What information lenders require to evaluate a borrower credibility?

Question

Hi everyone,

I had a question on what type of information a lender usually requires from a borrower to evaluate his/her credibility. Is there a sort of checklist of docs/information that is necessary before applying to a lender?

Thanks in advance!

Nicky

Matt Devincenzo · Answer

Here's the letter I got 6 mo ago for my cash out loan app. The first set is documents they send you and you need to sign and return. The second is support information you need to provide. Some will be individual specific like my having two employment income sources. All I did was draft a quick little word doc letter explaining it and then sign and send it to them. If they need anything above and beyond this they will let you know, or if there is a problem with the documents they'll let you know and tell you what you need to resolve the problem.

Thank you for letting_____serve your lending needs. Enclosed vou will find the following

disclosures as indicated below for your pending loan application with ______

1) Federal Truth-In-Lending Disclosure Statement

2) Notice to the Home Loan Applicant

3)  Disclosure Notices: Affidavit of Occupancy, Anti-Coercion Statement, Fair Credit Reporting Act, FHA Loans/Government Loans

4) Equal Credit Opportunity Act

5) Flood Disaster Protections Act of 1973

6) Notice to Applicant of Right to Receive Copy of Appraisal Report

7) Patriot Act Information Disclosure

8) Servicing Disclosure Statement

9) Good Faith Estimate

10) 4506T

11) Borrower's Certification and Authorization

12) Privacy Statement

13) Required List of Service Providers Disclosure

14) Undisclosed Debt Form

15) Homeownership Counseling Notice

Please sign and date each disclosure where indicated and return these documents in the

enclosed self addressed return envelope. In addition, please also include any items checked

below:

1) 2011, 2012 and 2013 W-2's

2) Please explain your employment, are you presently employed with both

____ and ____ ?

3)  2011 and 2012 (and 2013 if they are done) Personal tax returns, all pages

(If If you have more than 25% ownership in any businesses, please provide

2011,2012 and 2013 (if they are done) tax returns including K-l's

4) 30 days worth of paystubs that show year to date income

5) 2 months Current bank statements from all assets, all pages along with

documentation for the source of any large deposits

6) A copy of the mortgage statement from ______ ?

7) A copy of the insurance policies for _____ Avenue and_____ :

8) A Letter explaining the reason for the cash out

9) A letter of explanation for the credit report inquiries from _____ and_____

and whether any new accounts were opened.

10)  A survey for _____ Avenue

11) A copy ofthe Owner's Policy of Title Insurance for Ave.

12) A check payable to _____ for $450 for the appraisal

If you have any questions, please do not hesitate to contact me at______

Sincerely,

Keith Anderson · Answer

It varies from deal to deal. LTV, credit scores, etc. all come into play. At the end of the day the property and borrowers stick in the game carry a lot. Feel free to message me or call me if you want to go over your situation.

Jeff S. · Answer

Your question is unclear, @Nicky Rasulova.  Are you asking for all the documents any lender could possibly ask for or how to evaluate the credibility of a borrower?  Are you asking about consumer purpose loans, such as those sold to or guaranteed by GSE's such as Fannie Mae, or asset-based business purpose loans obtained by real estate flippers? These are big differences.

Business purpose loans, such as those typically made by the hard/private money lenders on this board are not subject to Dodd-Frank, the SAFE Act, TILA , RESPA and the like and don't require anything close to the rather exhaustive pile of documents mentioned above.  Most of these are for consumer loans and are only required by statute. Virtually none of them add to or even suggest a borrower's credibility.  This was true in 2007 and it's true now.

Credibility is established by a track record and a personal relationship.  You won't find any of that in a 1003 Residential Loan App (strangely, missing above?) or a credit report or bank statement.

While some lenders use a conventional lending approach to qualify a business purpose borrower (such as banks that sell their refi loans to Fannie Mae), others will focus on the asset, proven track record of the borrower, and an assessment of integrity you can only obtain by personally meeting and getting to know he or she.

Don't confuse qualifying for a loan with credibility.

Paul Granneman · Answer

Nicky,

I just bought a house here in Colorado and the list of information and paperwork that the lender required was quite extensive.

My position was unique however since I did not live in the US at the time (and had not lived in the US for 26 years).

They checked my credit, my work history, wanted 2 years of tax returns, pay stubs for the last two months from my job. In addition they wanted a note that covered every address on my credit report for the past seven years.  I had some stories to write on that since I have lived overseas the whole time!

Lastly they needed a confirmed quote for homeowners insurance.

Nicky Rasulova · Answer

Thanks Keith, it will be great to learn from you!

What information lenders require to evaluate a borrower credibility?

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