Despite the credit freeze of 2008, borrowers have not changed the amount of time they spend researching a home loan, according to a Zillow Mortgage Marketplace survey. The survey found that borrowers who obtained a home loan in the past five years typically spent five hours researching their options, unchanged from March 2008. Nearly one-third (31 percent) spent two hours or less. This is on par with the typical time spent researching a vacation or computer purchase, and half the time consumers typically allocate to research a car purchase.
In the past five years, 16 percent of U.S. adults report they have obtained or refinanced a home loan and two-thirds (65 percent) of those admit they want to do things differently when shopping for their next home loan, according to the survey.
FHA financing allows borrowers to come to the closing table with a minimal down payment.
Most lenders want ten to twenty percent down while FHA borrowers can come to the table with as little as 3.5 percent.
FHA borrowers can ask for a seller credit for up to 6 percent of the purchase price to help pay for closing cost beyond the down payment. This makes FHA financing very popular because closing costs usually run at least 5 thousand dollars.
FHA loans are insured by the government and guarantees investors their money back if the borrower defaults. These loans are super popular because of of the small down payment requirements.
Twenty percent of refinance loans are FHA and thirty percent of all home loans are FHA.
Another reason FHA financing is very popular is because borrowers can have substandard credit. Currently an FHA buyer can have a credit score as low as 500.
Guidelines about to change
The seller credit for 6 percent is expected to be reduced to 3 percent.
Minimum credit scores will be increased.
One law maker has proposed to raise the minimum down payment to 5 percent.
This means it will be harder for first time home buyers and those with little saving to get into home ownership. Home buyers with substantial down payments or investors with cash will have first dips on affordable houses.
Call me if you want to learn more about this situation and how it affects you.
Mark Divittorio 530 957 1577 or email at markdevo@gmail.com
The average time it takes for loan to be approved in 2009 47 days. That number is up from an average of 30 days in 2008. Customers are less satisfied with their mortgage service because of the extra time it takes for loan approval.
The extra time it takes to get loans approved is due to the fact that there is more scrutiny on loan files. Investors that buy the bundles of mortgage loans want reassurance that the homes and buyers are a safe investment, especially after the crash! The underwriters that review the loan files look for issues that identify a buyer that can not make their payment or a house that is defective. If the underwriter sees any problems, they will kill the loan and the purchase will not happen.
Another reason loans are taking so long to fund is because interest rates are at record lows, and so the shear volume of people refinancing is huge.
In the current state of the economy many challenges have surfaced making it more difficult to obtain financing on home mortgages.
Criteria for securing financing has become much more difficult. Stated income loans, also known as “liars loans” are a thing of the past. No longer can applicants “state” their income. Rather, their income must be fully documented. Even if their credit score is perfect, and they have always paid their bills on time buyer’s income must be verified with full documentation. This eliminates many buyers who want to take advantage of the current real estate market, but can not. This essentially means there is more product per qualified buyer.
Stricter guidelines in obtaining financing pertaining to the condition of the home is yet another challenge for home buyers. Guidelines were loose in the sub-prime hey day, now the pendulum has swung the other way and guidelines are extremely strict. Conventional financing and FHA financing have criteria that is strictly enforced by the underwriters within the lender’s department. Black mold in the shower that accumulated from lack of cleaning, if noted by and overly diligent appraiser, and then spotted by an underwriter, can stop a deal. A mold specialist would have to be hired to certify whether that mold is toxic or not. This is one extreme example of issues that can arise due to current market conditions as they relate to securing financing, there are many more.
A missing light fixture that was removed by the former occupant leaves bare wires exposed. This is considered a health and safety issue that underwriters will flag. An inexpensive fix, but banks are still unwilling to make these repairs. They would prefer a cash offer for an easier transaction that is more likely to close faster.
