I'm sure that your clients may have surprised you in the past with a lending question that you never expected. In this new economic climate, with Colorado topping the nationwide list of states with the most foreclosures, it doesn’t hurt to be informed on what to expect from as a buyer from a lending standpoint. As a Realtor you don't have to know everything in regards to mortgage programs, but it since most sub-prime lenders are curtailing operations or out of business, the lending picture has changed drastically. In Colorado, we had no licensing until the beginning of this year, which led to many fly-by-night operations and newly minted loan officers who stuck to a few programs they knew well and worked closely with the 2 or 3 lenders would waive requirements and hold their hands throughout the process. Both of those types are nearly all gone in our state, as result of the licensing requirement, and the subprime meltdown.  These loan officers did not know how to pro-actively inform their clients about the market, the pros and cons of getting a loan with escalating payment that wouldn’t fit into their budgets, putting them in a bigger house than they could afford (using risky interest only, balloon, or ARM loans). They would just go the path of least resistance. These loans just set the clients up for a financial crisis that could end in foreclosure. Many times, the Realtor wouldn’t know to question such risky financing, but the impending foreclosure crisis will affect all of us.

 A couple of things to remember:

Think back to your first transaction, or remember the first-time-homebuyer you first helped into a home. Many things that seems obvious to you and me make take much repetition to sink into the mind of a frenzied first-time homebuyer.  Make sure you client is aware of what is happening in the market. Remember, some people may still be thinking that they can buy a house with the prevailing interest rate, stated income, and a low credit score. Most subprime lenders, like New Century, have completely done away with stated programs at low scores and even 100% financing; your subprime buyers may have to be coached for a few months on raising their scores and saving money for a down payment. Many “soft community second” programs, like CHFA or H2O, can help with down payment assistance in return for promising to stay in the house for a set period of time. Make sure your loan officer knows what they are doing as well; a CCMB certification from the Colorado Association of Mortgage Brokers, although rare, is always good to see.