Refinancing Your Mortgage: Weighing the Pros and Cons

The mortgage application process is admittedly longer than what it is for other types of loans such as credit cards and auto loans. That’s because mortgage loans require a significant amount of documentation and third-party verification, as well as the fact that they are legally recorded instruments. Both put burdens on the mortgage process that require a certain amount of time and effort to complete.

But you can speed up the mortgage approval process by being cooperative by providing any documents that are needed. A well-prepared borrower can chop several days or even weeks off the approval process.

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Be Prepared for the Loan Application

There’s no getting around the fact that a mortgage loan application is something of an examination process. Whether you complete an application online, or you do it in person with a loan officer, you will be required to provide a considerable amount of information.

That will include personal information, such as your name, address, and Social Security number. The application will also require information on both your employment and your income. And naturally, you will be required to provide asset and credit information.

You should think of this almost in terms of what will be required to fill out a job application and prepare accordingly. That means being ready to provide information regarding who, what, where and when?

For example, loan application employment information. You should be able to furnish the name, address and phone number of your current employer; your date of hire, your specific position, and your income. You will also need to provide similar information for previous employers, going back for at least two years.

For assets, you should have copies of recent bank statements, investment accounts, and retirement accounts.

Your credit information will come largely off of your credit report, so the requirements here will be minimal. But you should have the name and account number for your current mortgage available since that information is not always readily available even on a credit report.

You should complete all required spaces on the application. Anything that you leave blank will bring questions later, and slow the process.

Have Written Explanations for Anything Unusual

If there is anything unusual, it will help to include written explanations. For example, you should have coherent explanations for any major credit events, such as bankruptcies and foreclosures. If there is anything strange about your compensation arrangement, you should include a brief note to explain it. That will help the mortgage staff to know exactly how to proceed.

If you have cosigned any loans for a third party, you should be prepared to document that the other party is primarily responsible (if you want the loan excluded from your qualification). You can often accomplish this by providing copies of canceled checks for the past 12 months, indicating that the other party has been making payments on the loan.

Have All Necessary Supporting Documents

There’s no getting around the fact that the mortgage application process is document intensive. You should be prepared with a laundry list of documents to support the major information provided on the loan application.

This will include:

• Copies of your most recent pay stubs
• Copies of your W-2s for the last two years
• Copies of the last two years income tax returns if you are employed, have business income, commissions, or significant investment income
• Copies of the sales contract on the house you’re purchasing, or the deed on your current home if you are refinancing
• Copies of the most recent statements from bank accounts, investment accounts, and retirement accounts
• The name, address, and account number for your current mortgage, or landlord and contact information if you are a renter
• Copies of leases on investment properties
• Donor information if you will be receiving a gift for the down payment on the new home

The more documentation that you have when completing the loan application, the more accurate the application will be. Meanwhile, you will be able to turn over those documents to the lender so that they will have them for verification purposes.

Providing timely and accurate documentation is probably the single best step you can take to speed the mortgage approval process.

Respond Quickly to Additional Information Requests

No matter how thorough you are in providing documentation up front, there will almost always be requests for additional documentation. Sometimes this happens because you forgot a document, and others because a situation arises that simply requires more clarification.

When you get such requests, respond to them, and do it as quickly as possible. Every request for documentation in the mortgage loan process represents a potential delay. The sooner that you can provide the lender with the information that they need, the faster the process go.

Recognize that the Mortgage Staff is On Your Side

While it can sometimes seem that the documentation requests are on the intrusive side, it’s important to understand that mortgage loans are legally created arrangements. And they also have substantial documentation requirements by the agencies and investors who ultimately fund your loan. Your full cooperation will make the whole process go quicker.

It’s also important to understand this limitation when the requests for information and documentation are coming through. The mortgage personnel who are contacting you for documentation aren’t doing it to make your life miserable. They’re trying to get your loan approved, but need help getting it done. After all, no one knows your situation better than you do!

By providing the necessary documentation, and doing it as quickly as possible, you are helping your cause. Every piece of information that you supply moves your approval and closing day ahead. Think of it that way – and be proactive – anytime the phone rings or an email arrives with yet another request for more documentation.