One of the major frustrations in acquiring home financing these days, is
the never-ending need for documentation during the loan application
process. This seems to be because the lenders’ questions and requests for
documentation seem so redundant & vast! Home buyers feel they are asked
the same questions over and over and must supply the same information two
and three times during the course of the loan application process. The
lending programs have become so much more detailed & wanting every piece
of documentation possible.
This is occurring because lenders are not looking to create a “perfect
file” as they used to be before the housing crash pf 22008-2011 era.
Whereas in the past, perfect credit scores always were the guarantee for
the loan approval, today it is different! Documentation to the nth degree
is what they now need. When I mean documentation, I mean that perfect
documentation (and plenty of it) weighs more heavily in your favor than
perfect credit! If you are planning to apply for a loan, the best way to
avoid frustration is to accept
the fact that you will scan, photocopy, fax, and deliver every aspect
of your financial life
to the lender to initiate the loan approval process. Then, once your loan
approved, the home inspections have been completed, and the closing date
is set, you might have to
do it all again because the documents cannot be older than 30 days in
many cases!
It seems crazy to the common home buyer in Kansas City, but to the lender,
it is the new Standard Operating Procedure. As a result of so many lenders
suffering staggering losses back in the 2008-2011 era (even to the point
of being forced out of business) from having to buy back “bad” loans, the
entire process has changed. Not always for the best or what we hope it to
be. A vast majority of these loans years ago should never have been
approved, but they slipped through the approval process because of
substandard documentation and underwriting practices. In the end,
the lenders have now taken steps to make sure each loan application is
fully, completely, and thoroughly documented for approval, so that once
it is approved, it fullfills all the lending requirements. The lending
requirements have become very complex.
The responsibility to provide all these myriad of forms and documents
required by the lender, falls to you, the buyer.
More important than 1) excellent credit, 2) a down payment, and 3) stable
employment with income to support your debt service to guarantee your loan
approval,
is the ability to provide a borrower profile that meets the
underwriting guidelines of the specific type of loan for which you are
applying.
Also, you must be able to hard-copy-guideline-document your profile. Every
nook and cranny of your financial life will be examined, re-examined, and
triple examined in order to satisfy the lender that your loan will not be
subject to repurchase.
The processors and underwriters are the folks who do all the
data-gathering and will be making all the requests for information. They
are as a filter to provide every documentation to help qualify the buyer,
evaluate all the papers, validate your documentation, and make the final
call for approval of the loan. These folks are well-trained and
experienced in assembling the proper information for each specific loan
type. They are the ones who see to it the loan requirements are completely
satisfied for the underwriter to completely sign the final approval. They
must have the proof that you, as the applicant, have all the necessary
documented capability to assure them you will be able to repay your loan.
The process begins with your pre-approval call to the lender which will
include a comprehensive telephone interview. These questions are critical
in the process and you must disclose everything. Many things must be
determined at this time. Expect to answer all kinds of questions about
your employment, salary information, investments, and more. Every asset
you have: savings, investments, retirement accounts, etc. will need to be
validated. Whether the property will be occupied by yourself or will be an
investment property determines the type of loan for which you will apply.
Buyers with a short sale history, loan consolidation program may have to
wait several years before being eligible for financing and approval once
again. It all comes down to your proof. If the lender asks for specific
documentation, you must be sure that you are providing
exactly what has been requested. Buyers who furnish
something they think is “close enough” to what is being requested, will
find they will experience costly delays in being approved or even
potential rejection. No one wants that to happen!
Avoiding defaults and loan buybacks has become the primary goal of the
mortgage industry. Making sure you are prepared to comply with
every lender request, whether or not it makes sense, seems important or
appears to be redundant, will make your application process go much more
smoothly……and get you to your goal of loan approval more quickly! Just
remember the lender’s requests are not personal and you just need to make
up your mind not to fight the lending system, and the entire process will
be much more efficient & easier for you!
