The Mortgage Process: The “Perfect” Home Loan File
Refinancing A Mortgage Can Go Smoothly If You’re Prepared
You hear all the time on the news that getting mortgage approval or meeting credit guidelines have made it nearly impossible to get a home loan. While those may be obstacles for some borrowers, the most difficult part is meeting the grueling document requirements for the home loan.
To put it simply, you will need to send in every aspect of your financial life throughout the entire process. It is like going through an IRS tax audit.
The mortgage world has taken this approach due to the housing crash that started in 2007. To prevent fraudulent loans, the fact checking process has increased tremendously. Lenders need to see all of your financial aspects to help protect themselves.
Have you ever been told the phrase “Because I said so”? Rather than fighting the mortgage lender on their requests, this is the attitude one must to take during the approval process.
So, what makes up the perfect loan file? Having excellent credit, a large down payment, and/or stable and sufficient income is no longer the bottom line. Here’s how the process works.
The loan originator acts as a filter to determine if the borrow will qualify under today’s guidelines. Their job is to determine if the borrower’s specific situation meets underwriting guidelines through automatic underwriting. If so, they must gather all the documentation to support the loan.
Every dollar in checking, savings, investments and retirements accounts, and gifts from relatives will need to be documented with some sort of paper trail. Even $50 birthday checks from grandma could be required to source.
If you previously sold a home in a short sale or own a rental property, a whole new list of guidelines come into play. Self employed borrowers also have their own hoops to jump through. Again, its not the fact of getting approved that’s hard, it is providing the documentation to prove you indeed qualify.
If a lender asks for a specific document, give them exactly what they are asking for. If they want a bank statement and the statement has four pages, you need to send in all four pages. If they want to see a copy of the check from grandma, you’ll need to send it. This may sound trivial, but this is the root of all the pain in the mortgage world today.
Every time you ask yourself why on earth do they need this, just tell yourself “because they said so”.