Effective 5-29-2008 FHA and the department of Housing and Urban Development (HUD) released a new set of guidelines for alternative tradelines.  They divided these types of accounts into 2 groups to help lenders and underwriters evaluate borrower credit worthiness:

Group One – rent/housing payments, gas, electricity, cable and land-line phones.  These tradelines need to be paid separate, and not be included in the rent payment.  Also if the borrower is renting from a family member, HUD requires lenders to request independent documents to prove regularity of payments, such as cancelled checks.

Group Two – consists of receipts of paid auto insurance, renter’s insurance, cell phone, internet, school tuition, child care providers, etc.  These types of accounts are acceptable but do not hold as much weight as Group One accounts.

Verifying Nontraditional Credit – HUD prefers all non-traditional credit references be verified by a credit bureau reported back to the lender as a nontraditional mortgage credit report (NTMCR) in the same manner as traditional credit references.  If a method is used to verify credit and rental references other than NTMCR, all references obtained should be backed with the most recent 12 months cancelled checks.

Evaluating Nontraditional Credit -

1. No history of delinquency on rental housing payments allowed.
2. No more than one 30-day delinquency on payments due to other creditors.
3. No collection accounts/court records reporting (other than medical) filed within the past 12 months.

Social Security Number, for borrower and co-borrower if any

Employment History
For the last two years, employment dates, addresses, “stated” salary
(income must be deemed “reasonable” by the underwriter)

Liabilities and Other Non-Mortgage Debt
Creditors names, addresses, account numbers
Monthly payments and balances

If you’re self-employed
A letter signed by your CPA, indicating what type of work you do, how long you have been doing it and to their knowledge how long you have been self-employed 

If divorced or separated
Complete executed divorce decree and settlement agreement
Payment history of alimony/child support over the past 12 months, if it is a financial obligation.
If you choose to have this be considered as part of your income (you don’t have to), be prepared to provide 12 months canceled checks or bank statements reflecting income deposits.

Name and address of all mortgage lenders for the past 24 months, account numbers, monthly payments and balances

If you’ve sold your home but not closed:
A copy of the sales contract

If you’ve sold your home, closed, and you will use the proceeds for your new down payment:
A copy of the HUD-1 Uniform Settlement Statement

Name, address and phone number of landlords for the past 24 months

Purchase sales contract or offer to purchase and all addenda
Furnish contract with original signatures of buyer and seller

If a source of your down payment is a gift:
Name, address and relationship of donor.
Gift funds will be verified in both the donor and recipient’s accounts.
Note: Not all loan programs allow gifts to be part of your down payment.

For Identity Verification
Evidence of Social Security Number and photo identification

For VA Financing
DD214 and Certificate of Eligibility

For Construction/Perm Loan
Signed construction with cost breakdown, builder plan and specifications

Social Security Number, for borrower and co-borrower if any

Employment History
For the last two years, employment dates, addresses, salary.
Current pay stubs or W-2 forms.

Check and Savings Accounts and Certificates of Deposit
Location of bank accounts, account numbers and balances;
Address of bank if out of town
Last 3 months’ statements

Stocks, Bonds, and Investment Accounts
Broker’s name and address, description of stocks, bonds, etc.
Last 3 months’ statements or copies of stock certificates

Life Insurance Policies
Insurance company, policy number, face amount, cash value, if any

Retirement Plan
Approximate vested interest value
Copy of latest statement

Automobiles
Make and model of automobiles, their resale value

Other Assets
Market value of personal and household property

Liabilities and Other Non-Mortgage Debt
Creditors names, addresses, account numbers
Monthly payments and balances

If you’re self-employed
Two years tax returns, profit and loss statements, both company and personal if separate.
Current balance sheet and profit and loss statement if more than two months into the new fiscal year, signed by CPA.

If you have income from:
Commission
Overtime
Bonus
Partnership
Rental Property
Trust
Notes Receivable
Interest/Dividends
You’ll need two years’ personal federal tax returns

If employed in family business
Personal federal income tax returns and all schedules for the past two years

If divorced or separated
Complete executed divorce decree and settlement agreement
Payment history of alimony/child support over the past 12 months, if it is a financial obligation.
If you choose to have this be considered as part of your income (you don’t have to), be prepared to provide 12 months canceled checks or bank statements reflecting income deposits.

Name and address of all mortgage lenders for the past 24 months, account numbers, monthly payments and balances

If you’ve sold your home but not closed:
A copy of the sales contract

If you’ve sold your home, closed, and you will use the proceeds for your new down payment:
A copy of the HUD-1 Uniform Settlement Statement

Name, address and phone number of landlords for the past 24 months

Purchase sales contract or offer to purchase and all addenda
Furnish contract with original signatures of buyer and seller

If a source of your down payment is a gift:
Name, address and relationship of donor.
Gift funds will be verified in both the donor and recipient’s accounts.
Note: Not all loan programs allow gifts to be part of your down payment.

For FHA Financing
Evidence of Social Security Number and photo identification

For VA Financing
DD214 and Certificate of Eligibility

For Construction/Perm Loan
Signed construction with cost breakdown, builder plan and specifications

 The HUD-1, also known as the settlement statement, is a prescribed form from the U.S. Department of Housing and Urban Development (HUD). This form itemizes all charges imposed on the borrower and all charges imposed on the seller in connection with the settlement of your real estate transaction. One business day before the settlement, you have the right to inspect your HUD-1 Settlement Statement.

 The HUD-1 is filled out by the settlement agent who will conduct the settlement. The fully completed HUD-1 Settlement Statement generally must be delivered or mailed to you at or before the settlement. In cases where there is no settlement meeting, the escrow agent will mail you the HUD-1 after settlement, and you have no right to inspect it one day before settlement.