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Understanding Mortgage Terminology in Your New Home Loan
By Sheryl Landrum
CMR Columnist
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Lenders have become quite creative with their mortgage products, allowing almost everyone to become a homeowner or to refinance an existing mortgage. However, sometimes it is hard to keep up with the options and terminology related to a new home loan.
Here is a guide to understanding the terminology associated with your mortgage options; understanding these options can make a difference between qualifying for that new home loan or not.
- Full documentation home loans require verification of all income, assets, and employment history. Documentation required includes:
- 2 years W-2s and 1040s
- 2 years tax returns for self-employed borrowers
- 2 months bank and asset statements including all retirement accounts
- 2 consecutive paychecks showing year-to-date earnings
- With State Income/Stated Asset home loans:
- Assets are stated on mortgage application
- Income is stated on the mortgage application
- Employment is verified
- Reserves between 2-6 months are required
- Reduced documentation home loans require:
- A verbal verification of employment if salaried or a wage earner
- A CPA letter or business license verifying two years in the same business
- 2 months bank statements for liquid assets (same as full doc)
- Income is not verified on the mortgage application
These are some of the most frequently used options when applying for a home loan. Your credit scores will also affect which home loan option is available to you. Talk to your loan officer or lender today to see which options are best for your home purchase or refinance.
About the Author
Sheryl Landrum is a senior loan officer with First Capital Mortgage of San Diego, California.
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