If you haven't tried getting a mortgage loan in the past five years or so, you will be shocked at how difficult and arduous the process can be these days, for even the best of borrowers with A+ credit. Stringent federal regulation and fear of costly penalties for even the smallest infraction have Las Vegas mortgage lenders on the edge of their chairs, making sure every "i" is dotted and "t" is crossed. Applying for a mortgage is very much like being pregnant and going through labor: It's a painful ordeal that seems to have no end, but once you are settled in your new home, you will gradually forget the pain and know that it was all worth it in the end.
Get Your Documentation Together
The mortgage lender will take an initial application from the borrower and will collect the following documents as applicable, including:
- Driver's License or State ID
- Secondary ID like Social Security Card, Passport or Government ID
- Most recent pay check stubs covering the last 30 days for each borrower
- Last two years of W-2 and/or 1099 forms for each borrower
- Last two years of tax returns (all schedules including business, if applicable) for all borrowers
- Social Security Income - most recent award letter
- Pension Income - most recent award letter
- Investment, Annuity, Stock or other relevant income disbursement documentation
- All pages (even blank ones) of most recent bank statements covering the last 30 days for each asset listed on the application
- Bankruptcy documents
- Divorce Decree
- Mortgage statements on all properties owned by each borrower
- Hazard Insurance statements on all properties owned by each borrower
- Rental agreements on any properties owned by each borrower
- Fully executed copy of the purchase contract for the property you are buying
In addition, at different times during the loan process many of the documents listed above will need to be updated to reflect the most current statements, so you will be asked to supply updated items multiple times.
The Next Steps in the Process
Next the mortgage lender will issue a loan disclosure package which must be signed by all borrowers and returned before an appraisal can be ordered. In order to prepare the loan disclosure package, the lender has to contact the escrow company for figures they need to complete the package. It can take 3 to 4 days (depending on how fast the escrow company supplies the figures) before the loan package is ready to go out to the borrowers for signature. Typically it takes about a week before the appraisal can be ordered, as long as the borrower returns the disclosure package promptly.
At the same time, the lender will run credit reports for each borrower and send out employment verifications.
Once the Loan Documents Have Been Collected
Depending on the complexity of the mortgage loan and how fast the documents have been collected from the borrower and the employers, about two to three weeks later the package goes to a loan processor who gets the file ready for the underwriter. The processor will make sure all corresponding documents are on hand for each asset, will review tax returns to make sure there are no unreported expenses that throw the borrower's ratios out of whack, look at bank statements for unusual deposits, etc.
Then the processor will make a list of more documentation they think the underwriter will require based on the documents that have been collected to date, and the lender will ask the borrower to supply that additional documentation.
Going to the Underwriter
This is where the fun starts in earnest. The underwriter will once again go through the entire file of documents.
Remember those stringent federal regulations I mentioned? Federal lending guidelines have seen massive changes in the past few years, and every underwriter seems to have their own interpretation of what many of the regulations require. You could send the same package to three different underwriters, and they will come up with three different ways of interpreting the law. Which means you could get three different "needs" lists after the underwriter is done with his/her review.
Once again the lender will go back to the borrower to get the requested documentation. Many of the requirements may seem totally unnecessary or outrageously silly. For example, one time I had a young couple that had just gotten married. They had received quite a lot of cash from wedding gifts because everyone knew they wanted to buy a home, and they were using that money for their down payment. The underwriter not only wanted a list of the people the cash had been received from, she wanted one of the actual wedding invitations!
Ready to Close
In the past few years we have seen a number of loans that had full underwriting approval and were ready to close that fell apart at the last minute. After all the underwriter's conditions are met, the lender still has to pull credit one more time to make sure nothing has changed and re-verify employment before they can fund the mortgage loan. If you have added extra credit card debt because you bought a washer and dryer for the new house or if you have changed jobs or the if the IRS has filed a lien against you, the whole loan can fall apart in the blink of an eye.
The Point of This Story
Try to keep in mind that for every document you supply, you will also be asked for more documents that support the original documents. And then you will be asked to supply even more documents to support the supporting documents! And many documents have to be constantly updated throughout the loan process.
By the time you have finally closed on your home, you will definitely feel like you have been jumping through hoops of fire for a month or more. And of course they will need everything ASAP.
A sense of humor certainly helps, and remember: the lender absolutely does NOT want to keep coming back to you for more and more stuff. They do their best to get as much as possible up front. But there is just no way for them to predict what the underwriter will require after everything has been submitted. And in order to purchase any Las Vegas real estate, the buyer has to comply with the underwriter's requests.
Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052
With over 30 years of experience helping families call Las Vegas "home!"