We are often asked why there is so much paperwork mandated by the bank for getting the right mortgage loan when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.
If you are buying a home right now, you’ve probably heard that in the past, there was so much less paperwork required in order to obtain a mortgage.
There are two very good reasons that the loan process is much more challenging for today’s buyer than it was in the past.
- The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. During the Great Recession, many people “qualified” for mortgages that they could never pay back. This led to millions of families losing their home. Lenders and the US Government want to make sure this doesn’t again.
- The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, banks don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.
However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allow you to get a mortgage interest rate probably at around 4%.
Your friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s).
The bottom line is this: Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low interest rates.
If you or anyone you know if interested in being qualified to purchase a home at today’s low rates, feel free to contact the agents at Broadpoint Properties.