WatchHi folks - I'm a reporter at Bloomberg, where I cover economic issues, including housing.
We all know how tough it's been to get a purchase loan since the meltdown. But I'm getting the impression that it's getting even tougher as of late. One reason, I think, is new lender anxiety about regulations being put in place in Washington. Then there's continued falling home prices etc. People here in DC say lending standards are preventing a housing rebound. Banks are loosening consumer and business lending, but not mortgage lending. What do you think?
Has anyone with good credit failed to get a purchase loan recently? Would love to hear your stories, either off the record here in the forum or on the record by phone or email.
Thanks,
Lorraine Woellert
Bloomberg
202 624 1963
lwoellert@bloomberg.net
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jvolstad's website
No problem at all getting a loan if I wanted one. I'm debt free, have six figures in savings, retired military and now working as a software developer.
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jvolstad says
Savings. Mmmmm.
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APOCALYPSEFUCK is Tony Manero says
Your ideas are intriguing to me and I wish to subscribe to your newsletter.
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I just closed on a house with Wells Fargo for the first time in Jan. It was much easier than we thought. We sort of fell into the house really - we weren't planning on buying anything but then we stumbled upon our dream home. (I may get beat up on this board for this) We didn't really have our financial house in order the way we would have wanted but the loan went through without a hitch.
I think the reason houses are falling out of escrow and loans are being denied has a lot to do with the appraisals. If the property values are headed south in a neighborhood the bank won't lend to you for it no matter how good your finances are.
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lwoellert says
I think the economy is preventing a housing rebound. "Unemployment" at 8.1% which is a suspect number to begin with. Then you have a housing market that has shown no signs whatsoever of stabilizing. On top of a growing number of homeowners waiting to sell for when the market recovers (Pent up supply waiting to flood market, and the baby boomers waiting to unload their house to retire on), everyone who was/is foreclosed on and is ineligible for a mortgage for x number of years after that event, new graduates burdened with student loans and a new perspective on what owning a home means, the continued government intervention in the economy preventing the markets from being rational, so that even with low interest rates housing prices are still falling showing just how weak the market actually is...so no I don't think it's a lack of loose lending practices that is preventing a housing recovery. There are so many larger issues at play here that the banks are just waiting this thing out, just like the majority of the people on this board. There are better places to put your money right now. And if I were a bank, business lending and consumer lending to all the new renters with better cashflows because they don't own a home makes more sense.
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San Jose, CA
Let’s look on mortgage market from this perspective:
Real Estate market is a combination of micro markets. BA definitely belongs to this category with its own specifics; majority of housing being above $500K, great weather, high salary, highly restricted development but… state financial problems, weak business climate plus high unemployment/underemployment. From bank perspective, they pay handsomely to institution predicting market trends in micro markets. If local market is poison to go down, they request more documentation and effectively mortgage is more difficult to obtain. (Activity in all cash purchases have partially they own reflection to local mortgage market). If local market reach bottom and begin go up, and then mortgage qualification tend to be loosen.
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Mountain View, CA
Will let you know, applying for a loan right now.
Main proble - people with all cash are coming in and overbidding big time. I can't compete with that :-(
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rowemoore says
Sounds pretty reasonable to me...
Lorraine - if you write about this it would be very interesting and valuable to put the present situation in a larger historical context. No doubt banks are stricter now than they were during the bubble years when "anybody with a pulse" could get a loan. But is it an overreaction or is it just a "return to normal"? Are banks stricter today than they were say 15-20 years ago?
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lwoellert says
Btw Lorraine, like many in this forum I reject the notion that a "housing rebound" is something desirable. We have just gone through an incredible housing bubble. This was not a good thing, it was terribly costly for banks, for tax payers, for individuals. We don't want it back. If banks return to traditional lending standards and house prices return to historical norms, that would be the best outcome in my opinion. For many parts of the Bay Area that would mean further price declines.
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Danville, CA
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Patrick says
You're moving up in the world.
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Lorraine, my wife and I closed on our home in Danville about two months ago and we didn't have any problem at all qualifying. Several caveats here: we bought a fixer, i.e., a home in the very low sixes in a neighborhood where most everything is in the sevens and eights and we had excellent credit and low ratios but other than that we're just two people who work for a living.
I think most of the issues with qualification tend to be in what these people call "the fortress" where ~2000 sq ft homes go for $1M or more.
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Vero Beach, FL
We had a tough time buying a primary residence we could more than afford. Our underwriter was new and questioned everything down to an $18 deposit into my checking account. Supplying information was a full-time job in itself. An acquaintance of mine is a VP with the bank and she had to get involved. We closed a day late. It was a huge hassle. Owning two rental houses complicated things.
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Seattle, WA
If you have a decent job with an income that supports the loan, and your credit score is not in the sub 630 then getting a mortgage should not be a problem.
And yes, the lender will want to see all supporting documents as evidence of what you earn, W2, bank statements (6 months) and references from work about employment history etc.
If you have all of the above, then its no problem.
Gone are the good old days of NINJA, Illegals, anybody who could sign their name getting a loan.
Which is how it should be..
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I've been watching the BA for a few years now and gotten know the situation of a lot of friends. If you got a stable job, 20% down and decent credit history getting a loan is about as easy as it ever has been.
If you perceive that getting a loan is harder you are ignoring the actual problem. The problem of course are lack of available jobs, sinking wages and too much accumulated debt in the middle class. With the economic policies we have today and had for the last 30 years this trend is likely to continue. Along with dropping house prices which will finally start to match what's really happening to average American families.
Personally I placed an offer on a home 9 days ago which was accepted the next day and got my loan approved today. With most personal banking information being available electronically and electronic signing you can get through the paperwork pipeline faster than ever. You just have to be organized and responsive. The appraiser took the longest to get the appraisal out: 4 days.
What's for sure though is that you have to disclose _everything_ about your financial situation if you are a first time buyer. They will double check everything, including calling your banks, employer, previous landlords etc. Lenders pretty much know what brand of toilet paper you buy.
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RentingForHalfTheCost says
Duh.
RentingForHalfTheCost says
Whachoo talkin' about, Willis? You made no sense, which is why whatever it is you attempted to say didn't translate into our language. You know, the languages on planet Earth.
Since I haven't tried to refi or buy in the past 5 years, I've got nuthin' for Lorraine. Just snotty comments about snotty comments, as usual.
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Pleasanton, CA
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iwog says
Great. So the same fools that get a piece of my tax money so they can live mortgage/rent free for years can get back in the game and do it all again. God bless America!
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RentingForHalfTheCost says
Amen.
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Pleasanton, CA
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iwog says
And will keep going lower because of the lack of buyers and the need to keep prices from collapsing. The day you say on this site
"buy now cause interest rates are rising"
Will be the day that the BA is in whole lot of mess. Cash will be king as always. Credit is for the weak.
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CREDIT IS FOR ASSHOLES who want to lick the sweaty gonads of the financial crimes industry!
It's CASH or FUCK YOU, America!
Die, Bankster Fucks, DIE!
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There's definitely huge differences between micro-markets. Ellie Mae, which processes about a fifth of originations, says that the average REJECTED conventional purchase-money borrower has 732 Fico and 81% LTV.
On the other hand, that average rejected borrower also had 42% back-end debt to income, compared to 33% for closed loans.
http://www.elliemae.com/origination-insight-reports/EMOriginationInsightReportMarch2012.pdf
I wonder if part of the problem is that underwriting has become a check-the-box procedure that no longer allows for any individual judgement. Maybe that's good and bad.
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I live and work in PA/NJ, building is steady, prices are flat, and people that qualify have gotten loans
Think like a bank. Is there money to be made? What's the risk? Does the risk matter or should we be taking more risk, knowing the usfedgov is our trust fund daddy and has promised to cut us a check, every time we misbehave and find ourselves in a jam
Now, think like a potential mortgage debtor. While the general attitude and mindset about how things are, and how one thinks they work,,,,,up until these last couple years, the herd agreed that buying a house (via debt) is an investment, and that house prices only move down a one way street, north. Now, the worm has turned and us younger folk realize that a house is a place to live, not an investment. 30 yrs of debt sounds like a long rope with an anchor at the end, maybe if wrapped around ones neck enough times, would be easier to drag. That, and the lie that prices only go up, has been exposed. Prices do in fact, go down
Why anyone thinks that trend will reverse on a dime, is beyond me. Ever heard the term saeculum? I'm 30 and was throwing a couple back with some old friends last night. When you remind them that half our lifetimes ago, you could buy 4 gallons of gas, a pack of cigs and a rubber for 5$, they cringe. Us younger folk are taking our time to see how all this pans out, seeing as how there's no entry to the ponzi for us to buy and flip our way up the housing totem pole. For many of us, access to credit doesn't matter so much, when we're not dumb enough to fall into the lifetime debt trap
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errc says
Or us older folk either. Excellent, so glad to see younger people are not blind.
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errc says
Ah banking...
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As ever, if the Realtor® wants the commission badly enough, he'll split it with the mortgage broker and blow him or offer him his spouse to blow him. You know, the free and fair market at work.
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Foothill Ranch, CA
ordertaker says
I think this experience is very accurate. If you have a clean file (W2 income, income covers PITI, little debt, etc.) getting a loan is not a big deal. But if you have anything off the painted line (K-1s, rental property, etc) the fun begins.
I bought last year and I think our app was over 200 pages. It is a full time job supplying documents.
Just closed on another rental. A lot easier when I have the 200 pages scanned and ready to go.
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I had to supply all sorts of documents and letters of explanation on my FHA loan closed on march 5, 2012. we have W2 and K1 income. they wanted to see all sorts of business bank statements, and questioned everything. Honestly, it all seems by the book. if someone can't spend some time putting together all necessary documents, then they shouldn't be buying a house. Now here's a tip coming from someone who closed a complex FHA loan in 43 days flat, and I have self employment income. if you want to avoid a colonoscopy, and avoid delays that amount to months in back and forth with underwriting, MAKE SURE you deal with a qualified mortgage banker who knows how to analyze your situation and get you to prepare the mortgage application and documents ahead of time the way pre-underwriting and underwriting wants to see it. do that and you'll save crap loads of time!
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Or . . . just have cash and drop it on the closing table and slap the seller across the face hard when you hand him the bag o' money.
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Foothill Ranch, CA
APOCALYPSEFUCK is Tony Manero says
Could have paid cash. I will take the almost free money the govies are handing out thank you. Leave the cash for when rates raise and the passbook pays more then the mortgages cost.
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michael H says
I did all those requirements as well, my MB told me what the LO would request and told me to preemptively print them up and send them in. I had about 5 different loan officers request the all of those documents all over again. Also every week they wanted me to reprint my banks statements and work pay stubs.
From my perspective, it only seemed to serve to aggravate me, as each LO seemed to have a deal killer tone to their requests.
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Ross, CA
errc says
The rubbers are still cheap! And why would a 15 year old need 4 gallons of gas?
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rowemoore says
Learner's permit?
Or maybe just for the lawn mower.
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rowemoore says
There's nothing more thrilling to a sex-crazed 15-year old than having sex on the altar of a burning church.
That's what he needs the gas.
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Ross, CA
APOCALYPSEFUCK is Tony Manero says
while wearing a rubber. Safety first!
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Safety is always a priority - even in arson sex orgies.
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Menlo Park, CA
lwoellert says
BTW, "back-end" debt is the total existing annual debt payments plus those from the loan applied for, divided by annual income.
"Front-end" debt is just the payments from the loan applied for, divided by income. Please correct me if I'm wrong.
Hmmm, you could make some good joke about back-end debt...
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I recently closed on a condo in SF. Due to the tightening of lending standards for buildings with pending litigation, it had fallen out of contract 3 times in the past 6 months. Closed in 45 days mostly due to the bank moving like molasses. A little frustrated that with a credit score over 800 and coming in over 25% down that I couldn't get 3.875% but the pending litigation really narrowed the field of potential mortgage lenders. I think this is where the other 3 potential buyers had difficulties. My rate is still pretty good since it's better than some of my friends who bought last year.
22% off the 2005 purchase price, 8% lower than the 6 month comps in the area. Rent ratio around 14.3 with a low HOA.
My sister just closed on a short sale over a million in San Diego. She bought in 2007 (against my advice and that of our parents) and is underwater on her home (purchase price around $600,000) but she was able to rent it out for $3500 which is why she's willing to hold on. Not quite sure how she pulled it off.
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My loan was recently denied by two lenders. My credit is 689, I have 2 fully paid homes (one of them is a rental), I've been with the same employer for 8+ years, I have no debt, make 6 figures, and I have 20% to put down for a 500K home. The first lender denied my loan because of lending overlays. I had to do a short sale two years ago due to a divorce. This lender requires at least 4 to 7 years even though I met Fannie Mae's lending guidelines. The second lender did not have any lending overlays but still denied my loan due to the fact that I short sold the house on my own, not with my ex-spouse, after the divorce. Well F$%#^ them! I will wait for the home prices to come down and buy them in cash.
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Not yet, but I will keep you posted. Preapproval letters are still easy. Closing a loan... another issue entirely. I'm a humble first time home buyer who is being diligent, so I have yet to pull the trigger on purchaste a home... in the event I ever do, then we'll tell how easy or difficult it is to close a loan... but on the face of it, qualifying is a simple matter... most recent two pay stubs and verbal assurance of a "good credit score" is all I needed – but a preapproval is MUCH different than closing on a piece of real estate.
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APOCALYPSEFUCK is Tony Manero says
Despite finding that comment offensive…wasn’t that a scene from a Madonna video back in the 80’s?
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EastCoastBubbleBoy says
I don't know, but it sure sounds like it could have been a Madonna video from the 80's. ;-)