I recently read an article in Forbes magazine entitled “The Perfect Loan File”. The article outlined all the documents that a loan officer would ask for during the application process. It made me think about how a borrower could be a bit overwhelmed by all the document requests. We ask for a lot of stuff. There’s no other way to put it.
As your loan officer, I am going to get to know more about you than many of your friends. I have to dive into every aspect of your financial situation. I need to know about every bank account, retirement account, loan, credit card balance and judgment. I need to know about that hospital bill that you are making payments on for that plastic surgery you deny having. I need to know about the loan you co-signed for your dead-beat brother. I need to know why you just put $5000 in your checking account and where it came from.
Why do I need to know these things? Why do you need to tell me these things? Lenders have become very cautious when they lend money. They want to make sure that you can pay them back. They’ve been burned in the past, which led to the mortgage crisis and the subsequent tightening of lending standards. The days are gone when you can state your income and get a loan. Everything must be documented. You will be asked to provide the last two years tax returns and W-2s, last 2 pay-stubs, last 2 bank statements, savings account statements and 401K statements. And make sure you send every page, not just the summary. If your bank statement says page 1of 5, send all 5 pages. When I look at each document, I look for items that need an explanation. For instance, I check bank statements for large and unexplained deposits. The lender will usually want an explanation letter. Same goes for your credit report. If there are inquiries in the last 90 days, the lender may need an explanation letter.
My goal is to get you into your new house, hopefully without too much trouble. By knowing what to expect from the beginning, your loan experience should be much smoother and more pleasant.