So you found the ONE, your dream home. You had a pre-approval from a bank and are starting the loan process. The bank gives you a list of things they need, all seems to be just fine. And then all hell breaks loose. The bank starts to run amok or so it seems. They are asking for documentation of the documentation. They are questioning deposits. They want copies of copies. All of a sudden it is not your loan officer you are talking to but somebody who sits 3000 miles away.
The whole process starts to be the equivalent of a prostate exam.
Is that necessary? Do you have to take this? What to do when banks go bad?
First and foremost, ask your broker for a recommendation. Most brokers who do a lot of business have tried and proven connections to lenders. They know who consistently delivers, in short periods of time, with a professional and streamlined process. They know who prepares a pre-approval well enough to ensure that the resulting transaction closes within or even before the estimated closing date.
My personal recommendation is to go to a local lender. A lender that has a processing center in your region, not on the other side of the continent. A lender that has ties to your town, where the loan officer is at his desk for a while and most likely will be there for a while longer. A lender that has interest in your town and wants it to do well because they are invested in it. A lender that wants to earn your local business.
This can be a local bank or a mortgage broker, the emphasis is on LOCAL.
If you are already a week or so into the process and things start to sour, it might not be too late to go elsewhere. Talk to your broker about that option, she will tell you if it is too late or it might be a good idea.
You do not have to be the victim of requests for boat loads of paperwork. In my opinion the reason why this goes out of hand is that the bigger and more anonymous the organisation is the less likely an individual is going to stick the head out and make a judgement call. The CYA attitude is what guides most employees and you cannot really blame them. But that is one more reason to go with a smaller and more nimble bank. The guidelines are the same for every bank but the process and the organization can be very different. And if a transaction closes within 3 weeks the bank will logically not require updates on papers that have expired due to 6 weeks of processing.
I sometimes hear the argument that a big bank offers a mortgage for a 1/4 or 1/8 percent less. Is that worth it? My father, who was a developer and built hundreds of houses, had a saying: "if you want to have the last drop from the bottle, the lid will hit your nose". Worth thinking about...