Ready to Sign 500 Pages For a House?
It’s not a huge shock to us that have purchased real estate before how many documents and how much people work is needed to complete the transaction but according to a recent article by CNN money, 500 page mortgage applications are the new normal. We never thought it would be this difficult just to apply for the home loan.
Sleek mortgage application files were the norm but with the housing market meltdown, lenders are reconsidering the mortgage application process. According to David Stevens, CEO of the Mortgage Bankers Association, the average mortgage application file has now ballooned to 500 pages.
Since the housing bubble burst, financial applications have increased steadily but just a few years ago the typical application was about 100 pages. Lenders didn’t need much more than a credit report, appraisal and property information. But now, these applications are running in the hundreds of pages, needing income and tax records, returns and assets, liabilities, credit card reports, tax statements and pay stubs. Pretty much any type of deposit, income, debt, liability and credit history needs to be in the loan application.
And it also depends on how much you make. “A middle income worker financing a median priced house may get away with just a few hundred pages, but business owners or wealthy people with several income streams can generate paperwork better measured with yardsticks and page numbers.”
This is mainly due to tighter rules that were put in place and an explosion of disclosures to be included within the mortgage application process. This alone can generate 50 to 100 more pages.
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While most of these documents are unnecessary, several talking about legislation and disclosures designed to combat terrorists, others such as income from tax returns, past tax returns and all forms of income are essential and can certainly add a lot especially for the self-employed. Having a large sum of money in the bank simply will not make a difference anymore. If you have millions of dollars in the bank but an unrecorded deposit of $5000, you need to record and show where that money came from.
The checklist alone that lenders are using can run up to three or four pages long so this is not only more work on the buyers point of view but on the lenders as well. They must check everything to make sure there’s no predatory lending, the borrower can legally purchase the home, and is financially responsible for the future.
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How can you get around all of this? Well, you certainly could pay cash which simplifies the transaction immensely. While not all of us can do so, just know that the more you make or if you’re self-employed, the more documents you’ll probably be filling out.