Here's a handy list of 10 things you can do to kill your chances of getting a loan today. 1. The house just needs too much work. 2. Low Appraisal 3. Borrower has too much debt. 4. Buyer is self-employed. 5. Borrower has just started being paid by commission only. 6. Your tax return doesn't match your IRS transcript. 7. You can't get PMI. 8. The condominium has issues. 9. You haven't allowed enough time for your loan processing. 10. You don't have all the necessary financial paperwork.
This applies to REO's, foreclosures, and short sales... sure they're good deal, but the financing can be rough. Any broken windows, bad appliances, leaking roof, water damage, obvious mold, health or safety issues, structural problems and of course any liens.
Appraisal used to be a "rubber stamp"... those days are long gone and best forgotten. Today, appraisers are trying hard to "prove up" your purchase price... and standards have become tougher (good!). If the appraiser can't, in good faith, shore up your purchase price... they're just not gonna. Re-negotiations (post appraisal) are becoming much more common.
Back in the day, large debt/income ratios were given a "blind eye"... no more. 35-40% debt ratios are the top end... the guidelines have become very tight... and if your buyer does qualify... make sure they don't make any large purchases just prior to closing, as many lenders are pulling credit just before closing... and if something has changed.... weee doggies, lookout!
Lenders today are looking for 2 years of tax returns for those who are self employed. And they look at you cross-eyed if your income is declining. Real income will not be used (such as a Waiter who doesn't report all his tips)... they're going to be based on the income shown on your tax return.
In an effort to save money, some companies have switched their long term employees to commission. Lenders will not count commissions unless they can show a history of at least 2 years.
Oh, this is a fun one. Used to be that you submitted a printout of your tax return, and the lenders just "believed" you. Sometimes they would pull a copy of the return for their files, but only after closing. Today, they are pulling transcripts prior to closing, and if they don't match up.. .(in other words, you "doctored" your printout)... that's fraud, and the deal is off, the loan is dead. (And keep in mind that lying on a mortgage application is a federal offense, punishable by time in your local penitentiary!!)
Again, PMI (Private Mortgage Insurance) used to be a "given"... no more. There are only two or three PMI companies nationwide, and they are picky, picky, picky. It is possible, today, to be approved for your loan, and yet denied PMI. Your credit needs to be good... you need to have low debt, and the better your down-payment, the happier they are.
Lenders are looking closer and closer at condo budgets, reserves and their general financial health. They're concerned about any pending litigation, and upcoming special assessments. Lenders have recently been pushing condo boards to increase their Fidelity bond... enough to cover at least 3 months of residents not paying their assessments. And they're taking a hard look at any owners (other than the developer) who owns more than 10% of the units.
All of these tighter guidelines are causing long approval times. The loan papers are often only good for 90 days or so... and if you get to that deadline, and have to rework the papers, that could cause a delay. If you're purchasing a HUD property... a delay could cost you the property entirely. Allow plenty of time for short-sale approvals, and even for standard mortgages. Realtors need to be hands-on with the lender and loan officers.
Lenders are looking for more documentation than ever. They want to see Bank Statements, verification of large deposits or gifts, earnest money and rent checks. They may ask for letters of explanation on credit inquiries, missed or late payments, income fluctuations. Make sure to have all your ducks in a row.
Bob Amato of Empire Home Mortgage Inc - East Meadow, NY
Hassan,
All true! You should add that lenders want condos to be at least 70% sold or under contract for new developments. Speaking of which, do you know of any lenders doing condos in Queens County NY with 39% sold or under contract?
Nov 17, 2010 12:57 PM
Group 26 - Edgewater, NJ
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