The lending business has seen major changes over the last 5 or 6 years. I remember when I first started doing mortgages in 1987. It was a lot like it is now. I used to have a poster in my office that made fun of all the items you had to give your mortgage company in order to get a loan. The last item at the bottom of the poster asked for the following, “Please supply us with a copy of your great grandmother’s social security card.” Over time things changed until it came full circle and we were basically giving loans to almost anyone. We could do what was called a ‘no-doc’ loan. Put down a little money, have ok credit, do an appraisal and that was it. No other questions about assets, job, and definitely not your grandmother’s social. That philosophy ultimately burned the mortgage and real estate industry when real estate values started going down in 2007.
Now we are basically back to 1987 and getting everything under the sun from the borrowers and asking them to supply us with documentation and then more documentation. So, here would be my advice to real estate agents about what to tell their clients. First, give your clients a little idea about what it will be like as far as documentation. Second, let them know why the lenders might ask for so much documentation. The lender’s want to make sure the borrowers can make their payments and the lenders do not want to buy the loan back from Fannie or Freddie if they failed to document the file correctly. Third, let them know that the bank is loaning them a lot of money and they have a right to ask for most of the documentation they are requiring. Fourth, give your clients the list below so they are prepared when meeting with the bank.
- Most recent paystubs for one month.
- W2’s from the last two years.
- Signed copies of your last two years’ tax returns, including all schedules that were filed.
- Homeowner’s insurance company name and number.
- Most recent bank statements for two months (statement must include all pages and have name of borrower, account number, and bank name).
- Most recent statements from any retirement and investment accounts for two months.
- Copy of purchase contract and earnest money deposit.