Buying a home can be a stressful experience. No one intends it to be that way, but sometimes that is just the way things work out. Take paperwork. It can seem like your mortgage broker never stops asking for new documents in an attempt to secure the best home loan possible. As frustrating as it might seem, there are valid reasons for your broker’s requests.
Brokers tend to represent multiple mortgage lenders. Each lender asks for a certain minimum in terms of paperwork and documentation based on banking rules and regulations. But then some lenders go above and beyond. But why? What is the need behind all the paperwork? It boils down to one word: creditworthiness.
Lenders Are Required by Law
Mortgage lenders are required by law to verify each borrower’s creditworthiness. What is creditworthiness? It is your status as a potential borrower, based on two things:
- Your ability to make monthly payments; and
- Your history of paying bills on time.
The lender wants to make sure you can actually afford to take on the mortgage you are requesting. Monthly payments need to fit inside your budget without stressing it to the max. As far as the second item goes, lenders need to protect themselves against too many borrowers not making payments. Your credit history goes a long way toward determining whether you are a risky borrower.
Lenders also need to ask for proof of your identity. That is why they ask for a photo ID and other supporting documents. Again, it is a matter of federal Know Your Customer (KYC) regulations.
Making It Work for the Customer
Most home buyers understand the need for documentation and paperwork during the early stages of applying for a loan. They are happy to supply whatever documentation the mortgage broker requests, whether applying for VA home loans, conventional loans, etc. The frustrating part is still getting documentation requests several weeks later.
We get it. As a Colorado mortgage broker and home loan specialist, we need to deal with our fair share of paperwork. But we can tell you this: brokers and underwriters are not purposely trying to make life difficult. In fact, it is just the opposite. More often than not, the requests for additional paperwork are the result of a broker or underwriter trying to make it work for the customer.
Nothing in the mortgage lending business is cast in concrete. Anything and everything are subject to change. So it is possible that a mortgage broker could get all the necessary paperwork up front, only to discover weeks later that something has changed. When that happens, more paperwork may be on the horizon.
Don’t Be Afraid to Ask
Next time you are in need of a home loan, you are going to face multiple requests for paperwork and documentation. It is to be expected. If you ever feel like you don’t understand what’s going on, please ask. Brokers and underwriters are genuinely happy to answer questions. We want customers to fully understand the borrowing process. We do not ever want them to be caught off guard.
Paperwork is part of the equation. So even though mortgage brokers, banks, and underwriters cannot seem to get enough of it, there are valid reasons explaining why they ask for so much. Our best advice is to just roll with it. Submit whatever is requested as quickly as possible. That way, the process is sped up for everyone involved. The faster it can be completed, the quicker you can close on that new house. That is the ultimate goal, right?