Let's Talk Mortgage Documents, Zero Point vs. No Cost, and Refinancing

What documentation will the lender typically require to process my mortgage?

The answer depends upon the quality of your credit and the amount of equity you have in your property. On a typical fully documented mortgage application (where an applicant is seeking to qualify based on an employee's salary), the lender will require: one month's current pay stubs, W-2's for the prior two years and bank and investment account statements for the prior 2-3 months. If an applicant is self-employed (has a 25% or greater ownership in a business) then additional documentation could be required (i.e. 1040's, 1165's, 1120's, P & L statement).

What is the difference between a zero point and a no cost mortgage?

With a zero point mortgage, a borrower has opted not to pay points to buy their interest rate down but will still be paying for their base closing costs (i.e. appraisal, credit report, lender doc fees, title and escrow, etc.). With a no cost mortgage, a borrower has accepted a higher interest rate, (typically .25%-375% higher than on a zero point mortgage) with the trade off that the lender or broker will pay for all their non-recurring closing costs (all base closing fees except for interest, taxes and insurance due).

Is it possible to obtain a no cost mortgage when refinancing your mortgage?

Yes. In fact no cost mortgages are extremely popular. Because a borrower pays no nonrecurring closing costs, it is easy to analyze how soon money is saved on a monthly mortgage payment by refinancing. Many homeowners will consider refinancing for as little as .25% improvements to their mortgage rate with no-cost mortgage financing.