Real Estate is No Longer About LOCATION, LOCATION, LOCATION!

The real estate market is no longer about location, location, location.  With all the changes in guidelines, buying real estate is mostly about documentation, documentation, documentation!  Even for extremely well qualified buyers with stellar credit, getting a mortgage loan these days can feel like a simultaneous root canal and colonoscopy. After all the damage from the mortgage fiasco, tighter lending requirements were expected (and needed) but the banks continue to tighten. We've all heard that banks are beginning to loosen but in the mortgage world, I've yet to see anything other than underwriting continuing to require more in depth explanations and documentation from those wanting to secure a home loan. The pendulum of scrutiny continues to swing, causing home mortgage transactions to take far longer and seems to be making buyers jump through hoops which cause a great deal of hassle and frustration for everyone involved. Just remember the golden rule, "He with the gold makes the rules". If you are buying a home or thinking about buying a home, strap in and be prepared to document, document, document. Having realistic expectations up front can prevent a lot of stress later in the home buying process.

One of my home buyers who just closed on his home loan last week called me when he was asked to provide another pay stub (the 3rd one during the processing of his loan) and was confused as to why he needed to keep giving us more and more documentation. My buyer explained that when he bought a home a few years ago he wasn't asked to provide a single pay stub or bank statement. Times have changed! Three years ago a home buyer with good credit could fly right through the process with 20-minute phone call and no-documentation loans. These days home buyers must keep track of every dollar of income and deposits into their bank accounts via pay stubs, W2 forms, tax returns, bank statements, credit reports, letters of explanation, additional verification from employers and the list goes on. It seems that the underwriters are afraid for their jobs right now and mortgage companies are afraid of "buy backs or uninsured mortgage loans". As a result, banks and underwriters feel the need to over document a file rather than fairly analyzing the consumer's default risk. For a single very clean borrower with one bank account, more than 30 pages of documentation are required, even IF his credit scores are in the 800's.

The home buyer is not the only thing being closely scrutinized these days. The property is also under the microscope. Currently, more than 60% of all properties being financed nationally require a review of the appraisal or a second appraisal. Lenders want to be as certain as they possible can be that the security for the loan is not one with an inflated value and is in good enough shape to resell in the event of a foreclosure.

These are turbulent times when it comes to getting a home loan but for those who qualify and are willing to go through the extra red-tape, the reward is a mortgage with an interest rate in the 4's and a home at a great price! If you or someone you know are in the process of buying a home or thinking about buying a home, just know that you are going to have to "prove" everything you stated on your loan application. Having your expectations in line with the reality of today's mortgage world, rather than what is was like 3 years ago should help to make the process a lot less stressful for you.

I'm here to help! If you have questions about this or other topics related to mortgages or real estate, feel free to email me at michelle.coolidge@cobaltmortgage.com.

Have a blessed day!