If you are purchasing a home as either a first-time home buyer or a current homeowner that hasn’t applied for a new mortgage in quite some time it may seem like there’s an insane amount of paperwork involved in the process to apply. It’s true that a decade ago home buyers didn’t have to deal with as much paperwork as they do now, but there’s good reason as to why the mortgage application process is more thorough and involved than it used to be.
Because of the housing recession and the number of people that were unable to afford their mortgages, the government now requires that banks prove potential homeowners can, in fact, afford their mortgage. Before the housing market crashed, home buyers throughout the country were given mortgages when they couldn’t actually afford them. This led to a record number of distressed properties through people losing their homes to foreclosure or having to complete a short sale to avoid foreclosure.
Like the government, banks also aren’t interested in owning your home. While they are more than happy to provide you with a mortgage, the increased number of properties they took ownership of due to foreclosure or had to negotiate short sales on, both in which they lose money, caused many banks to create an application process that isn’t for the faint of heart. They are simply covering their own backs with the amount of information that they require when a home buyer is applying for a home. They want to do everything possible to minimize their risk of either having to complete a foreclosure or short sale on your home.
While the amount of paperwork in the mortgage application process can seem daunting, the important thing is to keep your eye on the prize. Although the mortgage application process was much less complicated in years past, the average interest rate for a mortgage was also much higher. Going through all of the extra hoops to secure yourself a mortgage is definitely worth it when you’re saving yourself money.