What to expect on a loan application and don't get mad at the bankby John Price on 10/11/10
I have recently had some customer concerns on what they felt were intrusive requests for information from their banks.
Loans on my product are readily available, and the banks I recommend want to deal with you; but a few things have changed over the last several years.
In the old times, banks were not concerned about income if the collateral was good enough. I recently had a customer wanting to borrow $60,000 on a house in the clear worth about $300,000. He wondered why the bank even cared about his income. He felt insulted that they even asked. The answer is government regulations. The banks have to prove up to government regulators that he can pay for his loan. It is just a change in the times that has been in the making for 20 or 30 years. They don't want a loan that the borrower might not be able to pay back, no matter how good the collateral. And the change in attitude accelerated dramatically with fraudulent appraisals, fake income, and other issues that have now been uncovered as total scams. It is a government crackdown on fraud.
I had another customer upset that the bank wanted to see his social security card. It is part of the Patriot Act and an effect of 9/11. I mean, this guy is as Missourian as they come. But the banks have to have their paperwork because of the government regulations. I understand why the government needs this, but I also understand my customer's viewpoint.
So what should you expect when you apply for a loan? You should expect to have to fill out a loan application that looks a lot harder than it is. It is a standard form that all banks use and can be done in 20 minutes if you do not freeze up on details. A good banker will make it take 20 minutes versus 2 or 3 hours. And you should expect to have to provide 2 years tax returns.
That is about it. Good credit, a loan application, and 2 years tax returns should do it. Maybe some pay stubs.
If the bank wants much more, go to another bank, and go to a local bank. The local banks still have some common sense.
But don't get mad at your bank. The government makes them ask you for this information because of all of the abuses in the past.
If you have any questions on bank financing or general real estate, feel free to contact me.
Thanks for reading.