My Real Estate Blog

If you're looking to get a home loan here are a few things you should consider.

If you're self-employed the rules have changed considerably and not just for mortgages but also personal loans too. Some lending institutions are now requiring self-employed borrowers to provide documentation from assets to income and the documented income is then checked with IRS records. 

Another big change has to do with what borrowers may have done in the past. When Fannie Mae and Freddie Mac discover loans where the borrowers misrepresented their income, the agencies are requiring the lenders to repurchase the loan from Fannie Mae and Freddie Mac. In turn the lenders then have the option to go after the borrowers in the form of foreclosure—even if the loan is not delinquent. There's no statute of limitation for fraud.

One major lending institution hired a company to go through all its stated-income loans looking to see if there was fraud. At first they started with all the delinquent loans and then they moved into performing loans. Then they started requiring lenders to buy back all these loans which put lenders out of business. That closed down some shops.

The problem that many self-employed borrowers have today is that they need to be able to show that their business is legitimate in order to get the loan. The typical documentation includes, but is not limited to, a Web site, CPA letter, 411 listing, and business license.

If you're not self-employed, the rules for loans are tight as well—bigger down payments and better documentation are a must. While some lenders will allow as little as 5% down for a conventional mortgage, most are looking for more than that.

Everything you submit to a lender is now being double-checked.