What is the Mortgage Loan Process for Today?
The Mortgage Loan Process
The loan process for borrowers in 2011 is often reported incorrectly, but there are certain items that have become standard in today’s lending market that simply were not required in the growth years of 2003-2007. First of all, every borrower should be prepared to provide full documentation of income and assets for every loan. Once the lender has had an opportunity to evaluate the borrower’s credit, income, property type and of course transaction type (either a purchase or a refinance), then possibly less documentation may be allowed.
If you are self employed, the golden rule is this “You must report income for a lender to qualify you for a loan”. Many borrowers believe that the efforts of an aggressive CPA resulting in little “taxable income” can be explained to lenders. Some lenders (such as Private Mortgage Bankers) are allowed to evaluate cash flow, non-recurring events and other unique accounting tactics to determine “qualifying income”, but even then, the resulting income must meet qualifying levels.
The basics that every borrower should know is this:
1) You must have established credit with a minimum FICO score to meet the type of loan you are requesting.
2) You must have down payment funds in a liquid account ready to be documented at the point of loan submission.
3) You must have income to support a debt to income ratio of around 38%, some loan types may allow a higher ratio, while others may limit it to 35%.
4) You must be able to document everything on your loan application.
The standard documentation requirements of almost every loan is as follows:
1) Self Employed borrowers, 2 years personal and business tax returns and YTD Financial Statements. Any company/LLC/Partnership that you own 25% or more is considered “Self Employed”.
2) Salary Borrowers will need 2 years W-2’s as well as 1 months of YTD Paystubs.
3) Checking, savings and investments accounts will be documented with 2 months of the full monthly/quarterly statement – not screen prints of activity.
4) Existing liabilities, mortgages with escrows, auto loans, some credit cards, Condo fees, HOA fees may need to be documented to validate the credit report.
5) Letters of explanations are required for any derogatory credit filings or recent credit inquiries as well as any changes or gaps in employment.Posted by Sara Leicht - SaraSellsSarasota.com on
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