Do I Have to Provide a Financial Statement Every Year for a Mortgage?

HELOCs

HELOCs provide the homeowner with a line of credit, much like a credit card, against the equity of the home. Many HELOC notes allow the lender to periodically re-examine the loan to ensure the borrower and home still qualify for the loan. The amount of re-examination must be disclosed in the mortgage note at closing. If the home's value has fallen, the lender may reduce the maximum credit line of the loan. Some, but not all, HELOC notes ask for permission to re-evaluate the borrower's ability to repay the mortgage during the loan term.

When lenders consider modifying the mortgage loan, it's done as a way to prevent foreclosure of the home. The homeowner cannot afford the monthly mortgage payment as it was closed and may be several months behind on the loan. The Making Home Affordable Modification Plan requires the lender re-evaluate the borrower's gross monthly income and modify the loan's payment to 31 percent or less of that amount. Borrowers must provide financial statements, usually pay stubs, W-2s and tax returns when requesting a modification of their note. This plan is part of the government's response to the housing crisis and was set to expires Dec. 31, 2012.

Refinancing is simply asking for a new loan with better terms to pay off the existing mortgage note. The lender will perform the same fact checking exercises the first lender did when the initial loan received approval. Even if the new lender is the same company as the existing lender, they will require you to fully qualify for the mortgage as if they didn't already have your loan. They ask you provide proof of your income, a credit report, proof of assets and usually a new appraisal to establish value of the home.

Some loans are assumable. These loans allow the buyer of the home to simply take over the mortgage payments of the home from the seller. Some assumable loans are qualifying and some are non-qualifying. Most lenders no longer provide non-qualifying mortgages but some older ones still exist. If the loan is non-qualifying then the purchaser does not prove anything to the lender, they just start making payments and request the loan be changed into their name. If the loan is qualifying then the buyer provides proof they can make the payments and qualify for the loan.