Why Lenders Ask for the Things They Do

Regardless of how you apply for a mortgage, whether with a face to face meeting or an online application here in Alpharetta, there are more than a few questions your lender will have. At the initial application, you'll be supplied with a list of needed documentation based upon your personal situation. Mortgage lenders follow the same basic set of guidelines with a few twists, but there are some documentation guidelines that absolutely must be followed for most programs. Sometimes you might even wonder why your lender asks for the things it does when some of the things asked for seem so obvious.

For instance, why does a lender ask for pay check stubs that cover a 30 day period when one paycheck stub covering two weeks clearly shows how much you make and your year to date earnings? The answer is due to the lenders requirement to calculate monthly debt ratios. If you get paid on the 1st and 15th, and you only provide the pay stub from the 1st, the lender doesn't have full verification of your gross monthly income. If you get paid once per month, then one pay stub will do. If you get paid every other week or on the 1st and 15th, you'll need to provide the number of stubs needed to cover a 30 day period.

Okay, here's another one. Your lender will ask for copies of your most recent bank statements to show you have sufficient funds to close. You pull up your bank statements and there are 10 pages, but one of them is blank. Would a lender need a blank page? Of course not, you say. But the lender will ask for that page anyway. Your statements will read page 1 of 10, 2 of 10 and so on. If page 8 of 10 is missing, how does the lender know it's blank without you providing it? That's why lenders ask for all pages, even if blank.

When you apply for a mortgage and your lender pulls a credit report, the most important thing the lender looks for is your payment history and how much you owe compared to credit limits. A lender will also look toward the end of the credit report to see if there are any credit "inquiries." A credit inquiry lists when a consumer makes a direct request for a new credit account. But if the inquiry is relatively new, say within 30 days, and a new account is opened, the new account information may not yet be reported. Even if you applied for credit but decided not to take the new credit line after all, the lender will still need to see evidence that no new accounts were opened. For this reason, your loan officer will ask that once you submit a loan application, don't apply for any new credit accounts until after your mortgage is finally funded.