Home Loans in the New (Financial) World
You’ve heard the horror stories.
“My lender wanted EVERYTHING! I had to provide every page of every bank statement, every paystub and all pages of my last two tax returns. My lender needed explanations for very small deposits in my checking account and phone numbers for my employers, past and present. I even had to write an explanation letter about one credit inquiry on my credit report.”
There are more and more stories like this one, and with the current state of the industry, most of them are true. Documentation requirements for mortgages are 180 degrees from where they were prior to 2007. During that time, the lender simply asked for your income, the amount you had in the bank, an application and an appraisal before approving the loan.
Recent history has shown us underwriting home loans with no documentation can, at best, be problematic.
For lenders, there are now two goals when making a loan: (1) ensuring the loan is paid back and (2) making certain it is paid back on time. With this process being such an involved one with so many outlining influencers, decisions are now made by examining all aspects of your income, assets and credit.
With new industry regulations, acquiring a home loan can be more challenging than it was in the past. For many, it can be more difficult to meet the criteria to qualify for a mortgage. Even potential homebuyers who have been making payments to them on time for the past 20 years may find that alone may not help. Every financial document, any “minor” issue on your credit report and items such as overdraft charges or unidentified deposits on your checking statements can all be questioned. Those questions will need to be answered with more documentation. The goal of the lender and underwriter is to create a perfectly documented file before they issue the approval. Today’s mortgage process requires a team effort between you and your lender to make sure all the i’s are dotted and t’s are crossed.
It’s important to know that there are several things in your control to help make the process easier:
- Be prepared to provide all the documentation your lender asks for up front. The earlier you have the financial records needed, the sooner you close on your home.
- Keep your accounts stable and avoid make any major changes to your income, assets or debts just before or during your loan process. Double and triple‐checking these items before the loan closes is now standard operating procedure.
- Pick a professional and trusted lender to lead you through the process. Instead of seeing it as a reason to consider switching lenders, view the fact that your lender is asking for a lot of paperwork early on as a good sign.
The best news is that current market rates are great! It’s a wonderful time to buy or refinance. Look for a lender with experience and knowledge. Buying a home is one of the largest financial investments you will ever make, so you’ll want to work with a lender that is well-respected and known for providing their clients service beyond expectations. In many cases, it is still possible to finish the mortgage process in 30 days or less. A strong and trusted partnership between you and your lender can make this process actually pleasant.
Buying or selling a home?
You can get cash back on the real estate fees and earn a gift to be given to the Texas Tech Alumni Association at the same time.