You have no idea how many times I’ve gotten yelled at by borrowers, Mortgage Loan Officers and Loan Processors as to why I need an explanation from them on something that seem so ridiculous. Sorry, but it is part of my jobs to ask EVERYTHING. The banks pay me to question why they should lend you the money. They pay me to evaluate your credit profile and establish likelihood of you paying them back. They want me to question every single thing that is questionable. If you are the one who open up your check book writing them $200,000 in cash, I am sure you want to know everything about the person too. Agreed?
I can write an article about this topic forever. To make it easier, I’ve decided to pick out different scenarios that seem the most common.
Inquiry: Have you ever gotten asked to explain why there are lists of creditors pulling your credit recently? Yes, common sense tells me that is because you are shopping around for a better rate with different banks. But the reason why we want you to write a letter is ensure us of this: We want to make sure that you are not in the process of buying another property that we don’t know of, applying for a credit card or new car loan that hasn’t yet shown up on your credit report at the time of the application. If so, it is going to impact your ability to qualify for a home loan. New home loan, credit card and car payments mean additional debts added to your credit profile. That’s why. Make sense?
Addresses listed on credit report: We normally don’t ask for a letter of explanation in regards to your residence history. However, if your loan application said that you have been living at your current home for 5 years and you don’t own another rental property. All of a sudden, your credit report reported another home address within the past 5 years. Well, we want to know why. Did you buy a property within the past 5 years and sold it? Was that your parents address? Mailing address? Or are you not disclosing another property that isn’t listed on your loan application? We want to know.
Variation in names: “IT’S MY MAIDEN NAME YOU DUMB APE!”. Yes, you might be right. But many times different last name could also mean that our borrowers were divorced. That could be our borrower ex-husband’s last name for all we know. Some banks require complete divorce decree to show no child and/or spousal support obligation. Some banks just want to know why it is different. That really depends on the banks.