People often ask why there is so much paperwork required by the bank for a mortgage loan application when buying a home. They feel the lender asks “to know everything about us“ and requires three separate sources to validate each and every entry on the application form.
There are actually 2 very good reasons why the loan process is much more onerous on today’s buyer than perhaps at any time in history.
1. The government has set new guidelines that banks and lenders must follow.
During the run-up in the housing market, many people “qualified” for mortgages they could never pay back. This led to millions of families losing their home and to the housing collapse. By implementing tougher guidelines, only truly qualified borrowers will be approved.
2. 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 negotiating another million-plus short sales. For this reason, they double (maybe even triple) check everything on the application.
However, there is some good news…
The housing crash that mandated 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.
Real Estate Bottom Line
Instead of concentrating on the additional paperwork required, concentrate on the historically low rate you get when buying a home.