2010 New rules on getting a loan

A few quick rules and thoughts on more recently announced changes to refinancing or purchasing a home in 2010 and whom they affect.

1. Anyone that has not filed taxes for 2007 and or 2008 will not secure a loan at this time. EVERY loan is checked against the IRS using what's called a 4506T.
If they aren't on file you don't close it's that simple. And you can't wait to the end to file them. Just filing them doesn't make any difference. Unless the lender can see them thru the website they use the loan will be denied. It can take the IRS 6-8 weeks from submission to get to the point we need.

2. Self employed borrowers but also anyone that is W-2 and on commission such as a car salesman or say a loan officer or realtor is going to run into more trouble. First off lenders will want to see two years tax returns to verify any write offs you may take. Several lenders are in Jan 2010 requiring that the 2009 taxes be filed. AS I write this most people don't have the required paperwork to meet this requirement. Though it is coming soon but again these things take time.

3. Lenders are now putting out the guidelines and everyone does it differently. One lender I know isn't accepting a profit and loss statement but rather demanding he 09 taxes be completed now.
One lender is saying a 12 month P&L is acceptable but won't be used in determining income.

So what that means is this: Since people in these profession have different incomes from year to year what lenders do is take an average generally from the previous two years minus any business deductions. So now it will be 07, 08 and they want to see 09 but now use it unless it's an actual tax return that is verified by the IRS. Getting your taxes done is not enough.

I can promise you if the income shows a decline from 08 to 09 though you will have major problems if not out right denied. So they want to have it both ways, if you make more in 09 we won't use it to help you qualify but if you made less then we will hold that against you.

Bottom line lenders are afraid to make new loans for several reasons, government interference, a possible new wave of foreclosures and because FNMA and FHLMC are refusing to buy loans on the secondary market. Or even worse buying the loans and then demanding their money back a few months later. Of course the GSE'S are still losing BILLIONS of dollars each year and it is all flowing down hill from them.

I hope this helps and please contact me for any further questions or assistance. Remember if your loan officer isn't aware of these types of changes then run away as fast as you can.

Thanks,
Brent