Tales Of Future Past
September 3rd, 2008 categories: Buying Real Estate in Coconut Grove
This post is authored by our Guest Contributor, James Venney:
In the mortgage banking world of the 1990’s the saying “It is what it is” was a way of expressing that the underwriting guidelines are in place to be followed and a buyers income and assets were as reported on their tax returns and bank statements. Between 2001 and 2007 this saying was transformed into “it is what you want it to be” and we are now paying witness to the devastation wrought by the abuse of stated income and stated asset programs (a stated income or stated asset program is one in which you simply state what your income or assets are and are not required to provide supporting documentation of such).
Welcome Back To The Future
The go-go days of 2001 to 2007 are behind us now and the new reality of the mortgage world is again….”it is what it is”, truly a tale of future past. When applying for a mortgage you should be prepared to bring copies of your most recent W2, a copy of your most recent pay check stub and most recent asset account statements. Oh and if you are a business owner or self employed you will also need your previous years tax returns. In some cases you may be asked to provide two years W2’s (or tax returns), two paycheck stubs, and two most recent account statements.
Those lenders that are still doing true “stated income” programs are charging a significant interest rate premium for doing so and in most cases are requiring the borrower to sign an IRS form 4506T prior to closing. A 4506T allows the lender to request a copy of your most recent year’s tax return from the IRS to confirm that the income stated on your application matches what you reported on your returns. We are seeing these 4506T’s being exercised more often then not and some loans being declined as a result of discrepancies in the income.
“Full Doc” Pre-Approval
The old carpenter’s adage of “measure twice and cut once” is very apropos when it comes securing a pre-approval for mortgage financing. The only way to secure a pre-approval that you can be confident in is to provide all the necessary income and asset documentation up front so that when you do find the home of your dreams you know you will qualify for the financing and be able to close. Remember most reputable lenders will not ask you to pay a fee to be pre-approved and you should have your pre-approval updated every 45 to 60 days.
