I’m often asked by buyers why there is so much paperwork mandated by the bank during a mortgage application process when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.
Many buyers find the process of mortgage application intrusive and personal, and are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago. If you feel frustrated, you are not alone. Two new national surveys found that significant numbers of borrowers believe the current mortgage process is a major hassle. The surveys were contacted for Freeandclear.com – a mortgage website, and Nerdwallet, which offers personal finance and mortgage information. Read more about these surveys here.
There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.
1. The government has set new guidelines that now demand that the banks prove beyond any doubt that you are indeed capable of affording the mortgage.
During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their homes. The government wants to make sure this can’t happen again.
2. The banks don’t want to be in the real estate business.
Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.
However, there is some good news in the situation.
The housing crash that mandated that banks be extremely strict on paperwork requirements also allows you to get a mortgage interest rate as low as 3.43%, the latest reported rate from Freddie Mac.
The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of less than 4%, they would probably bend over backwards to make the process much easier.
Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates. If you are ready to make a move, feel free to contact me to schedule free no obligation buyer consultation.
To learn more about home buying process, please visit my Real Estate blog page – “BUYING A HOME”.
And please, don’t forget to download
My Buyers’ Guide:
“Things to Consider When Buying a Home”
As a home buyer, there’s plenty you need to know. You’re about to make the largest financial investment of your life, but with my Home Buyers Guide, you’ll have the information you need about buying a home, right at your fingertips.
Here’s what you will find inside:
- The Cost of Renting vs Buying
- 2 Myths That Might be Holding You from Buying
- Why Pre-Approval Should be Your First Step
- What You Need to Know About Mortgage Process
- What to Expect When Home Inspecting
- And More!
The best part is, our Guide is free and available to download right now. All we need is your name and email, and we’ll send it directly to you.