Archive for the ‘Loan Officer’ tag
A Six-Figure Income And Impeccable Credit Doesn’t Insulate You From Tightening Mortgage Guidelines
Four times annually, the Federal Reserve surveys 84 banks around the country about general lending standards and banking conditions.
One of the survey questions asks about current mortgage lending standards and whether it’s getting harder, or easier, to get approved for a home loan.
Modified from the report, we see that nearly 80 percent of banks are making it harder for "prime" borrowers to get a mortgage.
This is up from 18 percent a year ago and underscores mortgage lender risk aversion among even the "most qualified" among us.
A six-figure income or impeccable credit is no longer good enough to get you carte blanche with the bank — you’ve got to have the complete package and this chart is your proof of that.
Now, some of the areas in which mortgage guidelines are tightening are well-known:
- More thorough income documentation
- Higher credit score requirements
- Larger downpayment requirements
But most of the areas are less well-known and constantly changing. They includes the dark corners of mortgage approvals, addressing esoteric items such as:
- Investment property cash flow
- Appraised values and comparable sales
- 30-day delinquencies and credit character
And it’s only expected to get harder.
So, if you already know you’re buying a home next Spring, talk to a loan officer now and put a purchasing plan in place. This is especially true if you’re converting your primary residence into an investment unit — more than a few would-be buyers have been burned already by new rules that specifically exclude some types of rental income.
Where 80 percent of banks go, the other 20 percent is likely to follow. The best way to prepare for these changes is to ask good questions in advance of your actual needs. That way, you’re planning proactively instead of scrambling reactively for additional downpayment at the 11th hour of your purchase.
Fed’s Q2 Senior Loan Officer Survey Shows Banks Expect Tighter Credit
U.S. banks are expecting tighter credit conditions throughout the
first half of 2009, according to the Federal Reserve’s July
Senior Loan Officer Opinion Survey on Bank Lending
Practices.
The survey showed that 60% of domestic banks…
Use A Boy Scout’s Approach When Shopping For Mortgage Rates
If the changing mortgage guidelines don’t bedevil you, changing mortgage rates will.
It’s getting even tougher to shop for low mortgages rate because rates refuse to stay in any one place for very long. The pie chart above puts it in perspective.
The data is astounding — especially against the rate-change numbers from earlier this year. It appears that mortgage rates are getting more volatile as the year goes on.
- For the 2 months ending May 19, 2008, rates changed on 68 percent of the days
- For the 2 months ending June 20, 2008, rates changed on 73 percent of the days
Today, rates change mid-day 82 percent of the time.
When you’re shopping for a home loan, remember that Wall Street often sets the rates — not the loan officer. Your best protection from mortgage rate volatility, therefore, is to saddle up with a pro that understands how Wall Street works, and then be prepared to lock your mortgage rate as soon as possible.
This last step is critical.
As an example, think back 6 months. On January 23, 2008, 30-year fixed mortgage rates dipped to 5.125% and stayed there for fewer than 3 hours. The 30 days that followed was a complete unravel job.
Shoppers that were prepared when rates dipped in January now have very mortgage rates. Those unprepared, however, missed the boat.
Volatility comes from economic uncertainty and that should continue at least through the rest of the year and probably deep into 2009. The best protection from it is simple — make like a boy scout.