For "full documentation" loans, generally those with the lowest required downpayment, if you are employed, you will need two years W2s (or P60s from the UK); the past 30 days paystubs; two year's tax returns, the past 3 months bank statements(all pages, for every account, including any investment statements); 3 credit references showing type of account and date opened, high credit, monthly payments, number of times late; a completed application form, listing income, assets and liabilities, employment information (with phone numbers) and current and past addresses. The Lender will also need to pull a credit report and obtain an appraisal and a survey on the property you are purchasing. You will also need to open a US bank account and of course, have a signed purchase contract.

You may still find a few "limited documentation" loans available, but these would generally come with a much higher required down payment.  You would need the application form, one credit reference, a letter from your Accountant (if you are self employed) plus a credit report,  a US bank account and a signed purchase contract. An appraisal of the property will still be required. Again, lenders have different requirements that often change, so you always need to check first with your Mortgage Broker/Loan Officer.

If you are self employed, you would need all the above except instead of the employment information, W2s(P60s) and paystubs, you would need 2 years business and personal tax returns, business financial statements and a letter from your Accountant.

The majority of borrowers choose a 30 year fixed mortgage, which usually carries no prepayment penalty. However, many people also choose ARMs, or Adjustable Rate Mortgages, which usually have a lower interest rate for the first 5 years or so. Investment property usually has an interest rate some 1%-1.5% higher than an owner occupied property.

Please be aware that whenever you see the current average interest rates advertised (for example currently in Feb 2010 around 5% for a 30 year fixed), that quoted interest rate is only for people with absolutely flawless credit, full documentation, long stability of employment and residence and for the purchase of a residence or second home. Anyone with less than perfect criteria will pay a higher interest rate, as will foreign nationals in most cases.

Appraisers, who work on behalf of lenders, will often red flag rental properties if they suspect that the buyer may be continuing with the same usage, particularly if renters are present when the appraisal is scheduled. Contracts which mention rental bookings are usually flagged by lenders automatically as rental properties, so buyers are at all times responsible for disclosing their intent to their lender.

Foreign nationals usually have to show the Lender that they have enough money in reserve to cover 6 months of mortgage payments.

The main thing the Lender is looking for is to see that the borrower is stable, of good character, shows a history of timely payments, has enough income to be able to cover the new debt and has enough of a cushion in case of job loss.

Cash (meaning a big wad of actual dollar bills!) is never acceptable for a house purchase. Lenders always want to know that you got your money from legal sources and so you must be able to provide a paper trail of your down payment. If you are planning on using cash, it must have been in your bank account or some other traceable investment medium. Some good advice- if you are planning on getting a mortgage soon, don't go out and change your job, buy a new car or take on any new debt until after you have the mortgage!

Also very important - lenders now require that borrowers document the source of all funds used to purchase a property, regardless of how much deposit you put down. It is advisable to have all your deposit funds in place well ahead of applying for a loan and to try not to make any changes of bank accounts etc prior to application.

We always advise that you speak to a Mortgage Broker/Loan Officer BEFORE you have us start searching for property for you, so that you know exactly how much you will need and how much property you can qualify for. Otherwise, we may be spinning our wheels. We will always be happy to refer you to a loan professional in our area.