Why Are Mortgage Documentation Standards So Strict?

by Alex Stenback on December 9, 2011

A favorite question from many clients these days goes something like this:

“Help me understand why we need to document every deposit on our bank statements – I mean, we have the money, clearly.  What gives?  Are we being singled out for special treatment here?”

I find a speed limit analogy helps.

Today, it is well known that if you drive at 5-7 miles over the speed limit you will almost never get ticketed.

Imagine if one day, people driving even 1 mile over the limit almost caused a worldwide depression, and pushed the global economic system to the brink of the abyss?

That would be the end of the 5-7 mile per hour rule.

And that’s about where lending stands today. The path to loan approval is lined with virtual traffic cops who will pull you over and demand additional paperwork if any little thing is amiss.

Don’t take it personally - The good news is they won’t fine you, and as painful as it can be, they are there to ensure safe passage to your new home.

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