FINANCIER$ Mortgage Group
The “Approval Experts”™ since 1984!        
(817) 204-0028     Fort Worth 
(972) 644-8244             Dallas
 


I know this is going to sound crazy, but effective October, 2015 it became ILLEGAL for any mortgage Lender to ask for or imply they need any sort of income documentation such as pay stubs, tax returns, W-2s, etc. until you apply for a mortgage. 

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FINANCIER$
Mortgage Group

S.A.F.E. Act compliant


NMLS # 236854, 225460 & 234360


  1. (817)204-0028

(972) 644-8244



718 Boling Ranch Road

Azle*, Texas 76020


(*actually we are nowhere near Azle. We are really on the edge of Fort Worth)

PLUS consumers are no longer allowed to officially do a full application for a mortgage until they’ve already written a purchase contract.


So tell me this,

#1  how are you supposed to know about this law & 

#2  how are you going to find out how much home you can qualify for so you can write that contract?


There IS still a way to qualify for a home, but it is going to require a small amount of work on your part to be able to work with the new laws.


Most Lenders answer to that law has been to make it difficult for you to talk to a real live person so they don’t have to worry their employees might accidentally say too much, too early in the process.  Instead they shuffle you off to an online loan application so you can “volunteer” that information.  But this is a very bad thing for you, as I’ll explain in a minute, but in this way they can continue to hire the uneducated loan officers, they don’t have have to spend time & money training their loan officers and they can still be reasonably safe from the CFPB.


Our answer is to spend the time to not only to educate & train our loan officers, but also to educate our customers so they know how get the best deal for themselves.


Making you fill out an Online loan application before you’re allowed to talk to someone isn’t a very good answer for you since almost all fraud originates from online loan applications. Because of the fraud potential all online loan applicants are scrutinized much more closely than those who make an application the traditional way with a human involved.  


You’re a step behind because first you have to prove you’re really you!


This means if you make an online loan application you already have 2 strikes against you and your odds of getting your loan approved just dropped significantly.  It also means that if you are approved you will have significantly more loan conditions than if you’d made a traditional loan application.  So an online loan application is the last thing you’d prefer to do.


As you can see, we try to do what’s best, not what’s the easiest for us.
We’ve chosen to tell you the law, give you your options and
then let you decide what’s best for you.



How important is the income documentation?  By law mortgage Lenders now have to use the income on your tax returns and not what’s on your pay stub. If both you and your spouse are paid on a straight salary AND YOU HAVE NO INCOME TAX DEDUCTIONS then you might be safe without this documentation, but if you are paid any other way or have tax deductions there is no other way to arrive at a valid income amount for qualification or loan approval purposes.


So how does this impact you?  In Texas there are only 2 types of preliminary qualification a Lender is allowed to do:


#1  Pre-Qualification
Being Pre-Qualified means a Lender has asked you how much you make, what your bills are, do you have any money, how’s your credit (your credit may or may not be pulled), and then based upon your answers they give you some sort of idea of how much loan and the loan type you MIGHT qualify for.  In other words it doesn’t really tell you much.

A Pre-Qualification is useless for the purposes of writing a real estate contract as Sellers want to know for sure you can qualify, but it does help you understand how close you are to being able to buy a home, so it’s a good very first step, but still leaves a lot of unanswered questions.

#2  Pre-Approval
Pre-Approval sounds official and sounds like it is giving you a very definite answer.  Unfortunately a Pre-Approval isn’t really as definite as being Pre-Approved for a credit card or a car loan, but it is several orders of magnitude better than a PQ. 


For a mortgage both you and the property have to be approved and the approval process requires quite a bit of documentation that isn’t normally done at Pre-Approval time so a Pre-Approval simply means that IF all the information you gave us is correct, nothing changes in your situation, all the information you gave the Lender can be verified AND you buy an approvable property then you can secure a mortgage.  It’s not perfect, but it’s as far as any mortgage lender is allowed to go.  A Pre-Approval will be required if you are going to write any kind of real estate contract.


This means that if you decide you really want or need a Pre-Approval you have
to know to VOLUNTEER your income data & documentation
or the most a Lender can give you is a Pre-Qualification. 


Let me stress this again - unless you very clearly VOLUNTEER this additional information a Lender is forbidden by law from to give you a Pre-Approval and they aren’t even allowed to tell you this.




NOW LET’S TALK A LITTLE MORE ABOUT THE HUGE PROBLEM
WITH ONLINE LOAN APPLICATIONS


(And this applies to PreApprovals as well as your real loan application)


Almost every online loan application system takes your initial, and probably incomplete, loan application and runs it through the automated underwriting systems before it sends your data back to the lender - AND THAT’S BAD!


Most lenders aren’t aware of this, but because of all the tomfoolery that many tried during the recent recession the AUS (Automated Underwriting Systems) were changed to include a “memory” of the initial way your information was entered into the system and any subsequent changes made over the life of processing.


Any change in the data has the potential to cause your file to be flagged for “possible fraud” and require more careful scrutiny of all your data and consequently require much more documentation which will give you a more complicated loan process and a higher chance of a turndown. 


The example that was used to explain this to us was if we as loan officers discovered money in a retirement account that you hadn’t entered or entered incorrectly, when we entered the correct data your loan would be automatically flagged because the system wanted to know about this money that had suddenly appeared.


For the past several years just about half our loan applications have been turned down by at least one other lender, but because when an applicant goes to a new lender it starts a new file within the system, most of the time we can get an approval just by re-entering your information correctly & with minimal changes.  which means poor processing skills by the first lender or the fact that you filled out an online application is what caused the turndown.


So as you can see this means if you enter your data in incorrectly or leave something out then innocently you could be flagged and possibly turned down for your loan. 


Consequently we make sure that none of your data enters the system before we’ve had time to talk to you and ask questions so that we can be sure we are entering accurate numbers.  It is a lot more work on our end, but our job is to give your loan the best chance of being approved, not to make things easier on us.


We’ve even gone so far as to prepare a video that takes you through the loan application process step by step and shows you WHAT information is needed, WHY it’s needed and HOW you can improve your odds of a simple & easy approval.


If you’ll go watch the video at (Making a loan application) not only will you learn how to properly fill out a loan application but you’ll also see the problem with trying to making buying & moving plans based upon unverified information.  The loan application requires very specific information and the numbers used on it can be quite different than the information you might first give a Lender in the PQ.


Now let’s talk about what constitutes a Loan Application for a
bit since many things are now tied to loan application dates!



  1. 1)It’s now super easy to make an accidental loan application.  If you give the lender 6 pieces of information it’s a loan application whether you want it to be or not!

    Let me repeat that because it’s not something you’d expect.  If you give the lender 6 pieces of information it’s a loan application whether you want it to be or not!

    Lenders don’t want things to develop into an accidental loan application nearly as much as you don’t want it because it’s a lot of unnecessary work for them.  Let me explain.

    If you tell the Lender these 6 things you have made a loan application even if pen has never touched paper and you’ve only spoken over the phone or exchanged a few texts or emails.  So be sure you tell a Lender no more than 5 of these things!

    a) name
    b) income
    c) Social Security number
    d) Property address
    e) An estimate of property value or sales price
    f) And the loan amount

    If you are haven’t bought a house but are still in the looking stage you won’t have a property address which makes things simpler for you.


Why is this such a problem?  Under the new laws once your conversation becomes a loan application several things are set into motion & the Lender has to:

a) issue you a binding Loan Estimate - LE (which used to be known as a Good Faith Estimate of closing costs);

b) they have to officially enter you into the government system of record keeping &

c)
they have to turn you down for the loan if you should buy a property at a price different from the exact price/terms/closing dates on the LE or if you should change your mind and buy another property, use a different loan type or basically make any type of changes!

The reason you have to be turned down & start over is that the official LOAN ESTIMATE NUMBERS ARE NOW CAST INTO CONCRETE AND CANNOT BE CHANGED!  Which means certain of your closing costs are locked before it’s possible to know what they will be.  If there are any changes the Lender
doesn’t have any option except to turn you down and begin all over again.   So as you can see an accidental loan application isn’t good for anyone!

If an exploratory phone call early in your looking process generated the accidental loan app then you probably wouldn’t be delayed, but if you are calling on a real house that you end up buying, this can make it take even longer to get to closing.

Because of this new law
Lenders don’t want to take a loan application until you have a fully negotiated contract because changes in the contract trigger the exact same requirements to the Lender. If you already have a PreApproval then waiting till you have an approved contract won’t delay your closing, but if all you have is a PreQualification . . .


  1. 2) Now the ONLY solution a lender has for most problems that might arise during the purchase & loan processing is to turn you down and begin again. So don’t take it personally and think you aren’t going to be able to buy a home.  It’s simply the way the Government has chosen to “fix” a nonexistent problem.


Now you know all you need to know to ensure you get the proper type of Qualification & the information needed to keep you out of trouble which can delay things.  If you’ve ever got any questions about any aspect of the buying and financing process don’t hesitate to give us a call.  We don’t work Banker’s hours we work when you need us.  So even if it’s after hours, weekends or a holiday, if you have a question call us!  If we can’t get to the phone instantly we will get back to you very shortly.


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