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This article has been written by David Kanis and Beth Burdick
Contact David Kanis online at
www.ashefordfunding.com  
 

“Mortgages and More”

David Kanis and Beth Burdick

Mortgage loans available with different types of documentation

Over the past several weeks we have attempted to educate our readers on the psychology of the mortgage lending process. To recap: we have discussed the differences between  pre-qualification, pre-approval, and lender commitment. We have outlined the 3 basic levels of loan analysis. “Show me the money” for down payment and reserves. Prove your ability (income) to pay the mortgage. And we spent 2 columns discussing the credit worthiness of the borrower. Just remember, “it is all about the credit”.

 We have received a number of questions from readers about what documentation is required to secure a mortgage loan. There as many different loan documentation scenarios types as there are flavors of ice cream. If we don’t answer your question this week, check out part 2 next Sunday.

Q: We recently moved to Asheville from Kansas and are currently living with our children. We have recently purchased a house and our children are encouraging us to close as soon as possible. We think they have plans for our room. All our documents are in storage back home. We have excellent credit and live off our pension, retirement, and social security income. Can we get a loan as simply as we can get a credit card?

A: Yes. You can if you are credit worthy. There is a new type of loan called a streamline loan. You just need to sign the loan application and prove that you have had a consistent source of income for 2 years. Streamline loans are also available for people with excellent credit and 2 years of consistent employment/self-employment.

Q: The last time I applied for a mortgage I had to rent a U-Haul to bring in all my paperwork. Was this really necessary?

A: You don’t say when you last applied for a mortgage, but scanners, fax machines and overnight delivery services have greatly simplified the mortgage application process. Based on the lender’s analysis of your down payment, assets, income, and credit score he/she may recommend what is known as a “full doc” loan. Standard documentation for this type of loan includes:

  • Two months proof of down payment in an account that can be liquidated like a checking, savings, or money market account.
  • Two months of house payments (reserves). This can be in a 401K or retirement account and need not be “liquid money”.
  • Proof of your ability to pay the mortgage as evidenced by 2 years of W2’s in the same line of work and 2 consecutive pay stubs. If you are self-employed the lender will want to examine your last 2 years’ tax returns.

Q: I know I have great credit and I have money for a down payment. I lost my job and was unemployed for 6 months. I have recently accepted a new position. Can I obtain a loan despite previous unemployment?

A: Yes. You can if you are credit worthy. There is a type of loan called a “no documentation” loan in which no income, no assets, and no employment are disclosed on the loan application. Naturally a stronger down payment is required for this type of loan than some of the others we have discussed.

To sum up, you need not have absolutely stellar credit and a big bank account to qualify for a mortgage loan. Many of the loan options we have discussed are available to borrowers with credit scores below 620. In some cases you need not have your down payment money sourced and in some instances you need not even have a job. All you have to do is explore your options, get pre-approved, click your heels together three times and say “there’s no place like home”. In between tapping those ruby slippers together email us your questions for future columns.

David Kanis and Beth Burdick combine twenty years of financial management and lending experience. In addition to operating Ashford Mortgage, they teach mortgage and finance classes at the Carroll-Phillips-Cumbie Real estate Institute and at local real estate firms. Contact them at 350-8886 or by e-mail at ashford@mortmoney.com .


This article has been written by David Kanis and Beth Burdick
Contact David Kanis online at
www.ashefordfunding.com