Friendly Pointers on Completing a Mortgage Loan Application
Searching for a home or executing on a home purchase contract are not the most frustrating factors in buying a home in the current market. More likely, the most frustrating aspect of buying a home will be getting through the mortgage processing with the lender. Because of the prevalence of mortgage fraud, heightened sensitivity to crimes associated with mortgage fraud and recent experiences with a volume of failed loans nationwide, all mortgage lenders are required to put safeguards in place in processing mortgage loans. And, all this added screening and scrutiny of borrowers makes it a very frustrating process for borrowers (some mortgage lenders have even called these more stringent criteria and guidelines a "financial colonoscopy" of the borrower).
Our best advice for a borrower is to take the time upfront to ensure that all information provided to your mortgage loan officer and lender is accurate and complete. Likewise, if you know that there may be red flags in your file that may surface, please disclose this to your mortgage loan officer upfront.
Most lenders perform the following anti-fraud verification checks of an applicant’s background and information during the processing of a mortgage loan:
1. Credit Reports: The loan officer pulls an initial credit report with the three major credit bureaus at the time of application and another "refresher" report is run by the lender again on the day or two just before settlement/closing. Freddie Mac and Fannie Mae are now requiring lenders to search for, review and determine the disposition of all credit applications by a mortgage loan applicant for a period of 120 days before the mortgage loan application. Likewise, the refresher credit check just before closing is reason that the old axiom still applies: "Do not open any new credit accounts or buy a new car or furniture on an existing account" after making application and before closing. Otherwise, there may not be a delayed closing or no closing at all because of degraded "income-to-debt ratios."
2. Fraud Guard: This check that is frequently run at the time of loan set-up. This service cross-checks addresses, phone numbers, work addresses, work phone numbers, etc.
3. Rapid Reporting: This service checks social security numbers to borrower’s names.
4. IRS Form 4506-T Report: This service checks borrower’s tax transcripts with those that the IRS has in the IRS database.
BOTTOMLINE: If information provided by an applicant is half-baked or in error, all or one of the above anti-fraud services will raise red flags. The lender will then have to go back to the applicant for written explanations and added verification documents that will ultimately slow down the entire loan process. These errors could delay settlement on the purchase contract or could result in denial of the loan. Even if you are a millionaire with outstanding credit, you need to avoid the frustrations and possible humiliation prevalent in processing a mortgage loan in the current market. Please do yourself a favor and please be thorough and accurate upfront in completing your loan application!
The R&R Team, Inc.