Buying A House? Why So Much Paperwork?

“I’m getting a Mortgage, why so much paperwork?”

Gail Alm, Mortgage Planning Specialist at Fairway Independent Mortgage Corp. in Rehoboth Beach offered this information courtesy of Keeping Current Matters.

Woman-overwhelmed-by-pile-of-files“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 everything about us and requires three separate sources to validate each and every entry on the application form. Many 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 ago. There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

  1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. 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
  1. The banks don’t want to be in the real estate business. Over 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. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably below 5%. The friends and family who bought homes ten or twenty 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 <5%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.”

Mortgage-Information-KCM loresFor more information, or to contact Gail Alm, Mortgage Planning Specialist, call her at 302-260-7088 or on her cell at 410-868-0423; email Gail at gaila@fairwaymc.com or visit www.gailalm.com

“A picture is worth a thousand words,” and this one compares Historic Mortgage Rates by Decade. Click here or on the Chart for a closer look at interest rates from the 70′s, 80′s, 90′s, 2000′s and today.

Buyers, got Questions? We have Answers.

It’s not unusual to have questions. We recommend that you prepare yourself for the journey by educating yourself. This will ensure you are a knowledgeable home buyer prepared to make a confident home buying decision. CLICK HERE to read our Buyer’s most Frequently Asked Questions, a.k.a. our FAQs page. If you don’t see the answer, email us, we look forward to helping you!