When you’re getting a mortgage the process can seem a little bit scary because it’s unfamiliar and most people don’t take out mortgages that often, so the unfamiliarity of the process can seem daunting, stressful and somewhat cryptic. Here is how the mortgage process works and most importantly what you should avoid doing when getting a loan…
In order to successfully procure mortgage financing, you must compile supporting financial documentation including but, not limited to, pay stubs, W-2s, bank statements, copies of insurance and complete an application with the lender of your choice. From here most banks will create an application, send you disclosures and move your file into processing where they do some additional dotting of the i’s and crossing of the t’s. Next the processor will push your file over to underwriting. Make no mistake the underwriter’s job is to deny your loan. Your loan will come out of underwriting either denied, suspended or approved with conditions. Very rarely do loans ever get denied, generally most loans get ‘approved with conditions.’
Approved with conditions means on a purchase you can generally release your loan contingency if the conditions are met which is based on the discretion of your mortgage professional. Approved with conditions means your closing will close provided you provide more supporting documentation. Here is what this might look like:
Provide a year-end pay stub with a breakdown of compensation.
Explain $4,200 cash deposit in savings account ending in 334.
Letter of explanation about why you’re buying this property in relationship to the other property that you presently own.
Provide last page of K1 that you supply the bank that you’re using for your mortgage with the above documentation your loan would be final approved clear to close and docs ordered to close escrow.
Let’s say for example you provide all these things requested and upon the review of those items more conditions are added. It happens, but not often. Please understand mortgage companies are not trying to deny your loan and they’re not trying to make life hard for you even though it might feel that way. The federal government says this is how you must do loans. It’s not an option to simply ignore a bank statement or withhold documentation because when that transpires the loan could cause what’s called a buy back in the secondary market and that lender could be on the hook for thousands and thousands of dollars. Mortgage underwriters can only ask for documents that are within mortgage loan guidelines. They can at times ask for documentation beyond that in quirky complex scenarios, but it is seldom. So, it’s critical to work with a loan officer that knows the guidelines better than the underwriter. Finding such an individual is a rare find indeed.
The number one thing you want to make sure that you don’t do when seeking a mortgage is go dark or non-responsive or be resistant to providing documents that the underwriter needs. You also want to avoid trying to supply another document in lieu of the document that the underwriter originally requested- 9 out of 10 times that does not work.
The simple answer is you must surrender. You must be willing to surrender and trust that the lender that you’ve hired to handle your home financing is going to perform for you even when it seems difficult and all odds are against you, have faith. Not all lenders and banks are created equal, but a willingness to stick it through to the end is worth it.
When the mortgage company asks for document the right answer is “ok.”
“I am too busy.”
“I will not provide that.”
“I have already provided this before.”
“I don’t understand and will not provide until I understand.”
All the above answers when a lender requests further documentation is the wrong approach especially if you are under a mortgage rate lock and timing is off the essence.
*Mortgage tip: Nearly all mortgages contain a time clock which is continually ticking, and you could be on the hook financially, by failing to provide the necessary documents the lender is requesting in the form increased fees for not closing escrow on time.
It’s usually quicker, faster and easier for you and in your best interests financially to just get the piece of documentation that the lender needs rather than being resistant or uncooperative when they’re only trying to do their job in helping you reach your financial goals.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.