Applying for any loan can sometimes be complex, detailed and troublesome. Usually the Mortgage Loan takes the cake on this one. I will explain; if you have been through the process, you have a greater understanding about what it entails, than someone who is doing this for the first time. There are some customers, who do not like for anyone to "know their business", let alone a Mortgage Lending Institution. I do understand the fuss with all of the identity theft that goes on.
It is some what aggravating, (more so to some individuals) that so much information about their entire financial history is needed prior to approval of their loan. The question arises; why do they need to know so much about me? This part of mortgage lending has not changed much with "THE MORTGAGE MELTDOWN". Always remember, that not everyone sees themselves or their situation in reality; it must be verified and proven. Please know, (I am trying really hard to not say that everyone does not tell the truth). Document, document, document. That is the Industry strategy. With full documentation for all details, there is not room for loopholes.
The documentation requirements became less with the "Automated Underwriting Systems", "Desk Top Underwriter" of "FNMA" (Federal National Mortgage Association- "Fannie Mae" and "Loan Prospector" "FHLMC" (Federal Home Loan Mortgage Corporation- "Freddie Mac"). WOW! That is a mouth full!! I do not want to get you confused with this but this is a very important part of loan approval.
I will describe what the "automated underwriting system does". It allows the Mortgage Lender to input all of your financial information, and run your credit report. You must sign an authorization form prior to this being done OR give a verbal authorization. The latter is done quite frequently. Your information is evaluated then by either the "Fannie" or "Freddie" underwriting system. NOW, you really know how your loan is associated with these BIG GUYS. No, only partly, may I say! The system evaluates your credit, your employment/income history given on your application, assets (how much money you have, your downpayment and reserves), how long you have lived at your current address and the entire history you have stated. A mortgage application may be given face to face, by phone, mailed, email or fax. Upon evaluation, the automated system gives the Lender a preliminary status; approved/accept. IMPORTANT: the information must be authentic or the approval WILL CHANGE when information is verified and re-submitted to the system. It will spit out the MINIMAL documentation needed to submit the loan to the investor and what all requirements, including the appraisal of the property.
Please note: this is not all inclusive, but gives you some idea of the inside on how the Lender comes up with guided information concerning the approval of your loan. It takes some of the responsibility off their shoulders; but their duty is to submit any and all information implied by the mortgage applicant. A lot of work goes into getting your loan approved and this is "best practice" lending, geared toward your benefit.
I hope introducing you to the underwriting systems used within the system does not scare you. Not intended. This will actually help you know that you are being given every opportunity in getting approved. Your financial status, credit, assets, liabilities, and employment/income history are the tools used to evaluate you as a credit risk. Without the evaluation, their is nothing to build on. There is no loan without an evaluation.
Of course you do not deal directly with "Fannie" or "Freddie", no, but your Lender does as a general rule. Even thought these guys got into a little trouble, their guidelines and rules is what helps keep the Lenders straight. Then of course, the Agencies are regulated and are guided by RESPA,TILA, and the like. There is no such thing as a "good old boy" loan anymore. There are step, provisions, regulations and guidelines that must be adhered to and YES, IT IS FOR YOUR PROTECTION that all of this exist.
I will be back with more.
Linda Todd
I have worked within Mortgage Lending for 30+ years. There is a lot of information that applicants never understand or know. My purpose is to help especially, the first time homebuyer know what to look for and questions to ask.
I have seen baffled buyers left in the hands of strangers hoping they are getting the loan that is best for them without knowing for sure that it was! My goal in articles and my blog is to educate those who want to be educated or think they need to learn more.
It is very detailed and each step of the process has its own set of rules, including the property being bought by the buyer and, the contract its self.
Please stay tuned for more!
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