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.
