By John Rives
Many people are taking advantage of the record low interest rates to purchase a new home. However, a lack of understanding of the loan process and what is required can cause delays in procuring a mortgage, or worse, being turned down due to failure to supply the financial documentation requested by the underwriter.
In the past it was necessary to have excellent credit, a large down payment and stable employment with sufficient income to support your total debt payments to guarantee a loan approval. These days you must have a borrower profile that meets the credit underwriting guidelines for the loan you are requesting. And, you must be able to produce all hard-copy documents requested by the underwriter.
Once you have chosen a lender, they will supply you with a list of all the documents you must submit in order to secure the loan. They will ask for information such as your job tenure, employment stability, income, your assets (property, cars, bank accounts and investments) and your liabilities (auto loans, installment loans, mortgages, credit-card debt, household expenses, etc.). The lender will run a credit check to determine your credit status, but you will have to supply additional documentation such as paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance, and other documentation.
Those who enter the mortgage approval process ready to battle their chosen mortgage lender will come out with a nightmare story to tell. As the process, requirements, and guidelines are the same for everyone, your mindset makes the difference. Be prepared to provide all the requested documentation necessary for lender approval in a timely manner and your loan approval process will be faster and much less stressful.
Processors and underwriters are the people trained and charged with gathering your required financial documents, and then approving your loan. The process begins with the loan originator (a.k.a. loan officer, mortgage consultant, mortgage adviser, etc.) who is tasked with matching the qualifications of a particular mortgage deal to the appropriate underwriting guidelines. It is the loan originator’s job to determine if a loan scenario is approvable and to gather the documentation to support that determination. This is the most important part of the loan process and will determine whether you can qualify for the mortgage you have chosen. The rest of the approval process is just producing the necessary requested documentation.
In the end, it all comes down to your being able to provide hard-copy proof that your financial picture matches the necessary guidelines for your loan. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” -because it won’t be. When the lender asks for specific documentation and the borrower supplies something else, the entire process can take a bad turn and be delayed, or worse, the lender can decide not to approve the loan. So if the lender asks for a bank statement which contains five pages, send them all five pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you did not send them exactly what they asked for in the first place. This may sound like simple logic, but the vast majority of mortgage approval process woes stem from scenarios similar to this one.
A common mistake that many people make when relocating to a new area is packing up all their personal and financial files, bank statements, and other credit information so that they cannot easily provide necessary hard-copy documents during the loan approval process. If you are going to be packing your belongings before your loan has been approved, make sure to keep all of your financial files easily accessible as you will undoubtedly need at least some of them to procure your loan.
One of the best approaches to streamlining the mortgage approval process is obtain a list of all the documents needed for the underwriters from your lender and have them scanned and ready to go before the process starts. Being prepared to provide redundant and detailed financial and personal documents required by mortgage underwriters will make the loan approval process faster and easier for everyone involved.