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Why Does Your Lender Need So Much Paperwork?

Kurt Clements Real Estate Leave a Comment

Lenders these days ask for an insanely large amount of paperwork and documentation. There are a few things you need to know to understand why it is done this way.

How Did The Financial Crisis Affect Lending?

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Before the financial crisis happened, lending guidelines were flimsy at best. The lenders would verify income but if a page or two from a bank statement was missing it was often brushed under the rug. The thought process was simple. If a client had issues with making their payments, the home would be worth more than when they bought it if foreclosure did occur.

After the crash hit all hell broke loose. All of the sudden the “advanced” analysis of home prices went out the window. Even full documented and conventional loans were defaulting at high rates often due to lost jobs or loss of income. When the dust finally settled they started attacking the original lenders for lack of documentation. All of the sudden page 6 of the bank statement that was missing from the original loan meant that the bank was requiring the originating lender to pay back the ENTIRE loan balance. Some of these loans were many years old and had not missed a single payment!

How Things Are Today

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Originating lenders are still scared to do business for anyone on any type of loan. It doesn’t matter if your credit score is 800 and you have a fifty percent down payment. Lenders are going to require you to provide documentation for each that is compliant with the end bank’s guidelines. Thus assuring that if there ever is a default in your mortgage they can’t come back after the lender.

Just remember that your lender is not picking on you when they ask you to verify tons of little things. They are protecting themselves from never having to purchase back the loan from now until you have paid it off completely.

 

About the Author
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Kurt Clements

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Kurt has developed a unique system designed to turn renters into homeowners. Unlike most Realtors his initial focus is on the financial end of the transaction. This dynamic has allowed him to develop more buyers that were not previously in the market, which in turn leads to more listings being sold. While Kurt is constantly tweaking his programs to meet the needs of his clients, he is ever mindful that a home is not sold without a buyer. More times than not, a buyer that he turned into a homeowner.