Everyone who has been involved in real estate during the past several months knows of the problems with bad loans, of fraudulent lending practices, the collapse of institutions, the foreclosure mess and the terrible short sale scene. There have been many adjustments made affecting lenders and the qualifying requirements for loans, some self imposed, but most mandated by the Feds and other regulatory agencies. But all is still not well.
Today, buyers need to take a very strong, assertive, self-possessed stance in pursuing financing both for refinance and particularly for purchase loans. The reason for a slightly different distinction in the approach between refinance and purchase is that while one who owns the property may not get what is wanted with the new refi loan, the owner still has occupancy of the property. In the case of the purchase loan, if the applicant is not successful and is denied the desired loan, then the would-be buyer/borrower is still on the street or renting and not in the home of their own.
Although there has been considerable improvement in the lending procedures, including the tightening of qualification standards, there is still evidence of some lenders desperate for the loan and not acting with the greatest professionalism and attention to detail. Perhaps the following points would be helpful for the borrower who is trying to get the loan for purchase: ( 1 ) Be absolutely honest with loan officer and real estate agent about capacity and qualifications at the outset of the loan application. ( 2 ) Ask a bunch of questions about various loan types in order to make an informed decision about the loan that will best suit your needs. ( 3 ) Once a certain type of loan is identified and selected that seems to make sense for your conditions and circumstances, demand that the lender give a written "Good Faith Estimate" itemizing all fees connected to the loan and the closing. ( 4 ) If you are shopping lenders, it is vital that you have the facts and data to make accurate comparisons including rates, terms and conditions for granting the loan. ( 5 ) Be prepared with all relevant data at the time of selecting your agent, making the offer, and having the loan pre-qualification interview. Important considerations include: Present and immediate past employment; credit scores; credit factors such as late payment reports, collections and judgments; sources of income; sources of funds for down payment and loan charges including gift letters; if there is intent to consolidate multiple loans, have it done well in advance of the loan application. ( 6 ) Be certain that the objective of the loan is consistent with the over-all investment strategy. ( 7 ) Be certain that the terms of the loan are understood and that you can live with them in the case of unforeseen events such as employment adjustments, change in family makeup and the ownership holding period, so that you do not have to deal with acceleration clauses and penalties for early payoff or sale of the property.
Some lenders are still quite quick to make statements of the applicant's ability to get a certain loan without doing adequate and appropriate due diligence and meeting all the check list of items in the effort to try to capture the buyer/borrow. But in the end, if it is not all done according to procedure, one can likely experience collapse and failure of the loan and the purchase before the close of escrow.
St. George REALTOR® Jim Coleman is Associate Broker and Partner/Owner of ERA Brokers Consolidated. He Specializes in Residential, Investment and Commercial Real Estate, holding National Designations of Accredited Buyers Representative ( ABR) , Certified Residential Specialist ( CRS) , Resort and Second Home Property Specialist ( RSPS) and Seniors Real Estate Specialist ( SRES) . He was recently awarded NAR's new Green designation. You can contact him by e-mail at Jim@RealtorJimC.com. Call: ( 435 ) 674-0600; or write: Jim Coleman, 201 East St. George Boulevard, St. George, Utah 84770. This and other columns are available at www.RealtorJimC.com/articles.