Financing is one of the most important components of buying a home. In the past few years, lending has undergone many changes, including greater restrictions for lenders. Lenders have tightened their underwriting standards, making it more challenging for buyers to obtain loans.
Many mortgage lenders went out of business or lost great sums of money. This was due largely to inadequate or fraudulent underwriting practices. Regulators forced lenders to repurchase “bad loans,” which cost many lenders a significant amount of money. More rigorous guidelines were developed to prevent this from happening in the future.
While satisfying credit guidelines is a concern, one of the greatest hurdles of financing is meeting the rigorous documentation requirements imposed by lenders. To meet these challenges, I recommend that you be mentally prepared and ready to document everything.
Mentally you should be prepared that this may be stressful, seem redundant, and at times be frustrating. If you can begin the process knowing that this is not the fun part of buying a home, you will be ahead of most home buyers.
You need to be ready to have hard copies of almost every financial document you have concerning your bank accounts, investment accounts and other properties. If your lender asks for it, give them exactly what they ask for. Not something substantially similar. If you need clarification about what they need, it is better to ask, than to provide something you aren’t sure is right.
If you take this prepared approach, you will be more likely to successfully make it through the underwriting process on time and it will save you countless headaches.