(5/25/2012) It's hard out there trying to get a mortgage approved.
How hard is it?
It's so hard, police officers from short-staffed police forces regularly work overtime to protect the public, but struggle to get lenders to approve overtime income as part of their qualifying income.
"Holy cow! It's about 100 times more difficult to get a mortgage today. We have to fight to use overtime for cops that we have refinanced five times before with no problems. Now just proving overtime is an issue," says Julie Wyss a broker associate with Intero Real Estate Services in Los Gatos.
It's so hard, if you work at a tech company, lenders want to make sure you aren't holding out on them.
"We recently had an underwriter request a letter from human resources at Hewlett Packard to show that our client did not own more than 25 percent of Hewlett Packard," said Bill Phillips mortgage consultant and branch manager of First Priority Financial - Silicon Valley.
Applying for a mortgage in 2012 compared to years during boom times is like comparing night to day, and it's pretty dark outside.
If you don't have all of your docs in a row or can't quickly get them to prove statements made on your mortgage application or if can't get documentation to dispel negatives the lender finds, fugedaboudit.
In the mortgage loan zone
Your lender, Fannie Mae, Freddie Mac, the U.S. Department of Housing and Urban Development can all tell you what to bring to your lender's mortgage application desk, in general, but it's no longer that simple.
Keeping good financial records and related documents on just about every aspect of your financial life has never been more important.
Overtime pay, divorce degrees, bankruptcy discharges, Social Security income, second job income, investment liquidity, vested holdings, college transcripts, explanations for old credit inquiries, are just a few forms of documentation requests you can expect mortgage lenders to demand if they believe it impacts your and their bottom line.
Richard Miller, marketing director at RateComb.com and a member of the Silicon Valley Association of Realtors' board of directors, says toss in "proof of liquid assets in the mattress; proof that God parents are related and birth certificate documentation. The extent of change is enormous."
On pins and needles, mortgage lenders' biggest fear is that they'll be forced to buy back poorly documented loans deemed suspicious by Freddie Mac, Fannie Mae and others who buy and package mortgage securities, according to the survey. Mortgage securities investors got socked by the bust, they are mad as hell and they aren't taking it anymore.
Bank of America, the nation's second largest U.S. lender recently agreed to buy back $330 million in home loans from Freddie Mac after flaws were found in how the loans were originated, according to Business Week.
Earlier this year, the two agreed to a $1.28 billion buy back settlement over bad loans sold through Countrywide, which Bank of America purchased back in 2008.
The $25 billion National Mortgage Settlement also has lenders cleaning up their acts of abusive foreclosure behavior.
"Because this is the fifth year in a row that mortgage companies have foreclosed on over a million homes per year, naturally they are a little more cautious. Stated income, no income verification and many of the 'creative' loans that were available before and during the boom are not available and that seems to shock many borrowers," said Sheri Moritz a real estate agent with the Next Home Team - Keller Williams in Raleigh, NC.
Said Moritz, "They have heard of a friend who only had to sign a few papers with their last loan and didn't have to provide much if any documentation and now they feel what is asked for is extreme. There are so many factors the lenders look at based on hindsight and in an attempt to avoid a repeat of the last five years."
She added, "I think they will loosen up a bit as they realize there are still good opportunities to lend money to people who are good credit risks and who are likely to pay the money back."
Movoto.com's infographic reveals disparity between mortgage applications in 2011 compared to 2007. Mouse over and click to enlarge.
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