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posted: 6/6/2014 4:23 PM

If you plan to start loan-shopping soon, get your paperwork together now

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Q. I am getting ready to apply for a mortgage. What kinds of documents will the lender need to process my application?

A. Documentation requirements vary, depending on the lender's own rules and the type of loan you are seeking. But you'll probably be asked for copies of your W-2 forms that show how much you've earned over the past two years, as well as copies of your paycheck stubs for the last 30 days.

You will also be asked to provide an employment history for the past several years that includes addresses of the people or companies you worked for and an explanation of any gaps between jobs. Lenders don't mind if you took some time off to raise a child, but they get a bit nervous if you were out of work for several months for no apparent reason.

If you're self-employed, figure on providing complete copies of your federal tax returns (including all schedules) for the past two years. You will also be asked for a year-to-date profit-and-loss statement and a current balance sheet for your business.

The lender will also want to verify where you'll get the money to cover the down payment and the closing costs. So, expect to provide three months' worth of statements for your checking and savings accounts, retirement-savings plan, stockbrokerage accounts and the like. If your parents or someone else is providing part of the down payment, the bank will probably ask them to sign a "gift letter" that says the money won't have to be repaid.

Finally, compile a list of all of your outstanding debts -- credit cards, auto or student loans and so forth -- along with the name and address of each creditor, the account number, the current balance and your minimum monthly payment requirements. Pulling all this stuff together can be a real pain, but it's better to do it now instead of waiting until the last minute.

Q. We are applying for a mortgage. How will the lender verify the information we include about our incomes? If we stretch the truth a little, would we get caught?

A. Don't even think about lying on your loan application. Even a little "white lie" about how much you earn is considered loan fraud -- a felony punishable by a prison term and a stiff fine.

Fibbing on a loan application is easy. Getting away with it is not. Once your application is filed, the lender will contact your employer to verify everything you included about how much you earn and how long you've worked there. It will also check with the institutions you listed as holding your checking, savings and investment accounts to verify your account balances.

The lender will also probably ask you to sign a form that allows it to compare the income-tax returns you give the bank with the returns you actually filed with the Internal Revenue Service. This discourages borrowers from providing lenders with a bogus return that indicates they earn much more than they really do.

Even if you lied on the loan application and got the mortgage, your deception might be uncovered when the bank's books are reviewed by regulators or the lender's own quality-control team a year or two from now. The lender could then demand that you immediately repay the loan in a lump sum and begin foreclosure proceedings if you couldn't come up with the cash. After that, your case could be turned over to authorities for prosecution.

Q. My husband died two years ago, and now I am thinking of selling our home of 22 years. We held title as joint tenants with right of survivorship, which means I automatically received his half of the interest when he passed away. Will I have any trouble selling because his name is still on the deed?

A. You shouldn't have a problem selling, though you will probably need to do a little paperwork in order to put the property in your name only. In most states, the surviving spouse must usually file a certified copy of the deceased spouse's death certificate with the county recorder in order to clear up the title. Usually, an affidavit of survivorship must also be recorded.

You can file the necessary papers now, or you can wait until you actually sell and have the escrow agent or closing attorney who handles the transactions help you.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

© 2014, Cowles Syndicate Inc.

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