Basically the confusing paperwork is caused by the government's efforts to protect you. The mortgage industry has to abide by numerous different laws each of which causes another layer of complexity. These laws include:

	Federal Truth in Lending Act of 1969
	Federal Equal Credit Opportunity Act
	Federal Fair Credit Reporting Act
	Federal Real Estate Settlement Procedures Act of 1974
	Flood Disaster Protection Act of 1973
	National Flood Insurance Reform Act of 1994
	Fair Housing Act
	Home Mortgage Disclosure Act
	Financial Institutions Reform Recovery and Enforcement Act of 1989
	Home Ownership and Equity Protection Act of 1974

We make it as simple as we can, and still comply with all of the laws established to protect you.

If your pulse starts racing at the thought of all the paperwork you'll have to produce when you sit down and apply for a loan, relax. You're not alone. Sometimes even lenders feel overwhelmed by all the documents borrowers bring to their office. The important thing to remember is that there is a reason for every piece of paper you'll have to produce. Once you know the reasons for the paperwork you'll understand the process better.

Some borrowers find the whole mortgage process overwhelming. This is especially true since today it is so easy to get credit cards and other types of credit. However, a credit card with a $1,000 limit is a lot different from a home with a $100,000 mortgage. While the paperwork can be intimidating, it's not the lenders who decide what paperwork borrowers have to submit. We don't just make things up, we convey the requirements of the people we sell the loans to, such as Fannie Mae, Freddie Mac, and other investors. Fannie Mae and Freddie Mac are federally chartered stockholder-owned companies that make more money available for mortgage loans by purchasing real estate loans from lenders.

Most banks and other lenders sell mortgages almost as soon as they make the loans. This gives them more available cash for making additional loans. Fannie Mae, Freddie Mac, and other investors who buy most of the loans as income-producing portfolios are referred to as the "secondary market."

It's important to point out that while the secondary market sets the rules, these rules are embraced by the primary market. The people who make the original loans and those in the secondary markets are in agreement. What l enders are really looking for is your pattern. Missing one payment is understandable. However, when it's a regularly recurring pattern, lenders get nervous. Most lenders are interested in the borrower's ability and willingness to repay the loan.

Ability is how much income people make, how much they can put down. Over the years statistics have shown that "people who have a five percent down payment are more likely to default, or have problems, than those who put down 20 percent." That's why lenders who accept less than 20 percent usually also want Private Mortgage Insurance (PMI). PMI is an extra bit of protection for the lender.

To determine a "borrowers willingness to repay a debt" lenders look at two areas. The first is the borrower's credit history. What about the washing machine the borrower bought five years ago? What about the car? Does the borrower make all payments on time? How much credit experience does the borrower have? Someone with a $500 credit card might not be as willing to repay a debt as someone with more experience, so the lender would review and analyze a person's current credit history and experience.

The second area lenders look at is how much the property the borrower is purchasing is worth. The lenders needs to be comfortable that the collateral for the loan, the house itself, is really worth the amount still owed on it. When the real estate market was more volatile, some people would have the value of their home increase even before they moved into it. Housing was seen as a secure and profitable investment.

People are more likely to walk away from a loan if the property declines in value. If they still owe $90,000, but the home is now worth only $75,000, they are more likely to stop making payments and just walk away from what they consider a bad investment.

Now that you know what the lenders are looking for, here's where they expect to find it. While a tax return is a great source of financial information, it's not always required. We typically need tax returns for three things;

	If you are self-employed, the lender wants to compute your average income.
	If you earn more than 25 percent of your income from commissions and tips, the lender wants to look at your income.
	If you are asking for a first-time buyer's program, such as a reduced down payment, the lender wants to analyze the situation.

For most salaried people, we need pay stubs within the last 30 days and the most recent W2 statement. The other thing we'll study is your credit history. If your situation is complicated enough, you might actually need a lot of papers, but the odds are you can get away with no more than a pocketful of papers. So some people might need more paperwork than others. However, in most cases you really don't need huge amounts-just enough to answer basic concerns about income, credit, and a reasonable down payment.