Understanding the stack when it comes to completing a mortgage loan application.
Why is there so much paperwork mandated by the lenders for a mortgage loan application when buying a home today?
It seems that they need to know everything about you, plus everything you share requires three separate sources to validate each and every entry on the application form.
Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.
There are two very good reasons that the loan process is much more onerous on todays buyer than perhaps any time in history.
1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage.
During the run-up to the housing crisis, many people qualified for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this cant happen again.
2. The banks dont want to be in the real estate business.
Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they dont want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.
However, there is some good news in the situation.
The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate around 4%.
The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process, but also paid a higher interest rate (the average 30-year fixed rate mortgage was 8.12% in the 1990s and 6.29% in the 2000s).
If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.
Bottom Line
Instead of concentrating on the additional paperwork required, lets be thankful that we are able to buy a home at historically low interest rates.
Get in touch with your Metropolist broker about specifics for the Seattle area real estate market.
