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Loan Applications Do Matter

November 12th, 2012

Do application forms matter ?


Pre-qualification & pre-approval is how things typically start today.
Prospective homebuyers submit written paperwork for lender review.
If already under contract, formal loan application occurs instead.

For both, clients complete a form to supply personal & financial data.
People are often rushed or not focused when filling out such forms.
Often, people don’t read it and/or follow instructions well.
Instead of checking figures & balances, they list estimates, guesswork or forget & omit data.
Sometimes, one party might fill it out for the other (ie..husband & wife).
Sometimes, a loan officer fills it out on their behalf.

How and why doesn’t matter as much as what we do with it.
The initial form from a borrower carries tremendous weight in lending.
It serves as certification of their information & accuracy.
The entire mortgage finance process is designed to verify & validate the data.
It’s so crucial that we have an initial loan application & final loan application.
Data integrity is key to every stage to successfully obtain a mortgage.

Bet you’ve never read the paragraph above the application signature line ???
It’s well worth the read, will surprise you, and is a federal form all mortgage lenders use.
Every application signer in Section IX page 3 “agrees & acknowledges” to 11 specific items.
Starting with Item #1:
Information is true & correct, intentional or negligent misrepresentation may result in civil liability or criminal penalties.

The lending process is built to check & recheck data for approval purposes.
When data is found to be inconsistent, or inaccurate, warning bells ring !
The later in the mortgage process it happens, the worse an effect it has.

The loan process grinds to a halt with a question mark on the borrower’s credibility.
Generally, fraud isn’t the goal, simple or careless data errors or omissions just happen. 
No matter why, major review & auditing of the client’s whole file is triggered.
It portrays the borrower in a “dishonest” fashion, and brings intense scrutiny to their file & paperwork.
Certainly, the worst time is in underwriting, the very last place you want such issues.
When it gets discovered here, the result can be denial of their loan, even if they qualify !
Obviously, fraud is fraud, and is treated accordingly.

So, what do we do, as people will not change?
Partnering with seasoned lending professionals that get it right is what you can do.
Taking pride, attention to detail & good reading skills go a long way for good loan officers. 
Engineers always get an A+ for filling out the best loan applications!
Top notch loan officers always get an A+ for having complete & thorough applications.
This is an essential best practice to ensure your client’s receives approval.
The time to clarify their data & ask them questions is upfront, not late in the game !