Refinancing? 3 Mortgages That Require Less Documentation

By SCOTT SHELDON (Open Post

Looking to avoid all the paperwork associated with getting a mortgage? Here are three loan programs with no laundry list. See if you’re eligible…

Most mortgage loan products require you to provide two years of tax returns and W-2s, 30 days of pay stubs and at least two months of bank statements to provide a basis demonstrating your ability to repay the note. If you’re buying a home, there’s no back step, you will be subject to the scrutiny of the bank’s underwriter.

If you are looking to reduce your fixed housing costs here’s three programs that could meet you in the middle of the road. After all, who wants to go through a financial analysis every time you want to save a few hundred dollars per month?

Harp 2 -

If your loan is owned by Fannie Mae or Freddie Mac, and it was taken out no later than May 31, 2009 you’re gold. The role of the Making Homes Affordable Programwas to aid homeowners in refinancing due to loan-to-value restrictions, do so without limitation. The program still has the same flexible appraisal threshold. Each mortgage company offering the program must perform an automated underwriting analysis on your loan application. Automated underwriting is the nationwide algorithm lenders use in originating loans sold to Fannie Mae and Freddie Mac. The automated underwriting results determine a loan that is eligible for sale delivery to either entity. If the automated underwriting results reveal your loan does not require an appraisal, you need not obtain one. Additionally, even if you have a debt to income ratio as high as 60%, this may also fly with your mortgage company.

Mortgage tip: some mortgage companies have debt related adjustors built into their origination guidelines, meaning that even though the program does not have a debt to income ratio requirement, you might still be limited to 45% and it may mean having to request an exception for approval.

Additionally, if automated underwriting only requires pay stubs and for example one year of federal income tax returns, you need only that information in conjunction with your mortgage loan application. This may be acceptable with the mortgage company who we were working with to provide documentation specifically consistent with the automated underwriting results.

The same credit characteristics might apply as identified above, your mortgage company may still require full documentation. For the loan to be considered eligible for delivery to Fannie Mae and Freddie Mac, the only documentation that is required is specifically identified on the automated underwriting result your loan officer has access to. If your mortgage company is still asking you for more financial documentation, ask them to provide a copy of the Desktop Underwriter (Du) Fannie Mae’s algorithm or Loan Prospector (LP) Freddie Mac’s algorithm results on your application.

FHA Streamline –

The Federal Housing Administration insures loans made by mortgage lenders. They insure the lender originating your loan against default. The FHA offers homeownership options much more flexible and lenient in comparison to conventional loans. One of the nuances of FHA loans is the ability to refinance from one FHA loan to another FHA loan, called an FHA Streamline Refinance. The program requires no income documentation of any kind, and no debt to income calculation or limitation, either. In other words, your debt to income ratio could be as high as 70% and the lender is not required to qualify you based on your income to debt load.

The reasoning here is that the FHA is simply refinancing loans they already insure, minimizing risk. The FHA reduced mortgage insurance premiums in January 2015 making FHA Streamline Refinances more attractive as the mortgage insurance has been drastically cut from years past preventing many from taking advantage of the program. This program specifically does not require an appraisal as well, unless you are financing closing fees. If you have an FHA Loan on your home, that you took out in 2014 or before, there is strong likelihood you would save money with lower mortgage insurance premiums and current mortgage rates.

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If you are a US military veteran who currently has a VA Loan, you could stand to benefit without mountains of paperwork. The US Department of Veterans Affairs guarantees loans made by lenders against default. The Interest Rate Reduction Refinance Loan (IRRL) mirrors the FHA Streamline Refinance where no debt to income ratio is calculated and no appraisal is required.

Generally, to be eligible for any one of the three mortgage loan programs you’ll need at least a 620 middle credit score or better. Some mortgage banks might offer pricing incentives or credits for better scores as well.

Mortgage tip: while it is certainly an inconvenience to have to provide financial documentation, it could behoove you to do so anyway as your interest rate and/or credit could be more financially beneficial.

Also see:

• How Far Does $100 Go In California?

Other recent columns from Scott:

• Know How To Use APR To Compare Mortgage Offers
• Three Options First-Time Home Buyers Have To Get Started
• What To Know If Considering A 15-Year Mortgage
• How To Keep Costs Low When Taking Out Conventional Loan.

Scott Sheldon is Senior Loan Officer and consumer advocate based in Sonoma County. Scott has been originating home loans for nearly decade. His weekly consumer articles offering key mortgage insight and credit tips can be seen in Yahoo! Finance, AOL Real Estate, Business Insider, Realtor.com, Fox Business, MSN Money and many others.