Why is there so much paperwork required by the Lenders for a residential mortgage loan application when purchasing a home today? I feel like they need to know absolutely "everything" about me and even then they need 3 separate sources to independently validate every single fact I provided them on the application.
As a buyer, my friends and family are telling me the process was 100 times easier when they bought their home 20 years ago.
Well, there are two very good reasons why the mortgage loan process is much more difficult now than in past decades.
1) After the U.S economy crashed in 2008, the government put in place new guidelines demanding that the banks prove beyond any doubt that you are indeed able to pay the Mortgage you are applying for.
In the years preceding the housing crises, more than a few people "qualified" for a mortgage that in reality, they could never pay back. This ultimately led to millions of Homeowners losing their home. The government aspires to make sure this never happens again.
2) The simple fact is, Banks do not want to be in the Real Estate business.
Over the last several years (since the crash), Banks have been forced to take on the huge task of liquidating millions of homes that ended up being foreclosed on and also negotiating millions more through the short-sale process. Just like the government, banks do not want more foreclosures. For that simple reason, they need to double (or even triple) check every detail on the application.
However, there is some good news to be found in this situation.
The housing crises that forced the banks to be extremely diligent about their paperwork requirements also allowed you to get a very low-interest-rate in the 4% range!
Those friends and family you know that purchased homes 10 or 20 years ago did, in fact, experience a simpler mortgage application process. But, they also paid a higher interest rate - the average rates for a 30 year fixed mortgage in the 1990's was 8.12% and in the 2000's was 6.29%.
Today, if you went to your bank and said you were willing to pay 7% instead of around 4%, they would likely bend over backward to make even today's more complex process as easy as possible for you.
At the end of the day...
Instead of focusing on the more complex paperwork process, let's be grateful we are able to purchase a home at historically low interest rates.
Original Post - OCsearch.com