Advice from a Recovering Mortgage Professional

Homeownership should be an exciting time when you are moving forward toward a bright future and a better life. However, many people in the position of either buying or selling real estate encounter some pretty traumatic road blocks along the way, many of which are avoidable.

Throughout my career, I‘ve held many positions in the world of residential lending. Having spent time as a mortgage processor, underwriter and loan officer, in addition to being licensed in real estate sales and having bought and sold real estate of my own, I’ve observed all the moving parts of this often intimidating business first-hand. I have a unique perspective on how each role interacts with the other.

The fact is there are a lot of complex rules and regulations involved in mortgage lending today, and those rules are constantly being updated and tweaked to protect buyers as well as lenders. Back in the early years there was a lot more “gray area”, and lenders were able to make more judgement calls. Because of abuse of the system and the mortgage crisis of 2008, lenders no longer have a lot of wiggle room for interpretation of guidelines.

It’s easy to get caught up in the blame game: the attorney refuses to set up the closing> the underwriter didn’t review the documents> the processor held the information too long> the buyer waited until the last minute to supply a bank statement (and now they need even more information)> the loan officer advised me to hang onto it> the real estate agent told me I didn’t need it ….. on and on. When things go wrong, it’s not usually because one person is at fault; each plays a part and those parts greatly depend on the others. To be successful, you need to be proactive rather than reactive in this process.

Here are some tips for buyers involved in the mortgage process, based on my observations:

  • Give me what I want and I’ll go away: When you are asked to supply conditions, read the entire list slowly and completely so that you understand what is being requested. Make sure you are submitting exactly what is being asked of you and do it as soon as possible. For instance, if you are asked to supply “most recent, complete, 2 months’ consecutive bank statements, all pages” give them exactly that. Even if page 3 is blank, you must comply with what is being asked of you. No activity on your July statement so you just supply June and August? That’s NOT consecutive! You are going to create a request for more information and possibly hold up your commitment or closing dates.
  • Don’t buy stuff: Maybe you have put off buying new tires for your 11-year-old car because you planned to trade it in for a new car (and new payment) as soon as this whole purchase thing blows over. Once you get pre-approved, or receive your commitment, do not think it’s ok to go on a spending spree! Do not get that deferred payment plan for new living room furniture or 60 inch TV! When the lender reviews your credit again just prior to closing and sees inquiries by auto dealers or stores, etc., you will be forced to supply documentation showing the terms of any new debt. I have seen this cause not only delays, but sometimes mortgage denials at the 11th hour because the borrower no longer qualifies due to an increased debt-to-income ratio.
  • Don’t open a can of worms: Keep your financial activity at a stand-still. Any deposits that are not regular income will be questioned and will need very specific documentation to verify the source. And to boot, not all sources are acceptable! Cash that you have been saving in your mattress? You had a big yard sale? Cousins took a collection to help you out? Mom took a cash advance to give you a “gift”? No thank you. There are certain sources of closing funds that Fannie and Freddie will not accept without additional documentation, and some that are not acceptable at all.
  • Sit tight at your job: Unless you get the job offer of a lifetime, consider holding off on your job search right now. Not that it cannot be done, but getting a new job needs to be documented according to specific guidelines, and you probably will not be able to close until you have supplied paychecks from the new employer. Depending on how far into the process you are, starting new employment could postpone your closing several weeks.
  • Always tell the truth, just like mom told you: Right from the start, be forthcoming and honest when supplying all information & documents. If you try to hide possibly detrimental information thinking you won’t get caught or they don’t need to know, it will likely come back to bite you! Because of their experience, people working in this industry are akin to private detectives, and they are usually pretty astute at uncovering your secrets. They have seen it all, and they pick up red flags when a borrower is not being completely forthcoming. Uncovering information late in the game will hold up your closing. Choices have consequences, choose honesty and integrity.
  • Don’t fight the tide: While it’s understandable that you become frustrated with the process, keep in mind that there is not much flexibility in lending guidelines. If you are being asked for documentation that seems outrageous to you, there is a valid reason for it. Supply what is needed as completely and quickly as possible. The good people who are working hard to get your loan closed are exercising due diligence to make an honest and saleable loan to protect you, themselves and their employer from wrongdoing or repercussions!
  • Ask for help before making a move: If you are uncertain, rely on real estate agents and mortgage professionals who can point you in the right direction before you make any big decisions. They are bound by a code of ethics, integrity, compliance and fair lending laws including full disclosure. This means they cannot turn a blind eye to information considered illegal, immoral, or generally against lending regulations.
  • Remember, you are not alone: Keep in mind that the team of lenders is working on many loans, not just yours, and there is going to be some lapse in time between your submitting documents and their review and approval of those documents.
  • Breathe in, breathe out, move on: Good luck, and keep in mind this is a temporary process. You will soon be making memories and writing that exciting next chapter in your new home, and it will be well worth all of the struggles and uncertainty you went through to get there!

About the Author: Gratia Gosselin has been employed in retail banking and residential lending for over 25 years. In her current role as Jeanne D’Arc Credit Union’s Financial Education Specialist, she focuses on Grades 5 through 8, teaching the concepts of Needs vs. Wants, Goal Setting, Budgeting and more. She enjoys working with people of all ages, backgrounds, ability levels and cultures. She draws on her knowledge to help people achieve financial security by instilling a sense of fiscal responsibility.

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