There was a time a few years into the “Down-turn, recession, little depression” (Whatever y9u want to call it) during which the lending environment was VERY unfriendly.
Everyone (Politicians and mass media) felt the need to cast blame for the economic woes of the country and the real estate industry was an easy scapegoat, so the accusations began to fly.
Sure, there were some unscrupulous things happening in the “Sub-Prime” markets, but for the most part, the “A Paper” loans were clean. Loss of equity due to bursting bubbles was the killer and charges of appraisal fraud and lender collusion with appraisers flew about the place.
There were several months during which we actually heard lenders admitting to not wanting to give mortgage loans. The Fed had changed depository requirements, the appraisal process was uncomfortably odd, and Federal rules had underwriters scared and confused.
Between then and now (4 year period), the rules and guidelines haven’t changed all that much, but the lender understanding HAS . . . and business was pretty much getting back to a healthy flow of successful loans.
This easing of the “stips” for home mortgages (I believe) has been instrumental in aiding the reduction of housing inventory . . . Rates remain low, and Buyer demand is strong.
The pendulum is now swinging the other way . . . This lending environment is getting squirrelly as rumors of another dip gather steam. It is now appearing to become MORE difficult to get loans through underwiting . . .
10 tips to help you slide through the process more easily.
- House values are rising – this means that many purchases may be at prices higher than the recent comparable sales justify for appraisals. Avoid losing the deal due to low appraisal by giving the appraiser ample ammunition to defend the contract price. If there were multiple offers, let the appraiser know, and offer your own analysis of value and neighborhood nuance.
- Be CERTAIN you have at least the last 2 years of tax returns in order and ready to turn over to the lender.
- Be CERTAIN that what the IRS has on record matches the information you provide the lender.
- If you’ve had ANY recent change in job resulting in a change in pay, DOCUMENT . . . and let it season a bit (6 months) before applying for a mortgage loan
- DON”T MOVE MONEY! Leave it where it is until after the closing. Underwriters get VERY nervous if they pick up on large sums of money moving in and out of bank accounts
- Have a plan B – a relative who would be willing to co-borrow with you.
- Buyer STILL does not get to receive money directly from the Seller at closing – consider buying “As-Is” with Seller paid closing costs rather than requesting a cash settlement in lieu of seller making repair
- Don’t buy ANYTHING until after you’ve closed (Car, furniture, any credit card spending)
- Dont even try it unless your credit score is over 650
- Provide all documentation requested by lender IMMEDIATELY
This is a SUPERB market in which to buy and sell houses, so don’t let this cautionary message discourage you – Just know that if you need a loan, you’re going to have to play by the rules 🙂
Of course – connect with me when you are ready to start the process of Buying or selling a house. I’ll guide you through the minefield