Real estate agents and real estate investors know that change is happening. Market trends are unusual and new real estate opportunities and lending policies are occurring almost daily. Agents and investors know opportunities are out there but getting through the paperwork can be challenging and test anyone’s patience.
Jim Sahnger, a mortgage broker in Jupiter, Florida, a hotbed of real estate activity prior to the recession, laughs when describing a client who received a surprising mortgage approval in 2007. The prospective borrower filed an application for a mortgage on a property and had no down payment, a history of foreclosure and a bankruptcy. Yet, the applicant was approved fro a substantial mortgage.
Today, that applicant would stand no chance. While every lender has slightly different criteria, it is safe to say that the no down payment days are over, as are the days of loose credit standards and loose appraisal practices. Lenders are cautious and are obligated to create performing loans.
Purchasers should expect that every mortgage application must stand on its own merits. Today’s lenders require substantive documentation about every detail. Purchasers should expect to furnish bank statements, tax returns, balance sheets and job histories. Even with all this information, more details may be required.
Additionally, purchasers and their agents have become accustomed to changes by the appraisers, many of whom are criticized for loose work during the boom years between 2005 and 2006. Suffice it to say that appraisers now lean to the conservative side.
Appraisers are looking at location and especially recent transactions in those areas. If the area of the subject property has a history of short sales or foreclosures, the value of the purchased property can be impacted.
The new, conservative appraiser and conservative lender actually work to the benefit of the experience agent and investor. Investors should pre-qualify for investment properties. A pre-qualification letter goes a long way toward influencing a seller or third party lender in a short sale. Agents should encourage investors to acquire the credit approval prior to searching for property. That pre-qualification letter can well add to the possibility of creating solid opportunities for real estate profit.