Would you like to reduce your mortgage interest rate by doing more paperwork? Does this make any sense to you? Maybe not, but let me explain.

More paperwork in getting a mortgage

If you applied for a mortgage ten or twenty years ago, and you are applying again now, you will notice that there is a lot more paperwork involved. The increase in paperwork is due to government mandates. The government is requiring the banks to see more verification that a proposed borrower is, indeed, able to pay the mortgage. And the banks are required to double or triple check the info you enter into the application.

Why are the banks being pressured into all of the extra paperwork? The government does not want history to repeat itself. During the housing crisis of the mid 2000s, it was easy to get “qualified” for a mortgage. And many people were “qualified” but really weren’t. And they received mortgages that they were unable to pay back. This led to millions of families losing their homes.

This, in turn, put the banks into the real estate business, which is a business that banks do not want to be in. But after the foreclosure, the bank had to assume ownership until they could liquefy the millions of homes that were foreclosed upon. And the banks also needed to negotiate another million of short sales. For more info on short sales, read posts on that subject at www.55plusinmonmouth.com/blog/. And this is why the application process has become more stringent.

But it’s not all bad news.

The extra verification the government and banks are requiring is a partial reason for lower interest rates. Ten or twenty years ago, there was a lot less paperwork involved in getting a mortgage. But ten years ago the average interest rate was 6.29%. And twenty years ago the average rate was 8.12%. But today, the rate is about 4%. And that is partially because the banks have a reduced risk of the property going into foreclosure.

So – would you like to reduce the necessary paperwork to get a mortgage? Try this. Offer to pay 8% interest on the mortgage. I will bet that the bank will reduce the paperwork.

Questions? Call me.

Art Reiman – Realtor 732-598-7700