Well, you are not alone. The lending guidelines have become so strict, it feels like the banks do not even want to make loans. Even well qualified buyers are being put to the test; buyers with high FICO scores, good assets, good income, etc. Times are just different in this market and what I have learned over the past few months more than anything when it comes to getting a home loan, is that it requires a LOT of patience and more time than usual.
Lenders are requiring more paperwork, more time to review loans for approval, very secure income, more reserves, higher level of assets, and more scrutiny and careful consideration when an HOA is involved. The underwriters are being much more careful about reviewing all the information that is provided to them and making sure to dot all their i's and cross their t's, especially if a buyer has less than 20% as a down payment for a principle residence.
If you want to buy a home, the first step is to get a preapproval from a lender, however, with what I have run into lately, even with preapproved buyers, is truly that you should really be fully approved for the loan subject to finding a home, including knowing all the conditions you need to provide to get the loan, before you find a home you want to buy. Typically, lenders will only provide preapproval loans that haven't officially gone to an underwriter for review, since the underwriters typically only look at the loan packages once the buyer finds a home and is in contract.
But, in reality, a loan condition can actually be a deal breaker if a borrower can not meet that condition the underwriter needs to fulfill the requirement for the loan. So, it is better to know if a borrower can even follow through with all the conditions and such before they even enter into a contract on a home they want to buy.
My suggestion for any buyer who wants to buy a home is to really sit down with the mortgage broker and find out ALL of the paperwork that you need to provide and truly have that loan approved subject to finding the actual home. If you are truly approved for a loan with all the conditions and such, when you enter into a contract on a home, your transaction will be much smoother and little to no stress.
If you are buying a condo or townhome, typically the loan will be subject to the HOA documents and for that situation, sometimes things will come up that are completely unforeseen if the underwriter reads something in the HOA documents that doesn't meet or fit in the guidelines. But, it is hard to avoid that situation becuase you never really know what an underwriter will think of the HOA documents, unless there is a big red flag like the development is in litigation or something to that effect. Most lenders do not want to lend on a HOA that is in litigation, so most buyers don't even bother buying a home in a HOA community that is currently in litigation.
The moral of the story is that in these chaotic lending times, it is VERY important to work with a well qualified and experienced mortgage person who has been in the business for a long time and has been through these kinds of cycles before. And, it is important to sit down with your mortgage person and get all the information that they need you to provide upfront. The mortgage person should go through all the information with you and review all the documentation and look for any red flags that may come up and talk about those things upfront. And, if possible, you should be fully approved subject to finding a home, knowing all the conditions you need to meet to get the loan before you go into contract on a home. If there are issues that need to be addressed, it should be addressed before you go into contract on a home. Otherwise, the process is stressful and you will constantly be trying to "catch up" and jump through hoops to get it done, which is no fun at all for any of the people involved.
Also, do not try to "get away" with ANYTHING or think that you don't need to tell your mortgage person EVERYTHING about your financial situation. Trust me, if you try to avoid disclosing information and such, it will most likely come back to bite you at the wrong time and could cost you the loan. And, if you are in contract at the time, it will cost you the home you want to buy and possibly your deposit. If you are working with a good mortgage person, you need to tell them everything and they know what to do with the information you provide and will properly package your loan accordingly.
Also, keep in mind that right now with the interest rates so great, the staff is working on WAY more loans with WAY less people. There have been a lot of layoffs in the lending industry and the staff is working on a skelton crew, so to speak. Less people are working on more loans, so you can imagine how much time it may take to get through the workload.
All I can advise to make the process as smooth as possible during these crazy times, is to have your ducks in a row the best you can before you find your dream home and go into contract with deadlines.
I have been a full time real estate agent for 14 years and selling homes is my passion because I truly feel that owning a home is invaluable. Check out my website at http://www.karenlist.com for a lot more information and my bio/resume.
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