Many knowledgeable real estate agents understand the mortgage approval process but most often a few significant details are frequently overlooked, which may result in a delayed or denied purchase. Some daily changes that can seriously derail home loan financing includes new regulations, appraisal guidelines, updated disclosures, credit score, mortgage rate pricing premiums, property type, secondary approval layering, HOA insurance requirements, title, rescission deadlines and property flip rules.
In today’s unstable lending environment, it is vital for homebuyers to get a complete loan approval that clearly defines every contingency related to each homebuyer’s situation before going with an agent to look at new homes. Here are a few tips for your agent to bear in mind while showing you a new property.
1. Property Type: Condo, High-rise, Single Family residence, Town House and Dome Home have definite lending guidelines that impact credit score, down payment and requirements for mortgage insurance.
2. Residence Type: Your agent and loan officer should consider these questions from the initial loan application. Do you want to sell one home before you move into another? I intend to buy a home for my children to live in. Is this an investment property? Is a property in the same city a second home?
3. Rates / Locks: Mortgage rates are usually locked for a period of 30 days. If you want to get a new rate, you have to change mortgage lenders. In addition, rates have specific adjustments for the type of property and residence, down payment and credit score, which can greatly influence monthly payments and result in denial. A mere 1% increase can make the difference between a denial and an approval.
4. Headline News / Employment: Since underwriters listen to the news too, as a borrower, you will have to prove that you have secured employment and income if you work in a unstable industry. Other things to consider that may derail the approval process include job changes, location of property and periods of unemployment.
5. Title / Property Flip: A flip is a property that an investor bought and then sold quickly to a new buyer within a period of 30- 90 days. Usually, the investor will add fresh paint and a little landscaping before reselling the property for a higher profit margin.
Many lenders have implemented stringent guidelines that prevent borrowers from getting financing on properties from previous owners who have documented ownership for less than 90 days. Since these rules are changing frequently and are directed to specific property types, ensure that your agent knows about the boundaries related to your letter of approval.
6. Homeowner’s Association Insurance: Several lenders want town house communities and condos to have adequate insurance and reserves coverage concerning specific ratios on rented vs owner occupied units. HOA certification can cost as much as $300 and can take a few weeks. Ensure that your purchase contract includes your set Due-Diligence period.
7. Appraisal Ordering Procedures: The guidelines governing appraisal ordering is constantly changing as regulators formulate new laws to protect consumers from upcoming foreclosure incidences. Regrettably, several of these new regulations have negative effects on the buying process. The consequent results include a slowing down of the buying process with realtors, with borrowers and lenders confused about the correct evaluation of community values.
8. FHA, VA and Conventional loan programs: Since each has separate appraisal ordering policy, ensure your agent knows your specific approved loan. This allows for documentation of any foreseen delays in the purchase agreement.