The Biggest Delay In Processing A Mortgage Today

I had a conversation with one of my favorite ActiveRain members Lynn B. Friedman a couple of weeks ago, and Lynn suggested I write a blog about what is The Biggest Delay In Processing A Mortgage Today.  I have written blogs about this in the past, but this is a topic which needs to be written about often.  No one likes delays in anything, especially when it comes to a stressful process like getting approval for a mortgage. 

The biggest delay is one which everyone involved in the purchase or the selling of a home can assist in.  The biggest delay today in processing a mortgage is collecting all of the documentation required before the loan can be approved.  So once a Borrower starts the Homebuying Process they should begin to put together all the documents they will be required when they go to apply for a Mortgage.  When I Pre-Approve my Borrowers, and they plan on purchasing a home soon, I go over the list of documents they will be required to produce when they apply for the mortgage. 

Likewise I feel it would also be a good practice for Realtors/Agents to make their Buyer aware of the basic documents required when they meet with the Buyer as well.  Starting the process as soon as possible to put together all the documents required, before the Buyer/Borrower meets with a Loan Originator to apply for the mortgage  will avoid delays later, especially if the Borrower does not presently have them in their possession.  This is particularly important with the younger generations who do everything online, and normally do not have hard copies of many of the documents I will list below.

Not all Loan Programs require the same documents, but there is a group of basic documents required for every Loan Program:

• One month of paystubs, or if retired or disable
• If Retired Pension Award Letter & proof of receipt
• If Disabled Permanent Disability Award Letter & proof of receipt
• Social Security Yearly Award Letter
• W2's or 1099's for the past two years
• Two years of tax returns if self-employed
• 1-3 months of Bank statements depending on the Loan Program (all pages), for ALL accounts which will be use to provide the down payment and closing costs.
  

As simple as it may seem to compile these documents, there are many times when the Borrower does not have them as I previously mentioned.  This is the case for many young Borrowers and can be a big issue with others as well.  For example, there are Borrowers who do not keep their paystubs or bank statements.  There are even Borrowers who do not keep a copy of their W2's or Tax Returns and it will take them time to obtain new copies.  When the Borrower does not have these initial documents, delays are created which could have been avoided if they had started to look for them early in the Homebuying Process.

There are other documents that are needed depending on the Loan Program such as:

• Veterans Certificate of Eligibility & DD 214 (VA Loans)
• Divorce Decree
• Proof of receipt of Alimony Payments
• Proof of receipt of Child Support Payments
• Gift Money:
• Copy of Gift Check
• Proof of withdrawal from the Donor
• Proof of deposit from the Borrower
  
• 401K/IRA/Retirement Accounts
• Quarterly Statement
• Letter from Plan Administrator with proof of available funds for withdrawal
• Terms of withdrawal
• Copy of check for withdrawn funds when received
• Proof of deposit.
  
• Bankruptcy documentation

There may still be other documents which sometimes are also needed, but these are the ones most common depending on the loan program the Borrower is applying for.

NOTE: 

• Sourcing Deposits:  One other BIG thing Buyers/Borrowers can do to speed up the Mortgage Process is to go through their Bank Statements they will be providing to the Lender and have an explanation written out for all bank deposits if the source of the deposit cannot be identified on the Bank Statement.  These days Lenders need to document and source ALL deposits, so having these explanations ready would substantially reduce the time required to approve a mortgage.

• Limit Transfers:  The other BIG thing Buyers/Borrowers can also do to avoid delays is to avoid making transfers between bank accounts they will not be using for the down payment and closing costs.  If a transfer is made from one account into one of the accounts provided for the down payment and closing costs, the bank statements for that account will need to be provided as well, especially if it is a deposit.  This can not only create delays, it could put the loan in jeopardy if there were bounced checks it the other account.  The more documentation provided, the more the likelyhood something may be found which could put the loan in jeopardy.  Keep It Simple is a good thing to remember!
  

If the Buyer/Borrower is made aware of these things by all the Real Estate Professionals involved in the purchase of the home early in the Homebuying Process, most of the delays and stress a Buyer/Borrower goes through during the Mortgage Process could be eliminated.  Just a little time spent in preparation and planning, can sometimes save many days, and weeks of delays once the Buyer/Borrower has found the home they want to purchase.  The Biggest Delay In Processing A Mortgage Today does not have to happen if Realtors and Loan Originators are proactive in getting Buyers/Borrowers started on putting document together as early as possible in the home purchase process.