Why is my lender asking for so much documentation?

Q: We're looking to refinance our primary home. We own rental properties and the potential lender wants to know everything about those properties, including reviewing copies of the lease agreements. These aren't part of the refinance we are seeking. It is legal or necessary for the lender to require us to disclose details (insurance coverage, tax certifications, leases and more) for properties that aren't part of our refinance transaction?

A: If you declared any income from these rental properties as a portion (or all) of the income needed to support payments on your primary home refinance, the answer is yes. The lender must have a sense that the income you are reporting from the rentals are in-line with other properties in the area, that any required debt service on those properties (mortgages, liens) is being managed and that the income stream from your rentals can be expected to continue (lease agreements, etc). Investors and secondary marketers require such verifications; without them, this portion of your income would be merely "stated" (a.k.a. undocumented), and could be easily overstated.

While income property mortgages require even more paperwork than do owner-occupied ones, the list of documents you need to apply for a mortgage is quite lengthy in either case.