Thursday’s Thoughts – Has mortgage underwriting gotten harder?

Yes, mortgage underwriting has gotten a lot harder.  Let’s face it, it wasn’t that long ago a person capable of fogging a mirror could obtain some sort of mortgage financing if they really wanted to buy a house.  Over time investors got too greedy and the lending requirement were so loose that a lending and housing crisis was surely inevitable.  Times have certainly changed today.  Long gone are the days of “stated income and assets”.  Trust has been thrown out the window and over documentation is the direction of the future.

As loan officers, our main priority is to find the perfect mortgage program for each borrower.  Everyone has a different situation so the mortgage advice we give will vary from borrower to borrower.  We do our best to explain the details of the loan, collect the necessary documentation at application and explain the mortgage process and timeline.  What’s starting to become more and more common is for an underwriter to ask for something else, something we didn’t think they would need, something we thought wouldn’t be an issue.  In today’s environment, it’s an issue.

If you’re thinking about applying for a mortgage get your ducks in a row ahead of time.  Gather up your last two years complete tax returns with all attachments.  Get your last few paystubs and make sure there’s at least thirty days of pay included in the YTD column.  If you’re currently renting let your landlord know they will probably need to confirm your payment history in writing.  Make sure that any money you are planning on using in the transaction is currently in your bank account, not under your pillow or in a safe.  Lenders love a good money trail and any large deposits inside of 30-60 days will throw up a red flag.  A good money trail is very important.  Make sure you have a valid Drivers License or state I.D. and look for that Social Security Card.

Getting pre-approved is always recommended, even if you have excellent credit and money down.  This will allow your lender an opportunity to get everything ahead of time in case there is something they may need that could slow down the purchase transaction.

So, is strict underwriting a good thing?  Probably so.  Investors want to make sure they are getting a return on their investment and the only way we can keep interest rates at a respectable level moving foward it to ensure that each borrower is capable of handing their new debts. 

Interest rates are low, home prices are low, tax credits are available and good finance options are still available.  It’s definitely time to buy a home, just be prepared to jump through a few hoops to make your dreams a reality!