Can You Outsmart Your Mortgage Lender Forbes Article

Can You Outsmart Your Mortgage Lender Forbes Article


You cannot outsmart your mortgage lender, period.  All of the words that follow are just fortification, the truth is that no matter how smart you are, no matter how high your IQ is or how good you did on your SATs, you cannot and you will not be able to outsmart your mortgage lender.  Accepting that reality is the answer to all of the problems you are having getting your loan approved.  Triple checking redundancy and hair trigger underwriting red flags safeguard the mortgage approval process like a labyrinth of security laser beams.I have witnessed the practice of outsmarting torpedo perfectly good mortgage loans and derail the orderly process to loan approval.  Sometimes I can even see it as it is happening.  When hesitation follows a question instead of a confident answer, outsmarting is often lurking.  Identifying and sourcing assets, determining allowable income to qualify and of course explanations for credit issues are just some of the subjects for borrower fiction.Outsmarting doings are not generally nefarious or sinister, most mortgage consumers often find the approval process formidable and difficult to navigate, underwriting compliance can seem redundant and frankly lacking clear understanding as to why specific documents are necessary.   That being said, the myriad of individual circumstances and issues that borrowers present are not easily addressed using the small box of Ability-To-Repay underwriting and documentation guidelines.  Borrowing consumers try as they might to satisfy lender requirements that sometime seem un-satisfy-able! This is when substituting begins and in some circumstances can be raised to an art form that becomes outsmarting.The rule books that FannieMae and FreddieMac publish for lenders to use as underwriting guidelines are called Selling Guides.  The Selling Guides contain all of the secret formulas for successfully constructing a Qualified Mortgage loan.  Remember, if lenders adhere to the CFPB’s Ability-To-Repay underwriting and documentation guidelines, and approve, close and sell well constructed Qualified Mortgages, then even if a loan goes bad, the lender will not have to buy it back (see The Perfect Loan File,, 03/12/2012).The financial carnage inflicted as a result of the dreaded buyback, caused many lenders to suffer spectacular losses and put many others out of business.  Mortgage lenders simply have no appetite for anymore bad loan buybacks, none, zero.  And now with QM and QRM, mortgage lenders have a shield to protect themselves from the risk of buybackWhen you deposit money into your bank account and decide that your lender has no business asking you where that money came from, be prepared for mortgage misery.  Your lender will absolutely insist on knowing where the money came from, may even disqualify the source as unacceptable and presto, loan approval not!  If you are delaying the submission of income documents because they hold secrets that you fear will hurt your chances for approval, confess, disclose and submit.  If that unpaid collection account really is yours and not a credit bureau error, pay it.  Those secrets can be deal killers, and they will be deal killers no matter when you disclose them, early on, now or shortly before your scheduled closing.  Trust your lender to help you navigate the approval process, they have the same goal that you have and they will help you get to your closing target.Mortgage consumers today need to realize that QM (Qualified Mortgage) gives lenders the tool that protects them from potential buyback losses, all they have to do is follow the directions on the agency box and they are safe.  That means that borrowers  will have to adhere to underwriting guidelines and documentation requirements that are essentially carved in stone.  Negotiating with your lender to accept almost as good income, assets or credit proof will not be successful because the almost as good documents are simply not on the approved list.  Not being on the approved list means you will not get past the velvet ropes.  This is a form of outsmarting that will prolong the approval process, invoke ire and discontent,  and frustrate all parties involved.Getting a mortgage to buy a house or to refinance an existing mortgage should be an agreeable experience, after all, you want to borrow money and lenderswant to lend you money, (remember, that is how lenders make money), sounds like everybody gets what they want right?  Somehow the hand shaking excitement at the signing of the mortgage application can morph into an adversarial tug of war with documents and underwriting guidelines instead of rope.   Mortgage lenders have the skills, the tools and the resources to guide consumers through the assault on their financial profile.  They know how to address credit issues, they know how employment, income and assets are considered and corroborated, they know more about mortgage financing than you do, let them do it, it’s their job.

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Dated: February 21st 2014
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