I hope your situation has been resolved by now....and hope you will post to let us all know.
Not surprisingly, I have heard comments like @Augtust and @Amanda before. Ironically, the mortgage industry is getting more and more complicated and more nuanced than ever.
First, @August: The biggest issue I see (in relation to your comment) is that there are far too many loan officers (in my world, I differenitate between a "loan officer" (order taker) and a "mortgage professional" (a consultant/educator/advocator for the borrower)) who issue "preapprovals" that are nothing more than a "prequal". The two words are truly worlds apart in the mortgage industry. Many "lolan officers" issue preapproval letters on the fly, without validating any of the information provided by the borrower. And, of course, the borrower may, or may not, know how the information will affect the qualification process.
I do find; however, that many first time home buyers are more inclined to want to listen to the loan officer who glosses over the details and gets them out looking at houses with as little fan fare as possible. The problem is that the issues that should have been resolved at the beginning of the process tend to come to light at the end of the process. In that case, then I would have to agree with you that it is "just cruel, mean and unfair". Personally, I don't want any client out looking for their dream home until we are 100% certain they can have what they are longing for.
@Amanda, Without spending a great deal of time explaining and pontificating about the issues of credit scoring, let me just say that any "mortgage professional" (see previous statement) KNOWS that paying out old collections or debts WILL lower credit scores. The rule of thumb is NEVER, NEVER, NEVER instruct a borrower to pay off old collections prior to the close of the loan. Let the underwriter stipulate that the collection has to be paid at the closing...the requirements for the loan are satisfied and the fact that paying the collection will result in a lower score doesn't matter because the borrower has already moved into their home.
For all first time home buyers: The home buying process is a TEAM event....and the mortgage consultant (like it or not) is really the Captain of the Team. If he/she does not have the leadership skills, or the experience, to manage the plays to "score a touchdown" it is likely the "Team" is not going to win the SuperBowl. That said, a Captain does not always tells the Team everything they want to hear. Nonetheless, the Team has to rely on the experience and motivation of the Captain to get the finish line. Sorry for the metaphor...but it really does apply.
True mortgage professionals are advocates for consumers and partners with real estate professionals....and there is a lot of evidence in the advice threads here on Trulia. We truly are horrified when we see/hear the horror stories such as kperez has brought forth. It does take nuance, experience and a Team to close a loan. Borrowers would do well to look for leaders, more than shop for the cheapest rate. Ironically, there is often a very small savings for working with discount brokerage or online lender who is little equipped to finesse a first time home buyer through the mortgage process.
@Trevor: Sorry, but New York is not the only attorney state. In fact, there are somewhere around 7-9 (Florida, Virginia, Massachusetts, Illinois to name a few), Having closing loans in all fifty states, I will tell you New York has some the "kinkiest" requirements in the mortgage industry, however. LOL!