Mortgage Application Problems
Lenders dealing with current regulations create borrowers’ stress
Mortgage loan issues
Problems with the mortgage application process with in the current regulation climate are normative. The first time home buyers should not feel singled out when problems occur in the mortgage application process. The system creates problems. It is up to the mortgage professional to work through the issues, find the best solution and satisfy the lender’s needs.
Many first time home buyers think the person taking the application is the person who has a big say if they get the loan. Unfortunately, that is not the case. The lender has loan underwriters who actually ok the loan. They have rules and policies that the lending institution establishes to ok the loans. They also have to deal with government regulations in addition to pseudo government entities, rules and guidelines.
This creates the complexity that frustrates the borrower with the process. Getting a mortgage to buy a home is way more complex than it needs to be and the process makes it even more frustrating than it should be, but that is the current state of the mortgage industry.
Paperwork, documentation and validation of information are three key areas of the mortgage application. The mortgage loan originator explains what is needed to get the loan. Then the borrower provides that information, only to find out there is more needed. Why?
The problem is there are too many reasons why to give a satisfactory answer. Change is a big component of the problem. As regulations, rules and guideline change, so do the requirements of the borrower to supply documents, information and validation to the lender. Many times this becomes known only when the underwriters look at all the paper at the time of evaluation. The underwriter could be looking at over one hundred documents, but cannot ok the loan because they need a few more documents to satisfy the regulations, rules, policies and guidelines.
The process goes generally like this. The borrower applies with a lender. They supply a list of the paperwork, documents and validations needed to the mortgage loan originator (MLO) or bank representative. They tell the borrower what to get. The borrower submits all that to the MLO, who should check to see if it is all there before submitting it to the lender for underwriting determination.
If the MLO does not do the work of double and triple checking all the documents, that is the first problem. The underwriter will find out if one of the documents requested is not done exactly right.
But once the underwriter takes a look at a full and complete loan package, they may request more information and documents as part of a normal loan underwriting process. The borrower could view this as a problem, but it is really just part of the process.
The problem is when the underwriter comes back with a finding that the borrower needs more income to qualify for the loan. Or they may state more of a down payment is needed to meet current loan approval standards. Or the property could have some valuation issues like the real estate appraisal is lower than the debt to loan value will allow. These are problems that take some work to resolve.
Time is crucial at this part of the real estate transaction. There are time constraints in most real estate contracts on how long the loan process can take. There must be good communication between the mortgage professional and the real estate professional and the buyer and seller. If this breaks down, so can the deal. As a first time home buyer, the unfamiliar stress can create some hard ship.
Working with professionals is key to the assurance of the issues being resolved in time to make the real estate transaction conclude successfully. Coffee Real Estate agents work closely with the mortgage personnel to deal with problems. Realtors that just assume the deal will flow smoothly are often caught off guard and a deal that could have closed, will not. It is best to be looking for problems and proactively solve them before they kill the deal.