Anyone who has ever applied for a mortgage is well aware that the process can be tedious and often frustrating. As mortgage guidelines have become stricter, more information is required from borrowers, more paperwork is needed and more time is required to examine the entire loan file in order to reach a loan decision. From the very start of the mortgage application, either for a home purchase loan or mortgage refinance, borrowers and lenders can work together to gather all that is necessary to bring the loan to a successful closing. However, there are some things that can happen along the way. While some can be prevented, other issues will just show up. In an effort to prevent issues from delaying the closing, below are 4 ways to help the mortgage process run smoothly.
1. Completing the entire mortgage application as instructed by the lender will provide all of the preliminary information that the lender needs. Think of the mortgage application as a time line of events that basically produces a story for the lender. If a borrower leaves out any information that is required, chapters are missing and the story is incomplete. The most common areas that are neglected appear right on the first page of the mortgage application; the requirements for two full years of residency addresses and two full years of employment. Regardless of where a borrower lived or worked (or did not work), this information is mandatory.
2. Submitting the appropriate documentation is mandatory so that the lender can examine and verify the information. A full two years of employment documents will be required, even if there were multiple jobs. Different types of employment may require additional documentation which the lender will request. Providing this information as soon as possible allows the lender to get the verifications completed faster. In some cases, where a borrower was in school for a period of time in lieu of being employed, school transcripts must be submitted to fill the gap in employment.
3. Assets play an important role in the mortgage process. When purchasing a home, assets are necessary for the down payment, closing costs and reserves. When refinancing, assets are normally necessary for required reserves, however, they also provide the lender with a picture of a borrower’s financial stability which can have an affect on the mortgage rate that is offered. When submitting asset documentation, it is important that all pages of statements are sent to the lender. Many financial statements have blank pages; these must also be submitted. Bank statements are looked over carefully and any large deposits will also require submitting the paper trail as proof of where the funds came from, especially cash deposits. Similar to other areas of banking, loan applications are subjected to Suspicious Activity Report laws. When it comes to assets, lenders look for consistency in balances.
4. The credit report in itself is a story of a borrower’s debt and gives the lender an idea of how the applicant handles their finances. There is very little that slips by a credit report. If a borrower owns other property, it will most likely show up even if the property does not have a mortgage. If a borrower has used multiple names, these also will show up. Do you own rights to land for mining? Yes, most likely that will show up too. Some of the most unusual and unexpected things will show up on a credit report. Sometimes a judgment or lien will appear on the credit report and the borrower was not even aware that it existed. Being prepared to answer questions from the lender and possibly submitting documentation to clarify any issues will allow the mortgage process to continue.
Since every lender is different and each borrower is unique, it is impossible to know every possible situation that may occur when applying for a mortgage. The best possible way that a borrower can help the mortgage process run smoothly is by first understanding that the lender is only doing what they must do, and second by providing as quickly as possible the information that is needed so that the processing of the loan is not held up.
Rosemary has been writing since 2010 for FreeRateUpdate.com, a company that matches consumers with banks and lenders offering low mortgage rates. Previous to her writing career, Rosemary spent 13 years working hands-on in the mortgage industry as a mortgage loan analyst, mortgage processor, property manager, and a mortgage underwriter.