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Tips for Applying for a Mortgage

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While most of us have never had the unpleasant experience of sitting in a police interrogation room, fans of crime TV shows like me will recognize this scenario.

“I’ve already told you what I witnessed on the night of October 22, 2011 seven times,” says the frustrated and exhausted witness.

“Well, it’s time to tell it again,” says the cheery police office, as he asks the exact same questions for the eighth time.

I was reminded of this scene as I read the excellent article “The Perfect Loan File” on Forbes.com recently. One of the points the author, Mark Greene, makes is that mortgage customers can find the process of applying for a loan just about as frustrating. Why does the lender continue to ask for the same documentation over and over?

The truth is that due to many factors — increased federal regulations and stricter requirements enacted after the housing collapse just to name a few — the process of applying for a mortgage has become more complicated. There’s a lot of paperwork involved and a lot of moving parts in each application.

But applying for a mortgage doesn’t have to be painful. And it doesn’t have to be that frustrating. Here are a few tips for making the process go more smoothly.

1. Be realistic in your expectations. If you have glaring problems with your credit history or have total monthly debt ratios exceeding 40 percent of your monthly income, you may have trouble qualifying for a mortgage loan. If that’s the case, it’s best to work on your credit score and reduce your monthly debt first.

2. Give your lenders exactly what he or she asks for. While this may sound simple, it is at this point that a lot of problems and resulting frustration can occur. Say for example, the lender asks for copies of your tax returns for the last two years. You send the tax returns, but don’t send the accompanying schedules. If the lender asks for the tax return, he means the entire return. Don’t try to second-guess which parts of a document the lenders needs. Send all of it.

3. Accept that you will have to provide multiple copies of lots of documents. Cooperation is the key to a pleasant and successful mortgage application. Does everything you have to supply on your tax return make sense to you? There is important detail needed in the schedules that allows the underwriter to better understand your true repayment ability and income stream. It is in your best interest to supply the information requested.

4. Find a good lender that you can trust. This is the best tip I can offer you. The financial crisis of 2008 was created by careless lending practices and not putting the client first.  On July 30, 2008, President George W. Bush signed into law the Secure and Fair Enforcement for Mortgage Licensing Act (the SAFE Act). The SAFE Act requires licensing or registration of loan originators to ensure a minimal level of competency in the origination of mortgage loans.

Finding the right lender will make all the difference in the mortgage application process and protect your family. You want to find one that is licensed by the Nationwide Mortgage Licensing System, which ensures that the lender has met the minimum proficiencies set by Congress. There are plenty more factors to consider when choosing a lender and my column next week will be devoted to how to find the right lender for you.

— Cal Haupt, President and CEO of Southeast Mortgage

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