Everyone has heard that mortgage financing is more difficult to obtain these days. What people may not be aware of, however, is the “why” behind the time it takes to get a loan approved and closed in the mortgage industry today.
Typically, your offer to purchase contract is written for a 30-day closing. In most cases, you would have already spoken to your Mortgage Consultant/Loan Officer (MC/LO) to handle the prequalification for your loan. Well, prequalification and full loan applications are two different things.
The most important thing you can do following prequalification is to meet with your MC/LO to complete the formal loan application. Make sure to have with you all your required documentation of income, employment and assets. In some cases you will also need to provide information on credit such as explanations for any late payments, inquiries, etc.
Most every borrower will now be required to complete and sign the Tax Transcript form(4506) when they apply for a mortgage loan. While this requirement is not a new one, borrowers should be made aware that this form will now be sent to the IRS during your application process.
The Tax Transcript form, which checks the past two years of federal tax returns, verifies to the lender that the income given to them is accurate. The IRS then confirms the information or alerts the lender to a discrepancy. In the case of a discrepancy, the lender is given copies of the Taxes on file with the IRS.
For the borrower who is honest and submits accurate tax returns to the lender, this process should not be an issue or cause for concern. It does have implications however, for those who submit false tax returns.
If you ask many loan officers, although dealing with first time homebuyers is challenging, it is easier to set the right expectations on the mortgage process as they have not been through it before. Today’s first-time homebuyer never experienced the easy mortgage process prevalent in the late 1990’s to 2007.
The most difficult group to set expectations with are move up buyers or refinance customers. Most of them bought homes during the 1990’s to 2007 and in many cases did not have to provide anything in terms of documentation. At the most they provided paystubs and bank statements and usually just the first page of their bank statement. They did not have to write explanations for recent inquiries or address old credit issues. As for the requirement for all loans to have tax transcripts pulled( what is called a form 4506), this entails the lender getting confirmation back from the IRS that the tax returns given were indeed filed and are accurate.