I have recently been hearing from a lot of real estate agents about their buyer’s frustrations with the mortgage industry. It seems that most lenders today are taking forever to respond to new loan applicants, not too mention provide them with any speck of customer service, making it nearly impossible for buyers to make the competitive purchase offers required in our current real estate market. And when it comes time for the lender to come through on their loan pre-approvals, many are falling way short on their empty promises.
I hope to shed some light on some common mortgage pitfalls as well as provide some much needed guidance for anyone interested in starting the loan application process, especially if they are interested in applying for a mortgage in order to purchase a home.
The mortgage markets today are far more confusing then they ever have been for consumers, just four years ago banks were handing out loans to anyone with a heartbeat, but this is just not the case today. The same perfectly qualified buyer may receive loan approval from one particular bank but be turned down by another just because banks have their own overlying lending restrictions specific to their own interests.
These additional overlying credit restrictions can turn what seems to be a simple real estate purchase transaction into a nightmare for the buyers. Before they know it their bank of choice may not only be asking for all of their personal financial history over the past three years bust also for all property inspections on the home they are purchasing, and some even ask for all the recommended work brought up on the reports to be completed before they will fund the buyer’s new loan.
This may sound perfectly reasonable at first, but if the buyer is in the last legs of purchasing a short sale (which has probably taken three months to move forward) or worse yet a foreclosure (bank owned home/REO) then chances are that the sellers will not pay for the repairs, meaning the buyers would have to pay (could be thousands to tens of thousands) upfront for repairs to a home they do not own or face losing their chance to purchase the property, or worse yet, losing their earnest money deposit.
Many banks are also too busy to handle the business that they are receiving. On any given day the local branch of a larger retail bank may receive anywhere from 150 to 200 new loan applications. This creates a major problem when the branch employs less than 30 loan officers, not too mention the lack of loan processors and underwriters. Banks are still reeling from the mortgage collapse and just do not want to spend too much on building up their business around loans since they took such a hard fall over the past few years.
Then we have the Federal Government trying to do all they can to re-ignite the struggling economy by offering huge incentives for people to purchase and even refinance their mortgages. The Fed’s have now been artificially lowering interest rates on 30 year fixed mortgages, to the lowest in 40 years, for the past six months creating a huge demand for both refinances and purchase loans. But the banks know that the demand will be short lived, since the Fed’s can only afford to spend money for a short time-frame, and are reluctant to spend overhead increasing their loan operations thus leaving many loan applicants waiting as long as 100 days for their refinance and purchase loan applications to get approved.
So what can the savvy lon applicant do these days in order to protect themselves from a lender’s lack of service, but still hope to get an incredible interest rate?
It seems that the “time problem” many are experiencing is most likely due to working with the wrong banks. Although a particular bank has promised to help clients upfront, many end up wasting weeks of time and then end up telling the loan applicants that they cannot qualify due to recent changes in underwriting guidelines or something along those lines.
In my professional opinion, and the most important thing a loan applicant can do to protect themselves, is to first of all find a true mortgage professional to work with, not just a bank’s loan representative which is all you’ll find in retail. Rather I would recommend seeking the assistance of a mortgage broker as they tend to posses superior knowledge and a wider selection of mortgage programs.
For instance, I happen to work with over 25 different lenders (including Bank of America, Wells Fargo, Citibank, and much more) and have the ability not only to tell on any day which bank is offering the best rates but, most importantly these days, which bank is providing the most reliable service.
Just as some mortgage brokers have the ability to offer different mortgage programs from a wide range of major banks, loan applicants should also apply at more than one mortgage lender. If the applicants choose to work with larger banks this is especially important to remember.
And if any fears are brought up about credit being negatively impacted when applying through many different banks, this is not true. The credit bureaus allow mortgage applicants to shop at as many lenders as needed in a 90 to 120 day time period with all credit checks counting as a single inquiry against their credit.
Yes, I am a little biased because I am also a mortgage broker, but I also continue hearing about buyer’s horror stories while working with larger retail banks. And we have horror stories to tell from some of our own buyers who have chosen to work with some larger retail banks (I won’t name names but they are the largest bank in America) instead of working with a local mortgage broker. This doesn’t mean that all brokers are superior to retail banking operations (or vice versa) but some in particular are definitely better than others presently.
There are enough challenges in today’s real estate market that buyers must face; additional challenges in the mortgage market just complicate things even further.
