It is no secret that the lending industry has continued to tighten its belt over the last few years, and yet many borrowers are still struggling with the changes. Most often its the repeat buyers that have the most difficulty since it was so much easier for them to qualify for their last home. So I thought I might shed some light on why some of the documentation is now being required.
Tax Returns Vs. just the W-2's. - Many clients that are not self employed are still claiming losses on their returns. Most of the time it is from a side business that they themselves or a spouse has. To the end investor a 10,000 loss makes a big difference on the clients ability to repay the loan
Bank Statements Vs. a VOD. - Bank Statements give a much clearer view of a clients deposit history. Are the deposits coming from payroll? are there several unexplained cash deposits? where is this cash coming from?
Complete Inquiry Letters. - A huge hot button for lenders right now. Credit inquiries can mean new accounts with new payments. With many people buying at the top of their price range a new credit account can make them ineligible for purchase. Also new credit accounts can affect the score, that is why it is so important to wait until the loan is closed to go out and buy that new furniture, etc.
Any one in the market to buy a home should be prepared to provide full documentation. The basic needs list for almost every loan is as follows:
A complete loan application providing a full 2 year history for work history, residence history, etc. complete with addresses and phone numbers.
2 most recent years of Federal Tax Returns including W-2's, 1099's, Etc.
2 most recent months of assett statements, all pages, of Bank Statements, 401k, Stock Accounts, Etc.
Most recent Full Month of Pay Stubs
Clear Legible copies of their Identification (all loans) and Social Security Card (for government loans)
Letter of explanation for recent credit inquiries as well as any derogatory credit
Current mortgage statements for properties owned and/or landlord information for verification of rent
Divorce Decree (if applicable)
Bankruptcy Discharge papers (if applicable)