches public records to make sure the seller has the right to sell it and to find any problems, such as unpaid liens, judgments or errors in past records.

Title insurance protects against problems with the title that weren't found in the search. There are two kinds:

• A lender's policy protects the lender up to the loan amount. Lenders require it.
• An owner's policy protects you, the buyer, for as long as you own the home.

Unlike most insurance, title insurance is paid once at closing. Who pays for each policy is often set by local custom and can be negotiated in your purchase contract.

A real estate agent is a licensed professional who helps people buy and sell homes. In a typical purchase there are two agents:

• The buyer's agent represents you, the buyer. They help you find homes, write and negotiate your offer, and guide you through inspections and closing.
• The seller's agent (also called the listing agent) represents the seller. They market the home and negotiate for the seller's best interests.

There are times when one agent, or one brokerage, represents both the buyer and the seller. This is called dual agency. In California it's allowed, but only with the written consent of both the buyer and the seller. A dual agent has to be fair to both sides and can't share confidential information, such as the highest price you'd pay or the lowest price the seller would accept.

A good agent and a good loan officer work as a team. I'm happy to coordinate with your agent or recommend one if you need one.