Although most of the federal and state disclosures are in place to protect you as the borrower, the forms are not written in laymen's terms. If you have questions about your rights or the laws that afford them, your trained mortgage professional can always explain them to you.
A lot of the paperwork required for a home loan is just information that is needed to prove what you provided on your application. The lender just wants to make sure and validate that everything you said about your income, credit, and work/living situation are accurate. This leads to the lender asking for many documents to complete the file.
How does all this paperwork "protect me"? There are disclosures required to make sure that you are aware of important facts about your mortgage. For example: Is there a pre-payment penalty? Is my rate fixed or adjustable? Are my taxes and insurance included in my mortgage payments? What is the interest rate on my loan?
Don't be intimidated by the mountain of paperwork. Make sure you understand everything that you sign. Don't be afraid to ask questions.
It is a good idea to obtain copies of everything that you have signed, especially the Good Faith Estimate. The Good Faith Estimate, contains information about your interest rate, payments and all the fees associated with your loan. You should compare your Good Faith Estimate to the Settlement Statement you will be required to sign at closing. Ask your lender about any differences between the two.
If you have excellent credit you may be able to get a stated income or stated asset loan without paying a higher interest rate. This means that the lender will not verify your income or how much money you have in the bank. This will greatly cut down on the amount of paperwork that is required.
If you want the fastest possible closing without the bother of standard loan documentation you should consider a no doc loan.
With a no doc loan your employer, income, and assets are not listed on your loan application. Underwriting guidelines are strict regarding appraisals and credit scores, as these are the only factors used to determine the feasibility of the purposed financing. Due to the increased risk, no doc loans generally come with a higher interest rate. No doc loans generally close quickly because of the lack of information to verify.
Depending on the type of loan you receive you may or may not have to sign documents until the closing. Most sub prime lenders will underwrite a loan without having signed documents.
Because most real estate loans are used as collateral to be bought and sold in what is called a secondary market, each loan must fall in compliance with regulations to avoid fraud and illegal preceedings.
