There are all sorts of rules and regulations regarding what constitutes a quality mortgage loan.

The folks who pass judgment on each loan are now spending more time with each file to make sure there are no gaps in the documentation. This means you have to be particularly attentive to providing the mortgage originator with all paperwork required, even if it sometimes seems a bit “over the top.”

The rationale is simple. The institutional investor who will buy the loan has never met you and doesn’t know if you are a fine upstanding citizen or a criminal bent on stealing mortgage money by committing fraud.
With the advent of sophisticated digital duplication equipment at consumer prices, the temptation to create forged documents has risen to a new high. Even in the case of the third-generation multi-color $20 bill, there have been numerous reported cases of counterfeiting.

If you don’t immediately provide any verification document requested, it could come back to slam you in the pocketbook—even if you are perfectly qualified for the loan. That’s because your rate lock may not have taken into consideration a significant delay caused by underwriting issues that might arise.

A short rate lock window is not necessarily a bad thing—a 60-day rate lock is typically less expensive than a 90-day rate lock. The reason? The risk is reduced because the investor is not exposed to market rate fluctuations for the extra month of the longer lock.

But the shorter window could become a drawback if you do not have sufficient paperwork to document the source of the down payment on a purchase loan, to cite just one example.

Therefore, the No. 1 consideration in applying for a loan is preparation.