Loan Documentation

Hello, I wanted to do a video on loan documentation, the supporting documents needed to document your file to get loan approval. I honestly think this is the single most confusing, complex, misunderstood, agitating, irritating part of the loan process. It really is.

Purchase checklist or refinance checklist

I’m on my website, if you go to “Tools” and you look at purchase checklist or refinance checklists. We’ll go to the purchase checklist. It will show you some notes up top here. It’ll show you the income needed if you’re salaried, and it talks about it in detail. And income needed if you’re self-employed, talks about it in detail. Even gives you an example of a profit and loss statement, which you would need if you’re self-employed. Other documentation, asset documentation. It goes into great detail on everything you could possibly need. What I wanted to say that is the confusing part, and the part that really seems to agitate borrowers whether you’re borrowing money to refinance or borrowing money to buy a new home. The paperwork itself. It’s the documentation itself.

If I had a dollar for every time I heard a client say or saw an email where a client said, “I already provided that.” And they getting a little testy about it. I could have retired a decade ago. Honestly, not kidding. So here’s the frustration.

Government agencies create the guidelines, not mortgage lenders

I’m a pretty traditional lender, we don’t really do a lot of outside the box lending. I’m not a hard money lender. As you can see here, Fannie Mae, Freddie Mac, FHA and VA, not Capital Bank is not the originator of mortgage guidelines. We have to adhere as do all lenders to the government agencies that write the mortgage guidelines. Fannie Mae, Freddie Mac, FHA and VA.

So when you get a mortgage, I’ll just say this, there will be no stone left unturned. And I’m not trying to be humorous. So don’t think a loan processor or a loan officer, anybody you’re interfacing with on your loan team, is asking for documents. “That’s ridiculous. I have more than enough assets to cover. I can buy the house in cash.” I’ve heard that one too.

“Why do I have to provide blank?” Because you do. Because Fannie Mae or Freddie Mac or FHA or VA required it. We can debate it. We can waste a bunch of time and debate why these things are needed or you could provide them because there’s no yielding. There’s no work around, there is no alternative. Another lender will not give you a different answer. You have to provide what’s requested or you won’t get the loan. It’s just that simple.

I already provided that loan documentation

When I hear, “We’ve already provided that,” which they’re not doing. Because a lot times you skim an email. A loan processor emails you and says, “We need these seven things.” And you’re like, “Oh, you’re already rolling your eyes, “Seven things! I’ve already given you W2s, bank statements, pay stubs, a copy of the sales contract. What else could there be?” Again, no stone will be left unturned. Do you have rental property? Are you self-employed? There’s a lot of extra paperwork when your self-employed. But even if you have a very vanilla finance scenario, your salaried, you have no debt, one job for the last eight years; doesn’t mean that there won’t be things that will be asked for.

Bank statements – loan documentation

For example, bank statements. I’ve seen a loan processor ask for, “I see on your last month’s bank statement for X, Y, Z bank that there’s a deposit of $20,000. Please provide the paperwork showing where that $20,000 came from.” Because any large deposit we have to source it. We’re not going to go into underwriting guidelines right now.

Bank statements have to be no more than a certain number of days or a month old. So there’ll be times when a loan processor will say, “Can you send me an account statement for your X, Y, Z bank account from this date forward.” So maybe not a whole account statement, maybe not June 1 to June 30 account statement. But maybe we’re into late July and they need to see July 1 to July 20. Well, there’s no account statement for that yet because the account statement for July hasn’t been released. So they’re asking for you to do a partial statement. Maybe you can take a screenshot if it has enough detail in it. Maybe there is a way that your bank online can do a partial months account statement, and you can print it offline, maybe your bank has to do it for you.

Carefully read the requests

But what I’ll usually hear is, “Brian, I sent this in. This is the third time it’s being requested.” Slow down and read the request, you sent May and June account statements. We’re asking for July 1 to July 20, because in that period is when the borrowers earnest money deposit cleared, and we need to see it clearing. If they would have slowed down and carefully read the request, they would see that we’re not just asking for account statements from X, Y, Z bank. We know we have those already, we’re asking for an update.

So to have a less frustrating loan process, carefully read the request. I know it’s going to take some time. Spending five minutes reading the email will save you hours of frustration. Or ask for a phone call, pick up the phone and, “Hey, let’s go through this item by item and make sure I’m understanding.” It will save an enormous amount of frustration.

There’s usually a good reason to ask for loan documentation

But trust me when I say when lenders are asking for something, there’s a good reason. And chances are you haven’t already provided it. I know lots of people go, “No I have, you don’t understand, these people keep asking for the same thing,.” Maybe there are instances where they’re inefficient, maybe a lender is losing documents. It’s pretty rare. Usually there’s a good reason and everybody needs to slow down and take a deep breath. I really think this would be good advice to patiently carefully analyze what you’re being asked to do.

Contracts have rigid deadlines

And if it seems like something you’ve already sent, ask for a phone call. They’ll be happy to do it, we’re happy to do it. Let’s just talk it through and keep things moving forward. Because contracts, heavy emphasis on the word contract, this is a written document. You’ve made certain guarantees to a seller, you have a certain financing contingency date, you have a certain closing date. Being frustrated and letting a couple of days go by is not a good idea.

In a 30-day process, if you let two or three days go by without acting, you’ve just blown 10% of the processing time. Which could be really be critical. And at the end of the process, if you’re not releasing your financing contingency in time, and if you’re not closing on time, that could have other repercussions that are not good. So feel free to ask me any questions, ask a loan processor, ask any loan officer for clarification. But try not to get frustrated. Let’s just all get through the process. But realize there’s usually a good reason to ask for things and there’s no work around whatever is being asked for. It’s a mandate by somebody else, it’s not the lender. It’s some government agency, and we have to meet it. So hopefully, that all helps. Let me know if you have any questions. Thanks very much.

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