Loan Documentation is Paramount Nowadays

In today's real estate market things have changed a lot when borrowers are pursuing a home loan qualification or approval.

It was only 12 months to 24 months back, that all you needed to qualify for a loan was a credit score and a job. The creativity to get you approved was endless. Terms could be made for almost anyone.

Want to pay interest-only and get qualified using the interest only payment? It's a done deal. Can't afford the even the interest only payment, pay less than interest only? OK, you're approved. Were you self-employed for less than two years? Not a problem. No income documentation or asset evidence? That is acceptable too. We take your word for it.

Mortgage companies would run your credit report and if your score was in the low 500's there were still loan programs with 10% or less down payment. You would only have to pay a higher interest rate and possibly two loan points (a point is one percent of the loan amount) in costs. The point is there is a company or a few that would say "Yes".

Currently, prospective homebuyers and existing homeowners are experiencing a more difficulty in securing financing for a home loan. Lenders are saying "No" even when buyers and owners have good through excellent credit scores and credit histories.

It seems like they have turned to becoming major green living supporters by not wasting paper or time with applicants who do meet all of their new lending guidelines. The major change is due to how much risk mortgage investors will accept as their portfolio of real estate loan losses pile up. Once the credit markets see some positivity, the real estate market will be what it is.

So, how can you raise your chances of becoming approved for a home loan? Begin with gathering your pertinent documentation.

- Last two years of W2 tax forms for each person who is going to be a borrower on the loan.

- Provide the contact address and phone number of the human resources manager, so the mortgage underwriter can confirm and verify your income.

- Copies of last two years of your federal tax returns for the, including all schedules and attachments. These are mandatory for self-employed persons or those who claim external income sources such as rental income and other assets.

- Copies of last 30 days of work pay stubs, if employed (W2'd)

- Copies of last two or three months of bank statements, brokerage accounts, 401(k), IRA, Keogh, and other retirement accounts the borrower(s) own.

- Any larger than normal deposits into your bank accounts in the last three months will need to be explained by providing proof where the funds originated with an explanation letter.

These are the standard requirements for full documentation borrowers as stated income lender sources have all but dried up. You may find some available but rates will be higher along with down payments in the 25% range at a minimum. So, full disclosure of income and assets is a must to get a good home loan. The loans that have become very popular as a result are FHA Loan. They only require 3 percent down, full documentation and allow multiple borrowers to become approved.

Frank Collins is an avid investor in real estate and contributor to Jumbo Loan site and a Local Mortgage Lenders in your area.