Why Is There So Much Paperwork Required to Get a Mortgage?

    Blog ×Did you know?! You can now EMAIL any KCM Blog Post! Click the blue email icon below to get started! Use the buttons below to share with your Personalized Posts profile...                  Why Is There So Much Paperwork Required to Get a Mortgage? Why Is There So Much Paperwork Required to Get a Mortgage? | MyKCM Why is there so much paperwork mandated by the lenders for a mortgage loan application when buying a home today? It seems that they need to know everything about you and requires three separate sources to validate each and every entry on the application form.  Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.  There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.  1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage. During the run-up to the housing crisis, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.  2. 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, they 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 allowed you to get a mortgage interest rate around 4%.  The 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 1990s and 6.29% in the 2000s).  If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.  Bottom Line Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

    Why is there so much paperwork mandated by the lenders for a mortgage loan application when buying a home today? It seems that they need to know everything about you and requires three separate sources to validate each and every entry on the application form.

    Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

    There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

    1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage.

    During the run-up to the housing crisis, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

    2. 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, they 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 allowed you to get a mortgage interest rate around 4%.

    The 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 1990s and 6.29% in the 2000s).

    If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.

    Bottom Line

    Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

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    Jordan Forney

    Jordan is a recent graduate of Lenoir-Rhyne University where he received his BA in Multimedia Communications while also playing football all four years that he was enrolled. Jordan has experience in writing and photography from his time working for the school newspaper, Lenoir-Rhyne News (LRN). He also has marketing experience with WLRZ 99.3 where Jordan produced and aired PSAs and was in charge of marketing with the social media accounts. He was a part of the marketing team for the Lenoir Oiler's baseball team as well where he had a lot of the same responsibilities. Now Jordan works at Rinehart Realty where he is increasing his experience by posting blogs, maintaining social media accounts, and working directly under the Director of Marketing.

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