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Documentation You Need to obtain a Mortgage or other Property based Loan

The recent financial turmoil had much of its origin in mortgages being extended to borrowers, who could not document basic things, such as their income, when they applied for mortgages. As a consequence, the documentation criteria for mortgages are now a little bit more strictly enforced, than they used to be before the crisis.

The vast number of reputable lenders in the market place, require to see varied levels of documentation, before they consider, whether, or not, to give you a loan. Though, while it is harder to obtain a mortgage without all the documentation, it is still possible. But you will be dealing with more risk friendly lenders, charging you, no doubt, higher fees and interest rates.

It pays to have a lender or broker that is strict with his documentation demands. The sloppier the lender, or his agent, is, in obtaining and checking your documentation and doing a proper due diligence on you as a borrower, the more likely he assess you as a high risk. As a consequence, there will be some interest rate penalty, or some fee that come into effect, under some specified and defined circumstances, which will make your mortgage more expensive and more risky for you as the borrower.

A lender or broker who is not asking for complete documentation is simply not doing his job properly. Since he is paid for doing that through the various fees he charges, he is really being negligent!

Your Credit Score (FICO Score)

Before you start taking to a potential lender, and possibly even before you looked at your initial house, the first thing you want to obtain and check is your credit score. You can obtain a credit report for free, once a year under the Fair Credit Reporting Act, from

http://www.annualcreditreport.com .

There are several relevant credit monitoring agencies in the USA and they will assess you differently. The three main credit monitoring agencies are Equifax, Experian and TransUnion. There are two more, Innovis and PRBC, but they are of minor importance.

Although, all credit agencies use FICO scores as the basis of their evaluation, the three main ones include some additional measures and give them different weights within the total calculations. As a consequence, you will have differing scores from the three main agencies.The differences will not be large, but 20 or 40 points can make quite a difference to the way a lender views your credit worthiness.

The credit scores can range from 300 to 950. Though, the most relevant range is to about 850.

The Credit Scores

Just as a general guide, the scores are evaluated by lenders as shown below. If you want to know more about the credit score and how they are calculated, you can also consult our special credit page.

There are ways to legally improve your scores, though they all take some time.We have a page for that.

Remember you can get a free credit score once a year from all three credit reporting agencies under the Fair Credit Reporting Act, from http://www.annualcreditreport.com .

Once you have the credit report, examine it closely. Look out for accounts that are noted as delinquent, if you have any such accounts. Also, check out how many of your accounts show late payments. Both types of incidences will lower your credit score.

A bad credit history does not necessarily prevent you from being able to get a mortgage loan. There is always FHA, where credit scores are not an important part of the evaluation of your credit worthiness. Look at your options on our page showing the types of mortgages that are commonly offered.

The Documentation needed to obtain a Mortgage

The following items are now needed to obtain a standard mortgage with a reputable lender. Be sure to hand over photo copies only and not the originals. (you might have to show the originals, to assure your credit officer that the photo copies are true copies!)

	Employment Verification Form	The first item a lender checks will be your employment situation. This is done with a standard VERIFICATION OF EMPLOYMENT FORM. It is normally sent to your employer or given to you, so that you can hand it in at your human resources office. Make sure that your employer returns the form quickly to the potential lender.
	Current Pay Stubs	You will have to hand at least copies of two Pay Stubs (the calculation sheet that you get from your employer showing your pay, deductions, taxes paid etc., on your pay day). Some lenders now ask for two months of pay records - four stubs, if you are being paid every two weeks. If you are married and your wife/husband works as well, you should also hand in copies of the wife's/husband's pay stubs.
	Federal Tax Returns	You should supply the lender with copies of your latest joint tax returns for the last two years. If you file separately, both tax returns for the last two years should be submitted. Be sure that the copies of the tax returns are signed!
	W2's or Form 1099	The W2 is your Income and Tax Statement that you get every year from your employer. If you are paid as a subcontractor you will have to show the 1099 forms for two years. It is the payment and tax form you will get annually from your principal or the company/person that employs you.
	Bank Statements	Most lenders demand at least three month of bank statements covering your savings and checking account. See that there are no overdraft events and overdraft charges on your statements, because that will inevitably raise eyebrows and you will have to have a very good explanation for their occurrence. If you have several operating checking accounts, submit the statements for each one of them.
	Asset Statements	If you have other assets, such as bonds stocks or retirement accounts, make a copy of the latest monthly statements of each of these accounts.
	Copy of your Current Drivers License	You should include a copy of your drivers license with a photo with your documentation. See that the address of the drivers license is up to date.

Hand the above documentation package to the lender as a clean, ordered and well organized package. That shows your seriousness as an applicant. If you apply to a local bank or a broker, try to see your loan officer with the package when you hand it over. Make an appointment and sit down with him and asking him about the up-front and all other costs.

Do not pay any fees, such as prepayments for credit reports, to the lender or the broker until they accept your loan application and give you the loan, subject to a decent credit report and you accept their offer.

Before you have the meeting with the loan officer check out the most recent current interest rates, by going to http://www.bankrate.com . Obviously, you can also look them up in the Wall Street Journal or at their website http://www.wsj.com.

Good Luck!