Whether you’re refinancing or purchasing a home these days, many people are surprised at how much things have changed since the early 2000’s. Some may be minor nuisances, and others might seem like major hurdles but here are 4 things to know about getting a mortgage in today’s lending environment.
1. Say “Sayonara!” To the No-Doc Loan
It might seem surprising but I still do get requests to do a “No-Doc” loan – or in other words, where a borrower can state income or assets without any or limited verification. There’s no way around it; lenders will require documentation on your income with items such as W-2’s, tax returns, paystubs and will likely verify your employment verbally. Bank Statements will usually be needed and any large deposits will need to be documented; if you’re thinking about pursuing home financing the biggest piece of advice I can give is to limit the amount of money moved around between accounts in the months leading up – keep it simple, and keep it stress free!
2. It’s Not Personal
Piggybacking on #1 , some items requested might seem silly but your lender truly does want to approve your loan. Most loans are underwritten & approved according to FHA, VA or Fannie Mae/Freddie Mac guidelines which might not allow for a lender to make a judgment call.
3. Strengthen Those Hand Muscles
Legislation in recent years and changed the way a mortgage application is processed – from the new format of the Good Faith Estimate, appraisal rights, The Patriot Act, as well as beefed up State laws to name just a few. Most of those pieces of legislation come with added additional disclosures, so there certainly will be more paper work than in the early 2000’s. But a good loan officer is going to know what those additional disclosures mean and be explain exactly what forms you’re signing.
4. Appraisals Have Changed in this Brave New World
Before I get into how a house is valued, know that the way appraisals are ordered has changed due to legislation enacted after the housing meltdown. In order to reduce interested party influence, appraisals now are typically in a manner where the loan officer / lender has limited contact with appraiser so as not to influence the value of the property. While the lender will order the appraisal, the appraiser does not work for the lender.
A now a word about how a home will be valued; an appraiser’s job is to take a look at houses in close proximity that have recently sold that are similar in house style, square footage, number of rooms, etc. As someone who has had his home appraised, I know how it feels – my home is my baby. I have to remind myself to take emotion out of the equation and honestly assess what’s truly going on in my market. Items like new paint and accessories make my home more enjoyable and attractive, but won’t show up on an appraisal report.
5. You CAN Get a Loan!
With all the items above, it may seem daunting and you may be thinking “Heck, it’s impossible to get a loan!” I’m here to tell you that you can. Items will need to be documented, and you’ll need to sign some more papers, but by preparing yourself for these realities my clients end up at the end of the process saying “Hmmm, it really wasn’t as bad as I thought it would be” … Gee, thanks for the compliment!
But in all seriousness, getting a mortgage loan is not impossible. Since 2008 we’ve seen relaxing of some underwriting guidelines which are much more common sense. By being prepared & organized, you’ll find that getting a mortgage really boils down to being able to document your credit worthiness. So don’t fret, you can get a mortgage – it just might be a little different of a process.