Mortgage Paperwork Overload

November Cover

Happy November! We hope you are enjoying the beautiful weather. Another year is near its end. We hope you had a good year with more ups than downs and more joy than sorrow. As we approach Thanksgiving at the end of this month, we hope you have plenty to be thankful for with your family and loved ones.

October is one of the slowest months in the Orlando real estate market. The ending of the summer peak season is now clearly felt, yet the holiday season traffic hasn’t started yet. This is expected and normal. Overall, 2015 has been a good year for most of Orlando housing market. It is flirting with a market top but in a very healthy and stable way. Every 6 months or so, the market shifts in some subtle way. As we seem to always say, “next year will be a very interesting year!”

This month I’ll change pace a bit and share a conversation I had with Dustin Owen of Waterstone Mortgage. Over the last few years, one complaint we’ve heard frequently from our homebuyers was that the process of getting a home mortgage was long and onerous. Dustin understands this sentiment and his comment is below.

 Dustin's Face“Often it is asked why there is so much paperwork mandated for a mortgage loan application when buying a home today. It seems that the lender needs to know everything about the applicant. It seems like three separate sources are required to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was not this way when they bought their home 10, 15 or even 20 years ago.

Well, there are two very good reasons why the loan process is much more cumbersome for today’s buyer than perhaps any time in history.

– Reason #1: The government has set new guidelines that now demand that lenders prove beyond any doubt that the applicants are in fact capable of affording the mortgage. During the boom in the housing market, many Americans “qualified” for mortgages that they could never pay back. These buyers qualified because regulation supported lackadaisical underwriting standards.  This led to millions of families losing their homes. The government wants to make sure this can’t happen again.

– Reason #2: Lenders do not 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. In addition to the foreclosures, they had to negotiate another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application. The lenders realize they need to help the average consumer make better financial choices.

However, there is some good news. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed recent home buyers to obtain a mortgage interest rate in the 3% to 4% range. The friends and family who bought homes ten or twenty years ago experienced an easier 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). If you went to the bank and offered to pay 7% instead of <4%, they would probably bend over backwards to make the process much easier. A view from the glass half full…instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.”

I hope you enjoyed this perspective from a lender.

If you are thinking about buying or selling a home soon, the holiday season provides unique advantages for both.  Give us a call or send us an email, we will tailor a personalized strategy to help you meet your real estate goals.

Until next month, take care!