When applying for a mortgage loan you will need to provide certain documentation to assure the lender that you and the property are good credit risks. The documentation required will depend upon the type of work you do, the type of loan you are seeking, and the property you are buying. As many of you know, there are hundreds of mortgage loan products to choose from. In this article we will discuss three basic types of loans: Conventional (sometimes called conforming), Government, and Non-Conforming. This will give you a better idea of the type of information your lender will require-and help you choose the loan that's right for you.

The Conventional Loan
Conventional loans are available for amounts up to $240,000, and offer the most aggressive interest rates of all of the loans discussed today. Anything greater than $240,000 will be referred to as "Jumbo" and have a higher interest rate.
The documentation needed for this loan is:

• Current month of paystubs
• 2 years of W-2s or 1099s
• 3 months of bank statements/retirement/stock accounts.
• Signed loan application with necessary disclosures.
• $350- $500 for credit report and appraisal, payable to your lender
• Derogatory credit explanations and divorce settlement info. if applicable

If You Are Self-Employed You Will Need:

• Last 2 years of 1040s with all schedules attached
• A year to date profit & loss and balance sheet.

A minimum credit score of 620 is required to qualify for a conventional loan. The lender requires home buyers to have a 5% down payment, closing costs, and 2 months of mortgage payments in the bank at the time of closing.

Conventional loans generally require mortgage insurance for loan amounts above 80% and can be used with a second loan for loan amounts up to 95% with no mortgage insurance. These "Piggy Back" loans have been a popular choice for consumers that need a loan amount above $240,000, want the benefit of the lower "conforming" interest rate, and cannot afford-or just don't want-to put 20% down to purchase a property.

Government Loans
Government loans are either FHA (Federal Housing Administration) or VA (Veterans Administration). The maximum loan amounts will differ for each individual county. If you choose a government loan, your lender will require you to sign many more disclosures and will have higher standards for property condition and appraisal. You will need to provide all of the same information as the conventional loan above, as well as a copy of your drivers license and social security card.

Government loans are much more lenient on credit and do not require a minimum 620 credit score. They also have a slightly higher interest rate than the conventional loans. FHA requires you to have 3% down-which can come from a gift-and closing costs, but does not require the 2 months reserves for mortgage payments at closing. VA loans require zero down.

Non-Conforming Loans
Non-conforming loans offer the most flexibility of all the loans discussed. This loan offers you the ability to go "stated income," which means you "state" your income on the application and do not have to provide any paystubs, W-2s, 1040s or bank statements to verify it.

There are several versions of the non-conforming loan product sometimes called EZ Doc, Quick Doc, or any other number of names, with slightly different guidelines. If you do not use the stated income product you will need to provide the same documentation as the conventional loan above. Non-conforming loans do not usually have maximum loan limits. They are extremely flexible on credit terms. Because of their flexibility they do have the highest interest rates of the loans discussed here today-although they are still reasonable. Non-conforming loans offer 100% financing for borrowers with excellent credit and other aggressive down payment options for borrowers with tarnished credit.

To receive the most aggressive rate the market has to offer, go "full documentation" and provide the lender with verification of your income and assets. For the self-employed borrower who does not want to hassle with, or cannot qualify with the tax returns, profit & loss and balance sheet, "stated income" loans offer a stress-free alternative.

In today's mortgage arena there are wonderful loan solutions for virtually everyone. Because of the overwhelming selection available, we suggest calling a professional loan officer to discuss your situation and find a loan product that offers the best combination of features.

About The Author