This business used to be much more simple than it is now. A few years back if you had good income, assets and credit, it was a slam dunk. Nowadays, there is no such thing anymore. That's why the buyer has to be proactive when it comes to their mortgage. The tiniest little blip can alter the financing picture and make your mortgage process a very unpleasant one. Here is just a sample of those things that I have witnessed over the last few years. Read them and take notes:
1. If you are taking an ARM product, most banks no longer qualify you at the actual rate you have. Many times they add 2% to the actual rate.
2. Borrowers must show a 2 year history of bonus at the same job. I have had many Wall Street clients that earn significant incomes but couldn't qualify because of a change in jobs.
3. If you are buying into a condo development, is the building approved? Years ago, the banks didn't care how many units were sold or in contract. Now they do.
4. Many lenders no longer allow interst only loans.
5. Many lenders no longer allow interst only on co ops for certain loan amounts.
6. Some Fannie lenders allow up to a debt ratio of 50%, while others are at 45%. Knowing the difference and who does what can make or break your deal.
7. Many lenders use the actual payment from the credit report on a Home Equity Line of Credit to qualify a borrower's liabilities. Others use 1% of the actual line amount. That can be a significant difference.
8. Credit scores that are above 740 can still have a negative impact on rates depending upon the amount borrowed. Know your credit scores!!!!
9. You can still do 90% financing at some lenders but be aware that even though the lender will allow it, the Private Mortgage Insurance Company that insures it may not. Sometimes their guidelines are tougher than the bank.
10. No interest only loans are qualified at the interest only payment anymore. Just the principal and interest payment plus the 2%.
11. If you are buying a co op, does the building have the proper fidelity bond coverage? This covers against malfeasance on the part of the managing agent. 2 years ago, this was a serious problem because almost all co ops did not have the required Fannie Mae fidelity coverage. Now, it's less of an issue but still an issue nonetheless that never existed before.
12. For refinance transactions, the appraisers are being very conservative on values. Years ago, if there was a concern of value, I would always encourage the borrower to do the appraisal before starting the loan application. This ay, it could save a lot of headaches down the road. The law states now that you can't do that.
The idea here is that you must discuss all facets of your situation before getting involved in a contract signing. Don't assume you will have no problem obtaining the financing. It could be the difference between getting your loan or not.
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