Why Is There So Much Paperwork to Sign to Get a Mortgage?

paperwork for mortgageThe amount of paperwork my customers are confronted with when they apply for a mortgage has many of them very upset.  But there are very good reasons for the extra checks and balances and I found this article which breaks down the information and simply explains the reasons.  Everyone always says it was easier when they applied for a mortgage a few years ago and they are probably right.  However, we do not want to return to the chaos of the 2010 through 2012 when we had so many short sales and foreclosures because people could no longer afford their mortgages.  You can be sure when you are approved for a mortgage these days you can afford the payment and except for extreme cases you will not lose your home!



Courtesy Keeping Current Matters September 2016

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application 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 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.

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 bank 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 home. 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, theyinterestrates 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.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

The interest rates are amazingly low and will allow you to afford much more house than you could a few years ago.  Don’t worry about the paperwork I can help you with that detail!  Think about how wonderful your new home will be and how much you will enjoy the low monthly payments!

Remember it is always toasty in Naples and you deserve your piece of Naples sunshine and a new home!

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