Mortgage Documentation
Many people are shocked at the amount of documentation needed to obtain a mortgage. Yet, a mortgage lender is not going to hand over a large portion of money to just anyone, and they are trying to verify your level of risk by getting as much financial documentation to support the decision to offer you a mortgage. Mortgage documentation will include providing information about your income, assets, and employment, but how it is used can vary from lender to lender.
Mortgage documentation needed to get your loan will usually encompass verification of your income, assets, and employment. There are variations on the type of documentation needed to fulfill your obligation. You can provide full documentation, which is then fully verified by the lender. There is also alternative mortgage documentation you can provide like W-2Õs, bank statements, and verbal verification of employment.
For those that are self-employed, their income will be stated, because their tax returns do not necessarily reflect their cash flow. Stated income is also used when one member of a couple uses their income to qualify, possibly because the other spouse has bad credit or another reason. With regular stated income the assets must by fully verified and the employment must be verbally verified. However, there is also a stated income/stated assets type of mortgage documentation that is similar to regular stated income, but it also allows you to state your assets as well.
No matter what type of mortgage documentation your lender requires, how they use it is also important. The less mortgage documentation you have, the higher risk you pose to your mortgage lender. This is why mortgage lenders who require less mortgage documentation will often place a heavier emphasis on things like your down payment and credit score.
In practice, borrowers should try to provide as much mortgage documentation as possible to support the mortgage lender to approve the loan. Historically, full documentation was the only acceptable type of mortgage documentation. Yet as the workforce changed and more people were unable to provide full mortgage documentation, the other requirements were created. Still, the more mortgage documentation you can provide the better you look in the eyes of your mortgage lender.
Many mortgage lenders have moved toward allowing other forms of mortgage documentation, because they understand that the higher risk associated with less documentation can be offset by other risk factors. The rules of mortgage documentation are changing today to reflect all kinds of borrowers, just as the rules regarding credit changed previously. As bankÕs realize that people come from all backgrounds and have different financial situations, the mortgage documentation needed for loans has become more flexible allowing more people to become homeowners today.
