We are often asked why there is so much paperwork mandated by the
bank for a mortgage loan application when buying a home today. It seems
that the bank needs to know
everythingabout us and requires three separate sources to validate each and every entry on the application form.
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
There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.
The government has set new guidelines that now demand that the bank
prove beyond any doubt that you are indeed capable of affording the
During the run-up in the housing market, 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.
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.
housing crash that mandated that banks be extremely strict on paperwork
requirements also allows you to get a mortgage interest rate as low as
3.43%, the latest
reported rate from Freddie Mac.
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 1990’s
and 6.29% in the 2000’s). If you went to the bank and offered to pay 7%
instead of less than 4%, they would probably bend over backwards to make
the process much easier.
thankful that we are able to buy a home at historically low rates.