If so the only thing that changed since then is the amount of paperwork. Of course that would be the case as there wasn’t any paper then.
Sammy Grindstone, the loan officer, asked the same questions we do today so that First Bailout Savings got its money back. Like today they wanted payments on time and not Fred’s house instead.
Today we have credit reports, computer loan approvals, automated appraisals and lots of lender rules, hoops and stupid requests. All of this sophistication is to assess risk – will the mortgage be paid back as promised?
Well, we all know that it didn’t work so well recently. That was because lenders stopped checking if the loan would be repaid.
No more — but the good news is rates are still very low and home prices, while up, are only back to 2004 levels. The loan process today is an excellent check to make sure the payment is manageable for the long haul.
When someone applies for a loan these are the age-old questions:
- CAN you repay the loan? Do you have sufficient, predictable income and is it enough? No surprise you need to show tax returns and paystubs and employment of at least 2 years
- WILL you repay the loan on time? A credit report is evidence of a willingness to make payments. The longer you have had credit, used it and paid back on time the better chance you will continue to do so. No credit? No way to know.
- DO you have “skin” in the game? That’s what a down payment is and the bigger it is the more beans for dinner if income problems arise.
- DID you save enough for the down and for a “rainy day”? These are called “reserves” and why bank statements are needed.
Reasonable questions, yes?
Of course most loans today go to Fannie Mae, Freddie Mac, FHA or VA so we are dealing with government, not so much businesses. Crazy, stupid, nonsense stuff sometimes but they all start with answering the same 4 questions