Documents are new reality for borrowers
By Marcie Geffner, LendingTree.com

If you recently applied for a new home loan, you might be surprised at the large number of documents your lender will expect you to hand over before your loan is approved.

In 2005, 2006 and 2007, many mortgages required only limited documentation. But today, lenders have begun to reinstate traditional “full doc” requirements. The fact is that lenders have become pickier in recent months about who can qualify for a loan, and more documentation is part of that trend. Even if you submitted very few documents when you obtained your current mortgage, you’ll likely be asked for a stack of documents if you want to refinance now.

Why is documentation necessary?
Documentation isn’t just paperwork. Lenders actually use your documents to verify the information on your loan application and make an assessment of your financial situation.

Some of the documents you’ll be asked for include W-2 forms and paycheck stubs. These show that you earn enough income to make the payments on your new mortgage. If you’re self-employed, you might be asked for financial statements to support your earnings or net worth. You may also be asked to produce bank account statements to demonstrate that you have enough cash for your down payment, if you’re buying a home, and closing costs. Be sure to keep copies of all of your documents for your own records.

Lenders also rely on documentation to spot possible cases of loan fraud. That’s another reason why your lender may become suspicious and set aside your file if you refuse to provide the required documents.

Some borrowers think the loan process is annoying or intrusive. But documentation serves a reasonable purpose and typically can’t be avoided unless you’re willing to accept a much higher interest rate. The payback for your cooperation should be a speedier and more definitive thumbs up or thumbs down on your new loan.

Documents are new reality for home-loan borrowers
By Marcie Geffner, LendingTree.com

If you recently applied for a new home loan, you might be surprised at the large number of documents your lender will expect you to hand over before your loan is approved.

In 2005, 2006 and 2007, many mortgages required only limited documentation. But today, lenders have begun to reinstate traditional “full doc” requirements. The fact is that lenders have become pickier in recent months about who can qualify for a loan, and more documentation is part of that trend. Even if you submitted very few documents when you obtained your current mortgage, you’ll likely be asked for a stack of documents if you want to refinance now.

Why is documentation necessary?
Documentation isn’t just paperwork. Lenders actually use your documents to verify the information on your loan application and make an assessment of your financial situation.

Some of the documents you’ll be asked for include W-2 forms and paycheck stubs. These show that you earn enough income to make the payments on your new mortgage. If you’re self-employed, you might be asked for financial statements to support your earnings or net worth. You may also be asked to produce bank account statements to demonstrate that you have enough cash for your down payment, if you’re buying a home, and closing costs. Be sure to keep copies of all of your documents for your own records.

Lenders also rely on documentation to spot possible cases of loan fraud. That’s another reason why your lender may become suspicious and set aside your file if you refuse to provide the required documents.

Some borrowers think the loan process is annoying or intrusive. But documentation serves a reasonable purpose and typically can’t be avoided unless you’re willing to accept a much higher interest rate. The payback for your cooperation should be a speedier and more definitive thumbs up or thumbs down on your new loan.

Interest rates may drop on ‘jumbo’ mortgages
By Marcie Geffner, LendingTree.com

If you need to borrow more than $417,000 to buy a home or refinance your existing mortgage, you may be in luck. That’s because the economic stimulus package, passed by Congress and signed by President Bush, contains a hefty hike in the size of mortgages that two government-sponsored mortgage-finance corporations, Fannie Mae and Freddie Mac, can buy from lenders.

Currently, Fannie Mae and Freddie Mac aren’t allowed to buy these so-called “jumbo” loans, even in most areas where housing is very expensive. That means lenders can’t sell loans that exceed the $417,000 conforming loan limit to investors as easily as they can sell smaller loans. As a result, these larger loans tend to have higher interest rates.

Now, though, Fannie Mae and Freddie Mac will be allowed to buy loans potentially as high as $729,750, and that could result in lower interest rates. If you live in a high-cost housing area, you might be able to save hundreds of dollars each month on your mortgage payment.

Nothing is ever certain with respect to interest rates. But if you want to buy a home in a high-priced market, the higher loan limits may enable you to borrow more money at a lower interest rate. Or if you want to refinance an existing jumbo mortgage, you may be able to do so more easily and, again, at a lower interest rate. What’s more, if you want to sell a costly home, more buyers may be able to borrow enough money to buy it.

The stimulus package also raises the limits on loans that can be insured by the Federal Housing Administration. The current maximum FHA limit is $362,790.

None of the new loan limits has been announced yet because the calculations are complicated and the amounts will vary based on geographical areas. In some high-cost housing markets, the loan limit may be as high as $729,750. But no matter where you live, be prepared to act quickly since the higher amounts are set to expire at the end of 2008, unless Congress extends that cutoff date.

6 tips to refinance your mortgage faster
By Marcie Geffner, LendingTree.com

Hordes of homeowners across the country have decided it’s a great time to shop for a new mortgage, especially one that has lower payments, a lower interest rate or a rate that’s fixed instead of adjustable.

This rush to refinance, which was triggered in part by the Federal Reserve’s decision to lower key bank interest rates, has swamped lenders and mortgage brokers with fresh loan applications. Here are six tips to make sure your application stays on top of the pile:

1. Be Realistic. Lenders have tightened up loan requirements, so you’ll need a good credit score and at least some equity in your home to refinance. To figure out how much equity you have, subtract the total amount that you owe on all of your existing mortgages from how much you think your home is worth. If your credit is severely impaired or you owe more than the value of your home, you probably won’t be able to refinance right now.

2. Be Patient. Processing all of the paperwork that’s required for a new loan takes time. Be patient while your loan moves through the system. Protect your credit score by paying your bills and making your mortgage payments on time and not taking on any more new debt than you absolutely have to.

3. Be Proactive. Your loan representative should keep in contact with you even if there isn’t any action on your loan. But do your part to keep the lines of communication open as well. If you don’t hear from your loan representative for a few days, pick up the phone and ask for an update. The old adage that the squeaky wheel gets the grease definitely applies in this situation.

4. Be Inquisitive. It’s your responsibility to make sure that you understand the terms of your loan. Ask questions and listen carefully to the answers. Don’t sign your loan documents until you are satisfied with the information and confident that you have made the right decision.

5. Be Prepared. You’ll probably be asked for more information and documentation after you submit your application, but before your loan is approved be prepared to document your income and assets. Answer any questions and fax documentation to your loan representative as soon as possible.

6. Be Ready. After your loan is approved, you’ll need to sign your loan documents and provide a check for any out-of-pocket closing costs. Make sure the funds are available in your account, and be ready to make room in your schedule to read and sign your loan documents when they’re ready.