Wednesday, November 7, 2007

Lending Standards Tighter

Dollar Sign on SidewalkFrom Inman News, "About 41 percent of loan officers responding to a Federal Reserve Board survey in October reported they had tightened lending standards on prime residential mortgages during the previous three months, compared with 15 percent of respondents in a July survey."

I've just learned this first-hand. Had a devil of a deal that took 7 weeks to close because the buyer (not my client, I repp'ed the seller) was a 'manual underwrite FHA with a DPA'. In English, that means she was a first time home buyer with little cash down, a recent job change + promotion + pay raise (that all had to be verified by hand), plus a Down Payment Assistance grant from AmeriDream and some gift money thrown in by a family member. Whew! What a nail-biter it was.  The lender didn't make it any easier - he never returned my calls, never replied to my emails or faxes, and treated the 2 agents and the buyer (his client!) like we were hysterical females who pestered him.

The lesson you can take from this, dear readers?

1) Don't work with a lender your Realtor doesn't personally know. I'd never work with this guy again even if you paid me. He made the process truly miserable instead of just frustrating. I won't list his name & company here but if you want it, email!

2) Treat your Closing Date like a suggestion, not a date carved in stone. Make emergency backup plans to extend your lease, or crash with friends, or even just sign a pre-possession agreement that allows you to move into a house you haven't actually closed on yet.

3) Even if you're a prime borrower, expect to provide a little extra documentation to prove what you put on your loan application. Prime loans are those that have 10% to 20% cash down payment, a good sized saving account on the side, and a solid job history combined with excellent credit. These loans are still readily available! Don't believe the Doom & Gloom Media who say you can't get a loan nowadays. You can! Just get your bank statements, tax returns and paycheck stubs ready to hand over.

4) If you're not quite a prime borrower, make sure you hire a Realtor & Lender who have recent experience with non-prime loans. The borrower I described in the beginning of this post? Her chosen lender was a poor communicator who hadn't done a non-prime loan since the credit crunch began in August. She wishes she'd never hired him. She had to beg her landlord for an extra week in her apartment and pay through the nose for it. Three days before close she had to beg a family member for another $1200 gift to satisfy her loan underwriter. The lender's flippant attitude made the buyer cry twice in the days before close. 'Nuff said.

Want recommendations of great lenders around town? Email me. I'll provide you 6 super lenders who I'd bet my reputation on any day of the week. No obligation whatsover.