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Lending is Local. Work with Your Agent/Lender Team to Play Smart.

By
Real Estate Agent with ACME Real Estate

I keep myself informed on the lending market, but never claim to be an expert--experience has taught me that the lending and underwriting rules can change moment to moment, and what was true yesterday is not always true today.

There was a time a few months ago when three deals were closing and the underwriting had slowed so significantly that all of the closings had to be pushed back by a week. In one case, new underwriting rules required a last minute credit report which showed that the buyer had opened some utility accounts at the new property. Apparently that set the credit score off by just enough that the lender refused to do the loan. We had to switch lenders at the very last minute. In another case, the underwriting team, literally 2 days before closing, requested transcripts from my client's law school! You know how hard transcripts are to get under normal circumstances!

Currently in Los Angeles, one lender I recommend can do 5% down loan for single-family houses under $417K, 10% for condos under $417K, 10% for all single-family houses and condos over $417K and less than $729K. 20% down for all loans over $729K. At least FHA is still offering 3.5% down loans. There is an arduous process to get a condo building FHA approved, and some lenders are willing to help with that process (in coordination with condo management). It's still pretty tough.

In speaking with some of my colleagues, I'm also shocked that there are so many cash transactions. One agent I spoke with said that 60% of his sales were all cash. Wow.

What does this mean to the average buyer? If you need a loan and you are looking in the low end of the market, you have to keep your head up--position yourself and be ready to jump, probably several times, to acquire a property. The short sales and foreclosure properties in Highland Park and Glassell Park are flying off the shelves, frequently in multiple offers. Listing agents are using low prices to entice multiples offers and get those investor clients to put cash offers forward.

Checking out how people are financing properties will determine how you negotiate in an active real estate market. If I were a buyer in this market, I would:

1. Get a free copy of my credit report from www.annualcreditreport.com. Know my score.

2. ASK MY AGENT for 3 lender recommendations and call all three, armed with your credit score. Request that your credit report NOT be pulled, but see what loan programs the lenders have. Ask as many questions as possible and get a feel for the personality of the lender--is he/she responsive? Does he/she explain details in a way that is clear?

3. Choose one of the lenders and allow him/her to pull my credit report to get preapproved. This is KEY. I will need this before touring properties. I cannot shop for the best interest rate until I have a RATIFIED contract on a property, so I only need ONE preapproval.

4. I will ask my agent for an honest assessment of how my financial prequalifications fare in the neighborhoods in which I'm looking. We will develop a strategy.


It's important to remember that the process, when it comes to sales price and approaching the purchase of a home, will be much more successful if everyone is clear about the financial strength of the competition--it can mean the difference between a smooth transaction and one wrought with disappointment and misfired offers.

 

Posted by
Courtney Poulos, Realtor, GREEN, EcoBroker Certified | 323.919.0375 direct | DRE 01882678

Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Courtney - GREAT POST!  You and I are definitely on the same page when it comes to buyers knowing what their options are and actually interviewing lenders and MLO's to decide which one is best suited to the borrowers mortgage needs.  I recently blogged about this same thing because I am often quite surprised at how so many people chose to work with some other lender before they got referred to me.

Sep 07, 2010 01:09 PM