Mortgage Minutia #4: Everything has to be Exact...

Consumers can apply for an auto loan and in minutes they are approved and soon driving a new car off the lot! A person can just show their driver’s license and provide a social security number and have credit at a department store in seconds!

As you know, the mortgage approval process is not so fast and easy…in an age of instant everything, it is typical for consumers to be frustrated by the industry’s need for detail.

Mortgage Minutia #4 – There is no rounding on the application; everything has to be exact…

The completion of the mortgage application, referred in the industry as the 1003 (ten ‘o three), is an exacting science.  Many lenders have borrower’s complete applications on line but many consumers can be too casual when they fill out this important form.

As lenders, we are required to demonstrate a full 2 year residential and employment history for the borrower.  That is a full 24 months.  IF a borrower is not exacting and the loan officer is not double checking that every data field has been completed as required, problems can arise.  For example:

• If the application is completed stating that the borrower has been on their job for two years and a verification of employment comes back that they have been on the job for one year and 11 months, we will have to go back to the borrower, determine the previous employment and obtain documentation verifying the previous employment, even for just one month.

• Some programs require 12 months of cancelled rent checks to verify timely payment.  If the borrower indicates that they have been in a property for 12 months, we need 12 checks to that landlord for that address.  If the borrower has rounded the number we will have to re-do the 1003, and re-verify the rent for just one month’s difference.

• We had a borrower who completed an online application stating that they had been at one address for two years.  They actually had been at 8 addresses in two years.  They didn’t take the time to complete the application correctly, but in the end, we had all 8 addresses documented on that 1003 as required by guidelines.

Everything has to be exact even if it does not seem to be directly related to the transaction: number and ages of children; other real estate owned even if there is no mortgage on the property;  the ‘declaration questions’ all need  to be answered truthfully, any of these can come back to bite us and hurt the transaction.

Utilizing technology is a great way to start the process, but a thorough interview of the consumer by the lender is necessary to insure the proper completion of the application paperwork.

Consumers: Do the best you can with the details for the loan application; be concerned if the loan officer does not require an additional interview and review of the information to insure completeness.

*** On another note: There is a large national mortgage company advertising in trade magazines for recruiting purposes.  They tout in their ads that “Our technology lets customers self-submit applications, pull their credit and get full approvals – without taking any of the originators’ time”.

Realtors: After reading the above, how confident would you feel if your customer self-submitted their application which produced an automatic pre-approval letter for them to go shopping with?

Talk to us if you have any questions about the mortgage process, or about our Fairway Guaranteed Pre-Approval: 781-719-4664, visit www.fairwayne.com  or email info940@fairwaymc.com