Slower and Harder – Be Prepared!

I know I’m dating myself with the reference but if I’m getting old it’s fine. Better than the alternative.

Roger Miller had a hit song int he 1960s called England Swings Like a Pendulum Do.

Well most things swing like pendulums, don’t they?  Right now the ability to get a mortgage has swung as far away from a few years ago as it can.

Allegedly, not too long ago, the primary qualification for a consumer being approved for a loan, it seems, was a mirror test.  If you help a mirror up to the face of the borrow and steam formed, they got the loan.

OK – that’s a little extreme but let’s face it, getting credit was a breeze.  There was in fact, a loan known as NINA which stood for No Income No Asset.

As far as the house they were buying, there are folks claiming today, whether it’s true or not it is being said, that appraisals were, for the most part matching the negotiated selling price.

Neither of those points is meant to be a knock to lenders or appraisers.   My point is not so much whether loans should have been granted or not, but the perception.

So, given the media coverage of sub-prime loans and “over zealous” appraisals, the lending industry has swung completely in the opposite direction.

There are some folks today who will have a more difficult time getting a mortgage.  For example, in some areas, the new “rule of thumb” for minimum FICO scores on a loan up to $417,000 is 660.  It goes even higher on bigger loans.

Every possible precaution that can be taken to insure credit-worthiness is being taken.  This will, without a doubt eliminate some borrowers who might have been included a few years ago.

Same with appraisals.  Tighter requirements for “comps” are in place. Remember, an appraised value is not the same as the assessed value. Sometimes the appraisers are not finding any valid comps and have to rely on other formulations to come up with the right price.  Some houses are not appraising for the sale price.

Even if the house appraises as you hope and even if the borrower gets approved, the fact is that the typical time for completing this process is likely to be longer than we may be used to.  What once took 4 – 6 weeks might, in some cases take 8 – 10 weeks or more.  Maybe not  – sometimes the stars align and things go quickly and smoothly – but be prepared.

One of the things that causes agita in Real Estate transactions is an unexpected delay. Trust me, there’s nothing quite as aggravating for a seller or a buyer, than getting a phone call 5 weeks into the process that this or that hasn’t been done, or more information is needed or that there’s a backlog in processing.  There’s a dozen different reasons but the end result is the same -  you can’t move when you thought you could.

These factors will vary from region to region and from specific transaction to specific transaction – talk to your Realtor and your Mortgage Professional to find out how things are going in your area.

My advice is to go into a home transaction – as a buyer or a seller – with the idea that it is NOT going to be as quick or as smooth as you want it to be – or what you might have experienced the last time around.

As a Realtor, my responsibility is to to stay in close touch with all the various players on an ongoing basis until the moment that we all walk out of the closing room smiling.  The most important thing I can do for you, is to help you set accurate expectations.   Disappointment, is always caused by inaccurate expectations.