Mark Greene at Forbes Magazine nailed it earlier this month in his article the perfect loan file, which really does capture the rigor with which lenders are scrutinizing every mortgage loan application these days. In my opinion, this should be mandatory reading for every buyer in the marketplace now.
Lenders demands for proper / acceptable supporting documentation can be pretty daunting.
I see many clients with qualifying income and credit scores being driven to tears by the excruciating process. In recent weeks more than a couple have simply quit. Some are using all cash to make their deals, avoiding the hassle altogether. Others are giving up their dreams of home ownership. If I never hear a loan originator ask for (or a client complain about) "just one more thing," I will be a happy man.
Certainly understandable that lenders are being very cautious while processing their loans applications. No one wants to see loan failures given the still-too-recent market collapse - particularly where Fannie Mae and Freddie Mac are making the originators buy back problem loans. But, just the same, ill prepared consumers are at their breaking points. Inadequate loan documentation leads to delays, multiple requests for "proofs," and general levels of frustration are pretty high. Trying to keep up with the underwriters demands can be pretty severe. Many clients react poorly when told that the documentation they offered are rejected as "not good enough." Doubly so, when the loan officer "guesses" (hopefully suggests?) that they "might" be.
Smart real estate professionals, loan officers, processors, realtors, and attorneys must take extra care and effort, preparing their clients before the wage battle with the loan underwriter. Letting prospective buyers know what they are in for - early on - helps sets expectations properly, and will surely make the process a bit easier, at least less unpleasant that it currently is. Smart professionals should probably refer their clients to this article, to help their clients understand why.