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The Swing of the Pendulum.... What Borrowers need to know

As we all know - in years past; just about anyone could get a mortgage. Of course there were standards; but they pretty darn loose. A mediocre credit score; very little cash and even shaky job history - would get you qualified for a mortgage.

The Pendulum had swung so far - that my dog could have been pre-approved to buy a home!

Now things have changed. DRASTICALLY !

I have had clients will PLENTY of CASH. GREAT job history. GOOD - even GREAT Credit. But the hoops they are now having to jump through is getting simply - CRAZY !

Many of the agents in my office joke about buyers needing to supply a DNA sample when applying for a loan. It's almost the truth. Banks and their underwriters are being super-cautious when approving loans for people.

The Pendulum is now at the opposite EXTREME!

Some things Borrowers Need to know:

- Work with a reputable lending institution. With so many changes in lending standards - make sure you are using the best in the business. Remember: Biggest is not usually Best.

-Get your loan officer every single piece of paper he/she asks for immediately. Not quickly - but immediately. They need every hour; every day to get things processed.

- Be ready for last minute requests. An old tax form; an old check stud - keep all your important papers close at hand.

- DON'T move money around. Large deposits or withdraws are big old RED flags to underwriters. If you need to transfer money for closing. Do it as soon as you can and preemptively send your loan officer documentation as to where the money was transfered from and where it was transfered to.

- The Banks are backed-up. Period. They have cut staffs and now are overwhelmed as the volume of sales and re-fi's are increasing. For many of the large banks - be prepared for long hold times and overall lousy service. Even lenders whom I have worked with for years are victims by their own banks lack of resources and personnel to process the loans.

- The closing date - with so many delays and last minute requests from the underwriters - don't bank everything on moving the day after closing. Expect a couple of day delay.

Lastly - be patient. Easier said than done; especially in a big move; but it is the way things are today.

Contact James Downing of the Downing Real Estate Group, if you are selling, buying or have questions!

Office: 202-362-5800 Cell: 703.244.3971

Licensed in Washington DC, Virginia & Maryland.

Coldwell Banker Residential Brokerage - Chevy Chase
5028 Wisconsin Ave NW Suite 100 * Washington DC 20016

Posted by James Downing - REALTOR®,GRI, ABR - DC Real Estate on 06/03/2009 02:34 PM

Comments (28)

The Swing of the Pendulum.... What Borrowers Need to Know in the Mortgage / Finance Channel

mortgage, banks

Originally posted at: DC Real Estate News: The Swing of the Pendulum.... What Borrowers need to know

This post has been included in District of Columbia Information

28 Comments on The Swing of the Pendulum.... What Borrowers need to know

JUN

JIM..Things have certainly changed..it is sad..that good people are suffering for the mistakes of others..great post..Thank you

HelpfulHannah your friend in Philadelphia

Great info, JIM! That's why you're you!

Well said.

There are plenty of things changing every day. That's why I think the #1 point that you make is work with a reputable lender. They know what's going on and they keep up with the changes. This cuts down on a lot of the other issues that come up. They know what to expect.

Oh Jim how right you are! Things have gone so far that my clients are actually finding it insulting. And as for that closing date. You're right again - don't count on it. Congrats on the

I am finding that I need to set closing out for a longer period of time than in the past. 30 days isn't enough time.

Kathy

Right on. I actually like that there are hoops. The pendulum will swing back to 'the golden mean' eventually . . . buyers meanwhile are showing up qualified and diligent . . .

James, the banks have swung too far into the conservative area, no doubt about it. They need to ease up (a bit).

This is very good! So good in fact..I'm reblogging it! Thank you. :)

Yes, I agree with the comments on those with good credit getting DNA sampled. Yet with the first time buyer credit I am seeing buyers who want to use it yet they have great current credit activity and 1 historical blemish that is killing their score & disqualifying them.

Very good tips that will hopefully help more deals close smoothly.

I like your simple way of putting down these very important items. Congrats on the feature.

You are right banks are cherry picking the loans and only want the best borrowers right now.

The re-implementation of underwriting seems to have a significant effect. It may also be a deterrent for some borrowers.

You are absolutely right on the money with all the info! We're hoping for that pendulum to swing back to a steady middle.

Great post! I'm going to tell all my buyers to read this.

Jim,

Thanks for sharing the information. good information to keep in mind.

Good topic Jim! You know that if we lock for 30 days, we better already have everything already approved with the lender.

Also, Taylor Bean won't even do loans above 80% loan to value unless it's an FHA loan. I have a borrower with an 810 credit score, plenty of assets, 20% DTI, and 85% loan to value on a refi lowering his payment....that is the type of loan you would want to fund!

It's going to be awhile till we start seeing guidelines loosen up!

Hi James -- A must read for any buyer contemplaing a loan today.

.... my favorite - and IMO the most important part was to get your Loan Officer what they request "Not quickly - but immediately."

Excellent Post James !

JUN

James

Things have changed. I am going to have buyers read this before I put the Buyer agency in front of them.

Thanks for the chance to re-blog. This is a great post...part of what makes ActiveRAIN so valuable. This advice was never so timely as right now.

This is good info that all buyers should know. It is definitely time for smart borrowing.

Jim: Thank you for the great tips. You summed it up well when you told everyone to be a little more patient these days. We both know a more normal time will exist where closings don't take forever and everything isn't a short sale. I expect a nice little run-up starting sometime next year. And it will be nice to have; we're living and operating in a strange environment right now! Take care.

Jim - THANK YOU! THANK YOU! THANK YOU! In case you didn't get the hint, I can not thank you enough. Just the other day, I read a post where the member was asking "why the mortgage process can't be transparent?" and then proceeded to bash LO's for every single problem in the escrow transaction. Needless to say, the title had nothing to do with his post and most of his commenter's proceeded to follow his lead in bashing LO's for every problem that comes up.

As you have so perfectly illustrated, we (LO's) are typically up against forces, every single day, that are beyond our control, regardless of how much we try and control them. So many Realtors feel that if we don't control every single step along the way that this is indicative of what a lousy LO we are, which is absolutely asinine.

That post incensed me so much, I couldn't even comment because I physically couldn't keep my emotions in check so I just chose to say nothing and moved on. Although I may still write my own post, a kind of a day in the life of an LO post, I did want to say that I appreciate your post and you seem like a Realtor who actually knows and understands the kinds of problems that LO's are under these days. I would venture to say that you are very close to someone in the biz and you see first hand what we have to deal with on a day to day basis.

All I can say is AMEN!

What you say is so true. Here in Waikiki buyers need excellent credit and whopping down payments to get a rise out of lenders. Lenders are running scared. A lot of transactions are now ALL Cash, or forget it.

Thanks for all the great comments. It's true - lenders are screwed up! I just advised a buyer today - who needs a quick close to stay away from Bank of Every-where - because they can't seem to get the underwriters to write a loan on time.

JUN

The worst part of this "new world order" is that high net worth, high credit score individuals or couples cannot get loans. Their money may be tied up in illiquid investments or otherwise "sheltered" in a variety of tax deferred or tax avoiding ways. They may be self-employed business owners. They don't want to disclose their financial life to the world. However, their history shows a spotless record of paying mortgages and other debt flawlessly. Still, they can't get the mortgage because they are unwilling to let some $20,000/year underwriter put them through the wringer.

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