Lenders—the root of many of our financial woes during the Recession—have really been stepping up the rules as of late on giving out home loans and refinances. Granted, there are fewer lenders these days (thank heavens) because so many of the crooks closed their doors or were forced to close during and after the crash. Remember Countrywide or Washington Mutual? How about Taylor, Bean & Whitaker, the lender known for no-documentation loans? Oh, don’t get me started! Check out the list of lenders that have gone bye-bye or are currently in trouble at one of my favorite watchdog sites: The Mortgage Lender Implode-O-Meter (ml-implode.com).
We pros in the real-estate biz like to say that there are “about five banks left that give out mortgage loans these days.” That statement is not to be confused with the great number of lenders, because many entities can give out home loans (like credit unions and mortgage brokers). Since the crash, they are all now more under the thumb of government regulations, with more licensing requirements and standards of operation than ever before.
What does that mean if you are seeking to get a home loan or refinance? Rates are dirt-cheap—3.5 percent—so yeah, no problem there. But you won’t believe the amount of paperwork that you’ll have to amass to make the lender happy before you can get the 3.5 percent loan to buy that house.
Here’s the minimum of what you’ll need:
• W-2 forms for the past two years
• Most recent pay stubs covering a 30-day period
• Federal tax returns (1040s) for the past two years
• Year-to-date profit and loss statement (for self-employed)
• Corporate or partnership tax returns (if you own more than 25 percent of the business)
• Pension award letter (for retired individuals)
• Social Security award letters (for those on Social Security)
• Bank statements for the past two months (sometimes three) on all accounts
• Statements for the past two months on all stocks, mutual funds, bonds, etc.
• Copy of latest 401K statement (or other retirement assets, because they can count as reserves)
• Explanations for any large deposits and the source of those funds
• Copy of HUD-1 settlement statement on recent sales of homes
• Copy of estimated HUD-1 settlement statement if a previous home is for sale, but not yet closed
• Gift letter (if some of the funds come as a gift from a family member—the lender will supply a blank form)
• Landlord’s name, address and phone number (if you rent, for verification of rental)
• Explanations for any “late” items that may appear on your credit report
• Copy of bankruptcy papers if you have filed bankruptcy within the past seven years
• To document receipt of child support (if you desire to show it as income):
• Copy of divorce settlement (to show the amount)
• Copies of canceled checks for the past 12 months to document actual receipt of funds
• Copy of Social Security card (or other documentation of Social Security number)
• Copy of driver’s license n
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