Looking for a
Mortgage Today? Let's analyze the
biggest hurdles in the world of lending.The days of easy mortgage money are long gone! In many regards the changes are positive, but in reality the pendulum seems to have swung too far the other direction.
Lenders are looking at a much larger profile of the buyer
than in the past. Credit scores are
directly tied to the rates they offer.
The FICO credit score bar for approval of home loans has moved from a minimum
of 680 in 2006 to 740 in today's market.
Even credit scoring is changing. VantageScore, a new scoring
method created by the three leading credit bureaus, has emerged and is gaining
popularity. VantageScore is adopting the same ranges as FICO, but scores
differently, at least for now. FICO is making changes to fall in line with the
new VantageScore.
Buyers today have to provide more income and asset
documentation than ever before. If
anything looks out of the ordinary, rest assured the underwriter will not only
take a closer look but may turn the loan down.
The fact that one could actually pay cash but has elected to get a
mortgage doesn't always factor into the equation. We'll just call that over kill of
legislation.
Requirements - don't get too comfortable with the guidelines
published. They change regularly. The loan process may start with a required
credit score of 740 & 36% debt to income ratio, 20% down and stable
employment just to change before the process is completed.
Another frequent hurdle is a low appraisal. Since appraisals are done on a "look
back" approach they take past sales into consideration. Seldom will pending transactions be used as a
factor at all. We've seen some
improvement in pricing, but it takes time for appraisals to catch up with
current market trends.
Condo financing faces even more hurdles than single family
homes. The lender is now reviewing the
association documents, financials, rental policies, occupancy ratios and
more. Most lenders require 20-30% down
for a condo purchase, and I've seen it go as high as 40% for investment
purchases.
Have we eliminated the chances of home ownership for low
income buyers with all the new regulation?
Not exactly: The USDA is still approving loans in rural areas for 103.5%
of the sales price. In fact a family of
four with a household income of approximately $45,000 annually is eligible to
purchase a property valued at $77,400.
The program is designed to assist the low and very low income
buyers. There is even a payment subsidy
program available is some cases. While
the island isn't considered rural, there are still communities within our
county that qualify. If you know anyone
who may qualify, they can get more information on the USDA website.
There are still great rates out there for purchase or
refinance. Just be prepared for the
mountains of documentation that may be required. If you are selling, I suggest you start
packing the boxes, but don't move out until loan approval is received.
Published in the Marsh Creek Jounal May 2013.
