Hacienda Real Estate Blog

The World of Borrowing Money
January 14th, 2009 4:50 PM

I have many clients ask me how tough it is to get financing, assuming that real estate lending has dried up and the borrowing consumer has few options. Quite the opposite, mortgage money is out there, lenders have funds to lend, interest rates are really low..only borrowers have to fully document their financial capacity to borrow these funds. 

Loans are made now on almost an exclusive "risk base" analysis. Lenders want borrowers to have good credit, thus a fico score of over 700, hopefully over 750. Borrowers have to fully document their income, employment, and asset information.  The better your standing, or the lower risk you are as a borrower, the better your loan will be. Gone are the days where lenders would simply take "stated income information" and coupled with a good credit score and some light documentation, you were good to go. 

Another area of "fallout" from the loan crises is the appraisal process. If one pays attention and is around for a long enough time, one sees that everytime the real estate market downturns, loans go bad and homeowners loose their homes. It happened in 1990, it was over 18 years ago and people forget.  Pursuing the modern day philosophy of "it's gotta be somebodys fault", the appraisers get alot of blame for bad loans and declining values. This, of course, is ridiculous but nevertheless, the appraisers get new, more stringent guidelines and standards for appraisals.  Soon mortgage brokers and borrowers will not even be able to talk with the appraiser, even though the borrower is paying for the appraisal.  Pressure for conservative appraisals will continue and lenders may even limit the adjustments an appraiser can make when trying to compare a comparable sale property to the property being appraised. 

So the moral of the story is simply, "if you're a good borrower...you'll have little problem getting financiing".  Just be ready to hand over everything from your tax returns to your 3rd grade report card.  But if you are financible it is a great time to be a buyer.

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Posted by Michael Miller on January 14th, 2009 4:50 PMPost a Comment

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