Back in the good old days of the real estate boom, all you had to do was have a pulse and you'd get approved for a loan. Fast forward to the mortgage crisis, and many layers of fact-checking have been added to the mortgage process (as they should have been from the beginning) by regulators, Fannie Mae, Freddie Mac, and FHA (the national authorities who finance the majority of mortgage loans).
Lenders go through a 5 step process from the time they meet the borrower to the time the transaction is closed, and they need a whole lot of paperwork along the way. So borrowers, start getting your ducks in a row and be ready for your loan officer at every stage!
Stage 1: Pre-approval
At this stage, you'll need to provide all income and asset documentation to determine whether you qualify for a mortgage. Documentation required include:
*Credit report
*W-2's
*Pay stubs
* Most recent federal tax return
*The last 2 months of bank and investment statements
Your credit will be reviewed and the loan data will be put through underwriting. The loan officer will then issue you a pre-approval letter to take you your Realtor. Because it may be a while from the time that the pre-approval is issued until the Buyer puts in an offer on a home, any changes that come up should be communicated to and checked out by the loan officer.
****From a Realtor's perspective, my firm will not take any Buyers out to see a property until we see a proper pre-approval letter that has taking all of these documents into consideration in issuing the letter. The advantage to you, the Buyer, is that you know what you can actually afford instead of guesstimating, and when you see a property you like, your offer won't be held up by waiting for a pre-approval.***
Stage 2: Full application
The loan is official at this point, and the loan officer will update any documentation already submitted (anything older than 90 days). The Buyer will be questioned on:
*Any credit issues on the credit repor
*Deposits that appear on your bank statements that are over $1000 will require source documentation (excluding your pay checks)
At this time, a full mortgage application packaged will be completed by the loan officer and borrower at a sit down meeting.
Stage 3: Submitted to processing
The mortgage processor will now review the package that was submitted by the loan officer. The processor will order:
*Title examination and legal work
*An appraisal
*If you're buying a condo, something called a condo questionaire to be sent to the appropriate party
If anything was missed by the loan officer, the processor will request documentation (four eyes are better than two). If anything is missing, it will hold up the process, so it's important that all requested documents back ASAP.
Stage 4: Submission to underwriting
Once the appraisal comes back, the processor orders a "Fraud Guard" report. This report reviews everything and everyone involved in the transaction to ensure that no party in the sale has been involved in fraudulent activity in the past. The borrower and their background, the appraiser, the attorney, and the property and real estate professional involved will all be looked in to.
The appraisal, the condo information, and all documentation thus far will also be reviewed. Any of these reports may trigger a request for additional documentation.
Stage 5: Underwriting:
The underwriter is responsible for reviewing the loan package and issuing the approval. This will be the third set of eyes (six is better than four!) reviewing all the details for compliance to all regulations and guidelines. The goal is to clear all conditions, but if there are any concerns that arise, the underwriter can approve the loan subject to additional documentation.
After loan approval
Even after you close, there are several more steps in the process where additional paperwork may be asked of the borrower.
1) In the week between the approval and the closing, the lender has to do a verbal verification of the Buyer's employment status. Any changes will require additional documentation.
2) The credit will also be "refreshed" to make sure that there's no new debt or credit that may impact the mortgage qualification. This may require additional documentation.
3) If any of the documents are older than 90 days, the loan officer will need update documents.
4) After the closing, the loan is re-reviewed by the end investor, and there may be a request for additional documentation.
Clearly this is a long and time consuming process, but as my Transaction Coordinator says, you're not buying a head of lettuce, you're buying a house. Although it can be a very frustrating and annoying process, please remember that your lender is just doing their job and it's vital that you work with them. It's important for borrowers to understand the process and the reasons behind it, so ask questions and keep communications open with your loan officer to minimize potential frustration. Hopefully with all the information at hand, you'll have a smooth and efficient lending experience!
For More Tips, Please Read
Buying a Home Using Financing
If your or anyone you know need help Selling or Buying a Home in Broward & Miami-Dade Counties, please don't hesitate to call me at 954.667.7253
Help lots of people and have a great day!
Patty Da Silva, CDPE©, RESS®, AHWD®, e-PRO®, GREEN, CFS, TRC, RSPS
BROKER - REALTOR® Serving South Florida ::: 954. 667. SALE (7253) ::: Green Realty Properties®
Visit www.PattyDaSilva.com & www.GreenRealty.net for SouthEast Florida's best properties.
Copyright © 2008 - 2013 By Patty Da Silva, CDPE©. All Rights Reserved.
Legal Stuff: This article (Contents) reflects the opinion of the author and it is not to be considered legal advice. The author is not an attorney or a CPA. If you are in need of legal or tax advice, it is recommended that you to contact a trusted professional advisor.
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19 Comments on Why do you keep asking me for all that paperwork Mr. Loan Officer?
I just started the refi of my place and am going through all of this right now. It's going to be so worth it so I don't mind it all!
Some times they ask for things twice or dont ask for things buyers have ready to give. It gets frustrating but the best advice is just be ready for anything.
Education and communication helps in every aspect of real estate, but especially in something as complicated as getting the loan.
Kerrie, you have the advantage of being able to see in the long run. I think that sometimes the Buyers start off very excited, but then get so bogged down with requests that they forget why they started all this!
Chuck, my blog is going off the assumption that the lender does their job well and efficiently. I've heard the horror stories, and that's why we emphasize to vet out the lender you're going with, and always aim for a local lender.
Marianna, definitely.
Hi Patty-I sometimes miss the good old days of lending, I have a transaction that is supposed to close in a couple of days and the lender is still asking the buyer for documentation.
Hi Patty,
We called those days "smoke and mirrors". Now, the pendulum has swung the other way...now they need your DNA, I am sure it will swing to a bearable level. Have a great weekend. A
Patty, this is really good information for the public - nice job!
This certainly is not like the old days, is it. Buyers think because they have a "pre-approval" letter from the lender that they are good to go. Surprise!
Patty
Very insightful post, thanks for sharing your thoughts.
Good luck and success.
Lou Ludwig
Patty: Thank you for trying to further the education of clients entering the home buying and mortgage financing process. Education is so vital to obtaining the success they seek. Also having a thorough understanding of the machinations of the process itself is very helpful. They better understand WHY they are being asked for info and the need for timely compliance. Sometimes, I think THAT understanding and education is the most important to learn. It certainly helps move the process along more quickly and easily ...
Great post ...
Gene
Adrian, the last minuteness of it drives me nuts too. I know things come up, but I hate being on pins and needles until the very end.
Alexandra, hopefully at some point we'll be able to get to the middle.
We’re making some changes at Green Realty, and one of the changes we’re implementing is sending out the questionnaire attached asking about your favorite things. As you’ll see, the purpose of us gathering this information is to be able to give a little something back to you when you think of us and refer us a new client. We really do appreciate any help, and we’d like to be able to send you something that you actually like instead of something we’d think you like. I hope to hear from you soon! Take care!
Virginia, thank you! I know a lot of Buyers just aren't as informed as they should be.
Jane, big surprise! Lol. You're at step 1!
Lou, thank you!
Gene, I wholeheartedly agree. I think a lot of the frustration comes from the Buyers just not knowing why the lender is asking them for so much documentation. If they understand the reasoning behind it, I think they're more prepared and more willing to get them back to the lender without any issues.
Love, love your survival guides Patty! Great post!
Patricia, thank you! I used to be in the mortgage world many moons ago ;o)
Tamara, thanks buddy! I hope they help!
Hey, Patty! I included this post in Last Week's Favorites. Please check it out, and have a great week!
Patty-Thanks for giving some of the background activities for loan processing. Some lenders have additional steps but this was a great explanation.
Patricia, you're so sweet, thank you!
Wayne, oh by no means is this all inclusive, but it's a start!
Hi Patty this is a great way to lay it all out and I love the head of lettuce comment...too funny!
Sandy, thanks! I'll let her know. I think it's funny too.