A lender is not simply going to 'take your word' that you can no longer afford your home. You must provide 'backup' financial information to them substantiating your case.
While there is no 'standard' of what each lender expects to see from you, below can be some of the information they wish to see.
An owner's financial statement can be constructed very simply with a list of assets and liabilities.
Assets
Real Estate
Stocks, bonds, mutual funds
Bank accounts
Personal property
Retirement accounts
Liabilities
Real estate loan(s)
Personal loans
Credit card debt
IRS liens
Judgments
Lawsuits
Lenders will want the amount of all the monthly expenses in addition to the assets and liabilities. These would include:
Credit card bills
Utility bills
Car payments
Insurance costs
food and clothing
Medical bills
Child support
Tuition expenses
Supporting Financial Information
These items are typically the same required by a borrower when applying for a loan. The lender will let you know how far back (2 months, 3 months, 12 months) the seller needs to go in supplying this information.
Pay stubs: Pay stubs allow the lender to see if the monthly take-home pay would cover the loan payments plus all the other monthly expenses. If the owner is unemployed, there will be no pay stubs to include.
W-2's and / or tax returns: The lender is trying to get a complete picture of the owner's financial situation. Is the income going up? Is the income going down? Will the borrower be able to make payments if the lender agrees to a repayment program?
Bank statements and credit reports: Again, the lender wants to be sure the borrower is truly unable to make the payments and these support that. The bank will order a credit report on the borrower but if they have one available attached, it is a benefit.
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