“This is BS, I’m going to use someone else?”

By
Mortgage and Lending with Amerifirst Financial, Inc. - FHA, Conventional, Jumbo Loans

"All I gave the lender who did my mortgage the last time was my social security number and I signed my Getting yelled atdocs the following week. Now you want my last 2 years tax returns, this is ridiculous! I'm not giving you one more piece of document. Can't your underwriter see I have an 800 fico score and $500K in the bank, oh and I'm putting half down. This is BS, I'm going to use someone else!" 

This is an all too common question and reaction when we send our clients their list of needed items required in today's market to get them approved for a home loan. The client I quoted above actually did go down the road to a different lender but came right back because their list was longer than mine.

Fog a mirrorTo put it as simply as possible, the same people (banks/investors) who lent us money 3 years ago just by our ability to provide a social security number and fog a mirror, now have in response to the mortgage meltdown of the last few years created a much more extensive list for approval.  Fear and concern play a big role in this as they want to now make sure that your ability to qualify is fully documented, which means more paperwork.  When you think about it, this is actually quite logical and should have been the only norm all along.

But before we begin to think this is more trouble than it is worth, let's look at it Person loaning moneyfrom a different perspective.  Consider this question and statement is posed to you:  "Excuse me, you don't know me at all, but can I borrow $250,000 to buy a home?  I promise I will pay you back over the next 30 years." What would you ask for in return as a guarantee or satisfaction that this person actually has the ability to pay you back? Would you accept just a credit report and a couple of pay stubs?  Or would you want to dig deeper?

I would think that when you stopped and really looked at it from this perspective, ultimately what you would want to show their ability would probably be very close to what we are already asking for.  And as a Licensed Loan Officer it took me awhile for this to sink in and begin to look at it from this perspective.  As someone who has been in the mortgage business over 6+ years now, believe me I miss those parts of the old days too.  It is significantly easier on our end as well to only have to ask for a few things.  But when you look at it from a perspective of what would I ask for if it was my money being lent out, the items needed become reasonable. 

So I would leave you with this:  if you're thinking about buying a home, I recommend meeting with your Licensed Loan Officer FIRST and review your situation so you can avoid any pitfalls or surprises.  Knowing the process and the expectations beforehand, combined with a little bit of prep work on your end, will make what is supposed to be an enjoyable time go much smoother.  

Here's a list of items that may be required from you.

APPLICATION REQUIREMENTS

•1.       Last 2 years W-2s

•2.       Last 2 years Tax Returns Federal only, all pages and all schedules

•3.       30 days of Most Current Pay Stubs

•4.       Last 2 Months Checking and Savings Statements, all pages even if blank

•5.       Paper trail all large deposits, if applicable

•6.       Most Recent Asset Statement, i.e. 401K, IRA, Mutual Funds, Retirement, all pages even if blank

•7.       Drivers License & Social Security Card

•8.       Name and Number of your Human Resources Representative

•9.       Name and Number of your Homeowner's Insurance Agent

•10.   Mortgage Statement for All Properties, if applicable

•11.   Signed/dated letter explaining all credit inquires, if applicable

•12.   Signed/dated letter explaining all derogatory credit, if applicable

•13.   Rent free letter from parents signed/dated by parents, if applicable

•14.   Homeowners Insurance Declaration page for All Properties, if applicable

•15.   Last 12 months cancelled checks for rent payment, if applicable

•16.   Name and Number of your Landlord, if applicable

•17.   Copy of Cancelled Check from Earnest Money (Front and Back)

•18.   Awards Letters, i.e. Disability, Social Security, Rental, Retirement, Pension, etc. , if applicable

•19.   Copy of Rental Leases, if applicable

•20.   Current YTD Profit & Loss statement, if applicable

•21.   Child Support Agreement, if applicable

•22.   Copy of Divorce Decree/Separation Agreement, if applicable

•23.   Copy of Bankruptcy Filing & Discharge, if applicable

•24.   If you are VA eligible:

  1.  
    1. DD-214 or Statement of Service
    2. Drivers License
    3. Certification of Eligibility
    4. Name and Address of Nearest Relative

Please remember Lending guidelines have changed in recent months and additional documentation may be required, depending upon your specific situation. We want to help make the mortgage process as simple as possible and following this mortgage checklist will get the ball rolling in the right direction.

Posted by

 

Respectfully,

Ron W. Kelleher

Licensed Mortgage Planner

Email

Financing Available

                                                                

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Re-Blogged 7 times:

Re-Blogged By Re-Blogged At
  1. Kevin Kelly 01/04/2011 05:36 PM
  2. Timothy George 01/04/2011 06:23 PM
  3. Herb Baldwin 01/04/2011 08:04 PM
  4. Mark Taylor Mortgages 01/04/2011 08:59 PM
  5. Donald Bradbury 01/04/2011 11:53 PM
  6. Fernando Herboso - Broker for Maxus Realty Group 01/05/2011 05:56 AM
  7. Steven Brand 01/13/2011 11:10 PM
Topic:
Home Buying
Location:
Arizona
Tags:
why so much documentation

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Rainmaker
201,335
K.C. McLaughlin
RE/MAX United - Cary, NC
Realtor, e-PRO, Homes for Sale - Cary, Raleigh NC

WOW that list is long! If all of the items were required a few years ago, we would not be in the mess that we are today.

Jan 04, 2011 07:20 PM #13
Rainmaker
243,143
David Ames
Zephyr Real Estate, San Francisco - San Francisco, CA
San Francisco

Ron.  Great perspective using the scenario: if it was YOUR money to lend.  The "shoe on the other foot" is a perfect way to give perspective in this case.  We were spoiled for so long.  Then again, the sad part is how those who truly DO qualify by just "fogging the mirror" (lol, by the way) can't seem to get a loan because they don't fit into the current underwriting parameters (even though they may have enough cash to pay for the property outright and/or build in 30% or more equity from the beginning).  It's as if banks are looking for the elusive "zero" risk (which doesn't exist in nature). 

Jan 04, 2011 07:25 PM #14
Rainmaker
127,313
Faye Taylor
Floresville, TX
Faye Taylor

So true.  We warn our clients "they will even want to know the color of your underwear so be prepared."   It causes a chuckle but sometimes that chuckle is a stress relieving chuckle because the client is so frustrated at a process they really don't understand.

I love your $250k example.

Jan 04, 2011 07:28 PM #15
Rainer
30,113
Phil & Celeste Pafford
PaffordHomes.com, Corona CA - Corona, CA
Corona Short Sale Broker

Sure, the fog on a mirror is ridiculous, but...

So is putting someone through the ringer who does have, as in your example:

500k in the bank, 800 fico score, 50% down...

Again, no common sense.  If the box isn't checked, no loan.  It makes as much sense as: "You are the 15th person in line to fly, naked pic and feel'em up please". 

We went from redicuous... to the elimination of any rules... back to redicuous again!

When the pendulum swings, it just keeps going... Ug!

 

Jan 04, 2011 07:37 PM #16
Rainmaker
346,677
Sonja Patterson
RE/MAX Realty Center - Cypress, TX
Texas Monthly 5-Star Realtor Recipient for the Hou

Ron, this is a common reaction from some of my buyers.  I try to smooth things over...but sometimes the lenders do seem overly nosey. I can understand paystubs and tax returns. If they have proof of funds for their down payment of 25%...I don't understand why they need to dig into IRAs, etc., etc.  Perhaps, you can explain? :)  I always have more to learn!! :)

Jan 04, 2011 08:15 PM #17
Rainmaker
347,112
Rodney Mason
Prospect Mortgage - Atlanta, GA
FHA 203K, USDA, VA, HomePath Renovation Specialist

"all pages even if blank" and "all pages and all schedules" seem to be two phrases that borrowers just cannot understand.  Borrowers (and some agents still) can't grasp why the above is now all required.  I guess they have seen any news on the housing/lending market in the last 3 1/2 years.

Jan 04, 2011 08:39 PM #18
Rainmaker
478,381
Ritu Desai
Samson Properties - Ashburn, VA
Virginia Realtor-Fairfax/Loudoun/PW-703-625-4949

Ron, thanks for putting together the updated list. I see buyers being frustrated with lender's paper work demand. Best Realtor can do is to assure that everyone is moving in a right direction and achieve the goal to get to closing.

Jan 04, 2011 09:16 PM #19
Rainmaker
360,029
Karen Feltman
Cedar Rapids/Iowa City, IA Skogman Realty - Cedar Rapids, IA
Relocation Specialist

I think that you are right that the pendulum has swung the opposite direction from a few years ago with all the stated income loans!  This is a great way of explaining the "whys" of why this process of documentation needed to be revised.  Thank you for sharing your list!

Jan 04, 2011 09:44 PM #20
Ambassador
686,724
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

I have to say that sometimes real estate agents don't help the situation any by adding fuel to the buyer's fire.  When working with buyers, your list is  good list to provide the buyer so that they will know what to expect.  We need to understand the process but seek clarification for loan officers and allow the to do their jobs so that we can do our.

Jan 04, 2011 10:25 PM #21
Rainmaker
89,655
Brad Yzermans
First Time Home Buyer & Down Payment Assistance Specialist in So Cal. - Temecula, CA
Temecula-Murrieta-Menifee FHA/VA Mortgage Lender

Great list.  I try and explain the why's of why all this is needd when asking for it.  I get real personal with my borrwers because i always write a detailed cover letter to the underwriter detailing the good points for the borrower as well as explaining the negative things, such as credit, income, and employment history.

Jan 04, 2011 11:15 PM #22
Rainmaker
357,237
J. A. Michail
Real Property Management of Sarasota & Manatee - Sarasota, FL
Real Property Management of Sarasota & M

I am very much in favor of tighter underwriting standards, not because it makes it easier to sell real estate, but because it's the right thing to do to keep people from getting in over their head.  "Fiduciary duty" also includes telling a client when it is NOT a good idea for them to buy --JM

Jan 05, 2011 12:38 AM #23
Rainmaker
1,321,945
Carla Muss-Jacobs, Principal Broker/Owner
BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% o... - Portland, OR
Buyer Focused ~ Buyer Results

Things have certainly changed in the last few years.  YES, home loans require a lot more now.  I don't get the fact that if the buyer was paying 50% down, and he wanted to go stated, couldn't he?  With that much down, I thought buyers could still obtain a stated loan.

Jan 05, 2011 12:48 AM #24
Rainer
88,252
Michael Simcock
Coldwell Banker (Elk Grove, CA) - Elk Grove, CA
Elk Grove, CA Realtor 916 425-1084

From a Realtors standpoint, we can do a lot to make the whole process go more smoothly. When I sit down with buyers for the first time to put their home buying plan together, I let them know how the market has changed and how brutal the loan process is going to be. They get pretty much the worst case. Also let them know it is only going to last a few weeks and they will be getting a home for half (or less) than 2005 prices. Back then, they got easy loans and maybe then lose it to the bank.

I ask which situation they would prefer, and a tough loan process starts to sound pretty good.

Jan 05, 2011 02:19 AM #25
Ambassador
1,656,075
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

Great post and a very astute marketing material for you. .I reblogged you

Jan 05, 2011 05:59 AM #26
Rainmaker
449,885
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
The Agent Who Uses "Watermelon Tough" Sign Posts

Nice list of things that might be needed.  I'm going to save that for future reference.

Jan 05, 2011 06:58 AM #27
Rainmaker
598,992
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Ron - I'm going to politely disagree with #23.  When pre-approving my borrowers for a loan, I always have that conversation with them, "just because you can get approved for XXX amount doesn't mean you should spend that much".  I always try and advise my clients, especially the first timers, that they need to make a realistic budget for themselves and to stick to it.  Now, while many of my borrowers may take my advice, there are others that won't and they will buy the max they can get.

I just had this conversation recently with one of my borrowers who wanted to do this.  Once again, I had the conversation about the payment shock and his dti ratio (within program guidelines but high).  He didn't care and he's looking at the max price range.  While we do have a duty to educate and advise our borrowers to be cautious and prudent with their mortgage and home buying needs, what they choose to do is their choice.  JMHO

Jan 05, 2011 12:08 PM #28
Rainer
29,035
Ron Kelleher
Amerifirst Financial, Inc. - FHA, Conventional, Jumbo Loans - Scottsdale, AZ
FHA, VA, Conventional, and Jumbo Home Loans in Arizona

Thank you everyone for your GREAT feedback and comments!

Carla - I don't know of a stated income program available and not sure when or if they will come back.

Sonja - if the borrower is using retirement funds for down payment then they borrower must provide the agreement from borrowing from their retirement fund and paper trail the withdrawal. If borrower is only using the retirement for reserves, thety should only need to provide most recent statement.

Thanks again!  

Jan 05, 2011 12:51 PM #29
Rainmaker
588,959
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

Ron, Well aware of the Home path plan, but this was a refi scenario... After 20++ years in the lending business not much has changed.... everyone's hair dresser, mother, neighbor etc... knows more that we ever will!

Jan 05, 2011 02:27 PM #30
Anonymous
Karil Lauren

Ron, I almost had a couple transactions bust because of buyer frustrations with lenders. It really does require patience (on everyone's part) to educate and understand that today's market is not the same as 'the good old days' ... which in retrospect, weren't really so good after all.

Jan 08, 2011 10:30 AM #31
Anonymous
David Delahunt REALTY EXECUTIVES INTEGRITY - Milwaukee, WI

Great post Ron!! Arguably a bit of this is "over the top" but it is the inevitable result of many unbridled, undisciplined, "devil may care", irresponsible, "loosey-goosey" and (ultimately) costly lending practices of the past. Now comes the time to pay the piper!! Thanks in advance for taking good care of Rose and Dick D!!

Mar 07, 2011 05:09 PM #32
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Rainer
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Ron Kelleher

FHA, VA, Conventional, and Jumbo Home Loans in Arizona
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