After the sub-prime loan meltdown and the resulting housing crisis who was inflated by lower quality loans, there have been severe changes to the lending process.
It has been less difficult finding interested buyers here in greater Phoenix and Scottsdale than the news portrays. However, it has been exceedingly more difficult to find buyers who can qualify under “Full Doc” loans.
I asked several of the most respected lenders in Scottsdale and Phoenix what it takes to get a loan approved to close a real estate transaction.
The term that consistently came from each and every mortgage lender I interviewed is “Full Doc”.
Further, each and every lender interviewed said the same thing about
Stated Income Loans
- These loans are all but gone.
- FBI reports misrepresentation of income as most prevalent form of mortgage fraud.
- Mortgage Fraud is #1 white collar crime committed over the last couple of years.
- Mortgage Insurance companies will no longer insure stated income loans in most parts of Arizona.
- The term Full Doc is a departure from the worlds of Alt-A, sub-prime and non-prime mortgages where no-doc was the norm.
I asked what does the term Full Doc really means?
Here is a summary of the answers I received from my interview some of the most experienced loan officers and mortgage brokers in Peoria, Glendale, Tempe, Mesa and Chandler.
These are the two most important pieces to a Full Doc loan may seem obvious. However, these were the ones most exaggerated by lenders and buyers.
Buyer’s Income
- A simple Verification of Employment and 1 month pay-stub will not work.
- Several months pay-stubs, bank statements and tax returns will be required
- Documentation of income must clearly support the buyers income on his 1003 application for a loan.
The glaring answer that I received from my peers is that few if any income exceptions to the strict requirements.
Asset Verification
- Lenders need to see assets in bank for 3 months with name of borrower on the asset statement.
- Assets will be verified.
- If there is a large deposit that they can not identify, a good explanation better be prepared.
- The amount of assets must be at least 6 months reserves according to one mortgage lender.
- No more 2 month minimums will be sufficient.
- Retirement Accounts, 401K, IRA, Life Insurance will not be weighted dollar for dollar in asset statements due to withdrawal restrictions and penalties
Prior to Closing Conditions:
- Expect quite a few of these conditions
- All buyers are going through a high level of scrutiny by scarred underwriters with upper-level managers looking closely over their shoulder
Appraisals, Inspections, and Re-Inspections:
- “As is” is not an acceptable answer to an FHA inspector.
- Bank Owned properties are required to repair safety issues
- Appraisal must use very recent appraisals. No more 6 months.
- Builder comps can be excluded for new home sales.
Closing Times:
-
- Another consistent them I heard from the lenders I spoke with are longer closing times.
- Before, 30 days was considered the norm in a real estate contract.
- Now, unless a buyer is truly organized and the lender is on the ball, 30 days is cutting it close.
- 40 days/6 weeks is what is recommend to Realtors when drafting a contract
Finally, each loan offer, mortgage broker and real estate agent said how much more difficult their job is today.
Banks requirements are changing on a daily basis. Often, underwriting procedure and needed documentation will adjust in the middle of the loan process.
Experience and knowledge and attention to detail will be the difference of not only getting a loan completed on time, but possibly at all.
If you are thinking about buying a home, I highly recommend you speak with a true Mortgage Professional.
Here are the names of some of the best mortgage lenders in the business.
________________________________________________________
Copyright © 2008 By James Wexler, All Rights Reserved. *What it Takes to Get a Home loan in Today’s Market!*
Contact James Wexler (480) 221-8080 for all your Phoenix | Scottsdale area Real Estate needs
