Giving More Information Means That You Have to Document More.
Let's say that, because you wanted to make your application look as good as possible, you entered every piece of financial information about yourself. So one of the bank accounts you put on your 1003 shows a balance of $20,000, with a deposit of $15,000 made a few weeks ago. But you didn't need the $15,000 to buy your new home.
Sudden increases in amounts on deposit attract the scrutiny of underwriters. Where did that money come from? Is it a loan? Do you have another business or job that we don't know about? If it's a loan, do you have to pay it back? If you do, then your debt ratios would be affected. Did you get a gift from someone? Did you transfer funds from one account to another? If so, why, and were those accounts yours or were they accounts of others?
It's not your underwriters' fault. It's their job. Whatever you put on your loan application, they have to verify it. If you don't need it, don't put it on the application. It saves you time, and it saves them time.
If you have a loan officer who immediately, upon application, asks for all your stuff, simply ask, "Why are you asking me for all of this stuff now?"
Instead, you need to work with your loan officer to determine how much money, or "cash to close," will be required to close your deal. Whatever is needed, you simply supply that. Nothing more, nothing less.
Some Things on Your Loan Application Are Completely Unnecessary.
Your 1003 is five pages long, with more boxes than you can count, and your loan officer is asking you to fill out the application. "Which part?" you ask. "Why, all of it," replies your loan officer.
Here are some things you can mostly ignore on your loan application.
First and foremost, if you have no clue as to what the application is asking for, don't feel compelled to complete that question or frantically track down your loan officer to ask what you should put down. If you're scratching your head wondering what in the world you should put down, then leave it blank. If it's vital, your loan officer will help you fill in the blanks.
First, lenders don't care if you don't know what type of loan you want. At the very top of page 1, your 1003 asks you what kind of loan you're looking for. Heck, most people don't know that. So leave it blank if you feel like it.
Another section on the first page of the 1003 asks how many years of school you've had. As if that matters. It doesn't. I've seen loan applicants who, perhaps embarrassed, put "eight" or "ten" years of school. I imagined how stressed out they were, thinking that how much education they had would affect their loan approval. So maybe they fudged a little bit and put down that they graduated from high school or got their G.E.D. and were worrying that somehow the lender would find out that they had lied about that and they would be declined.
It doesn't matter. If you've had 20 years of college, put that down. If you dropped out in the third grade, put that down. It just doesn't matter. Years of education is an old, bogus box. A college graduate is no more deserving of a home loan than someone who dropped out of high school to help his parents make ends meet.
Page 2 of the 1003 can sometimes be very intimidating, especially to those who are buying their first home. There are no less than nine sections that ask you to list all of your checking, savings, and retirement accounts.
It's intimidating because, human nature being what it is, if there's a blank spot, people think, "I'd better fill it in."
Don't worry about any of that. Just complete what you need to do the deal. Don't feel that you need to have 18 different investment accounts, some mutual funds, and stock accounts lying around in your sofa cushions. Lenders don't care about everything you have; they just care about whether you have enough to close the loan.
If you look further down on page 2, you'll see a section asking you to list your automobiles and any jewelry or furniture. Tell the loan application to take a hike. This is another old school loan question that's not needed and, in my opinion, is kind of embarrassing to ask.
If you take a loan application at a lender's office and your loan officer asks you if you have a car and, if so, what kind is it and what is it worth, then I suggest you walk away and find another loan officer.
"Pardon me, can you now tell me what jewelry you own?" What is this, a pawnshop? Give me a break.
If your loan officer takes you through these questions, then you know that he's not at all well versed in the loan approval process. He's simply an application taker, and if there's a problem with your loan application, he won't know how to deal with it. And you're the one who will get screwed. The loan officer goes back to work the next day. You may have lost the house you wanted to buy.
So where do these questions come from? They've been around for a long time. A very long time. The furniture and jewelry question is an old "net worth" question that grumpy bankers would use to evaluate your loan application.
So, too, was the automobile question placed in the mix. Your car is an asset—at least, it will be when you pay it off and retire the note so that it is fully yours. The automobile question also added something else to the underwriting matrix: If you didn't put down a car on your application, the underwriter would want to know how you got to work.
Honestly, this has happened to me, and to most loan officers who've been in the business for several years. If there was no car listed as an asset, the underwriter would want to know how the applicant got to work. Why?
If the borrower had a job, she had to get there, right? And if she had a car, she probably had a car payment. If she had a car payment, that would affect her debt ratios and perhaps her ability to qualify for a mortgage loan.
To add to the insult, the application asks how old the car is. If the car is just a couple of years old, the underwriter would suspect that there was a car payment somewhere that wasn't showing up on the credit report. In this case, the underwriter would demand, and get, a copy of a clear title to the car to prove that no car payment was being made.
I'm not kidding about all of this. But the 1003 still asks for stuff that's not needed. And it can be intimidating to think that just because there are boxes to fill doesn't mean that you have to fill them.
Automated underwriting has eliminated most of the fluff yet the loan application still asks for it.
Some Boxes Are Simply for Identification and Won't Be Used to Determine Eligibility.
Another entry on page 1 of the 1003 asks for your age. This box isn't used to determine whether or not you're young enough to take out a 30-year loan.
"Yeah, this guy wants a 30-year mortgage, but he's already 65, so we should probably turn him down because he'll never last long enough to pay off the loan," says an imaginary lender.
I have been asked this question on more than one occasion. Once it was by a daughter who was helping to fill out a loan application for her aging father. She actually said, "Would they approve him for a 30-year loan if he's that old? He surely won't live that long." First, this is age discrimination. Lenders can't deny a loan based upon age.
Okay, if someone is too young to enter into a legally binding contract, then yes, the loan will not be approved. But if my 92-year-old grandmother applied for a 30-year mortgage and the bank said, "No, we can't approve you for a 30-year loan, but we can lend you some money based upon a 2-year loan because that's how long we think you're going to live," then you can bet that I and my army of lawyers wouldn't stop suing the bank for age discrimination.
The "Age" box is used to help determine identity, not to decide whether to make a loan based upon how old or how young a person is.