Mortgage Loans

Mark Ferguson, Sandy Spring Bank, visited my Arlington office earlier this week.

Sandy Spring Bank is a regional bank. Regional banks are the backbone of the building and real estate communities.

After the 2007-2008 financial crisis, national banks stopped lending to small builders, builder clients, and many individuals seeking mortgages.  Our regional banks, like Sandy Spring, never left our communities.

Since 2008 the real estate and building industries have been supported by regional banks. They have stepped up and made loans to the construction and real estate industries.  The regional banks have led the way as these industries slowly recover.

I asked Mark to write a short piece on mortgage banking today. Here it is (thanks Mark!):

Since the “great humbling” in 2008, we’ve experienced a significant change in mortgage underwriting requirements and guidelines.  No doubt, the risk pendulum has swung completely, and the need for thorough and accurate documentation has never been greater.  Clearly, with the level of mortgage defaults, short sales and foreclosures experienced since 2008, today’s mortgage loan encompasses a more in depth analysis of a client’s income, assets, and credit.  Therefore, in order to provide clients and real estate agents with the best opportunity for quick and easy loan approvals, the best approach is to follow the old boy scout motto “Be Prepared”.  Setting the right expectation up front regarding needed documentation will almost certainly alleviate challenges later in the process.  Specifically, all mortgage loans today require the following documentation:

2 most recent years personal tax returns and W2s (if applicable)   All pages and supporting schedules

2 most recent years business tax returns (if self employed; self employed is defined as having at least a 25% ownership interest in a business)  All pages and supporting schedules

Recent paystubs covering a period of 30 days

2 months most recent personal bank statements

Most recent quarterly asset statements (non liquid accounts such as IRA’s, 401k, etc)

Evidence of funds to close (if coming from source other than documentation listed above…i.e. gift funds, etc)

 

Your mortgage banker should request this information early in the process to ensure the ability to provide loan approval and provide it within the established financing contingency in your sales contract.  Loans for different property types or loan types may require additional documentation.  For instance, construction/permanent loans will require building plans, specifications, and the contract with the builder.  Loans to finance a condominium will require the condo association documents and have a condo questionnaire completed to ensure financing is available on that project.  In short, it’s important that the mortgage banker and prospective buyer are having a detailed conversation early in the process to ensure the right documentation is provided so loan approval can be easy and seamless.