After the problems we have seen over the past couple of years in the real estate, mortgage and banking industries it is not surprising we have seen massive legislative changes brought about which make it more challenging for a home-buyer to obtain a mortgage, not to mention more work on the part of their real estate agent, mortgage lender and title company. Some of the changes we will see include:
- Documentation – Kiss “no-doc” loans goodbye! In addition to requiring borrowers to provide items that have been standard for years such as paycheck stubs and bank statements, additional documents to prove residency, income, financial soundness or even identity will be required. “Verbal” employment verifications, for the most part, will be gone as well as the lender must also do a much more in-depth inquiry about the borrowers’ employment including asking the employer questions about job stability and detailed income information.
- “Fresh” Documentation – If it takes longer than 30 days to close the loan the Lender will likely ask the borrower to provide updated bank statements on a monthly basis, as well as update other documentation as necessary so that all documentation is up to date and current at the time of closing. The lender will also contact the borrowers’ employer a few days before closing to make sure his or her employment situation and compensation have not changed since the verification was done.
- Whoa, Slow Down – Allow plenty of time to get the deal done as the new legislation is slowing the process. For example, it is now mandatory that no less than eight days must lapse between the time of the loan application and the closing of the loan. Normally, this is not a problem as most loans take considerably longer, but it could be an issue if your buyer is in a time crunch and waited too long to start the process. In addition, even minor changes to the terms of the sale or loan could delay closings by at least three days due to requirements of the lender to update disclosures and give the borrower a mandatory period of time to review them prior to closing.
- Tax Returns Don’t Lie – In the past lenders typically did not request a copy of your tax return unless the borrower was self employed or had “other” income outside of employment that was necessary to count to qualify for the loan. Today, for most loans, lenders are required not only to obtain a copy of the borrowers’ tax return for the past two years, but to get them directly from the IRS. If there are discrepancies between the information provided by the borrower and the tax returns this will either delay the loan closing or result in a denial.
- Appraisal Issues – New regulations prevent the loan officer from speaking with appraisers directly in order to assure that there is no influence put on the appraiser with respect to his or her opinion of value of the home. This has caused many lenders to turn to using national appraisal management companies (AMC’s) which sometimes hire non-local appraisers which may affect the accuracy of the appraisal.
- The silver lining – Sure, there are new regulations and it is more challenging, but interest rates are at near historic lows, so the extra effort borrowers have to put forth will be handsomely rewarded for years to come!
For more information or if you have questions on mortgage rates you may contact Rob Fishel via phone at 800-735-5957, email at rfishel@paramountmortgage.com or you can visit his company website at http://www.paramountmortgage.com.
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