Many experienced real estate agents in the Phoenix metropolitan are have a general understanding of the mortgage approval process, but there are a few important details that frequently get overlooked which may cause your loan to be delayed or denied when you’re buying your new home.
New Federal and State regulation, updated disclosure policies, appraisal guidelines, interest rate pricing premiums, credit score, secondary investor approval guideline layering, property type, HOA insurance requirements, title and property flipping rules are just a few of the many recent changes that can have a major impact on a borrower’s home loan financing.
With today’s volatile lending environment, it’s extremely important for home buyers to get a full loan approval, which clearly defines all contingencies that pertain to each unique home buyer’s scenario, prior to spending time searching for a new home with a real estate professional.
Here is a list of a few of the most important topics your Phoenix real estate agent should keep in mind while showing you homes:
Caution – Agents Beware:
Property Type –
High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.
Residence Type –
Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city? What if I’m buying a home for my children to live in, it is still considered an investment property?
These are just a few of several possible residence related questions that should be addressed by your real estate agent and mortgage professional at the initial loan application.
Rates / Locks –
Mortgage Rates are typically locked for a 30 day period. Rates also have adjustments for property/residence type, credit score and down payment. Most of these could have a big impact on your monthly payment. An increased monthly payment could also have an adverse affect on your loan approval.
A 1% increase in rate could be the difference between getting an approval or denial.
Headline News / Employment –
Underwriters are human and watch the news just like you. Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.
Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.
Title / Property Flip –
A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period. Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a profit.
While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.
These rules change frequently, and are specific to particular property types, so make sure your agent is aware of any changes in title in the last 90 days.
Homeowner’s Association Insurance –
Some lenders require Condos and Townhome communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.
It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.
Appraisal Ordering Procedures –
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Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.
Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.
VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.
For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.