Lending Guidelines

Wells Fargo

I was at the Title company today to sign papers with my clients who are selling their Foster City townhouse when our escrow officer informed us that of the five files on his desk ours was the only one that the loan documents had come in on time…and thus we were on schedule to close on time next week. The other files he had were due to have closed either earlier this week or last week and were still awaiting the arrival of those precious docs. I had to laugh because I thought it was only my deals this year that had gone completely haywire from a timing standpoint! Why, you ask? The reason is because the lenders right now have become really, really strict when it comes to their guidelines. I actually had a transaction last month that was delayed almost two weeks and one of the reasons was that the buyers were $178.00 short on their cash reserves and the lender’s underwriter was uncomfortable drawing the loan docs if they were in any kind of a negative situation. $178.00. On a $700,000 loan. I actually put $200.00, of my own money, in my buyer’s savings account to put them in the black. The underwriter asked for a copy of the receipt! Needless to say, the easy, breezy days of zero down and stated income loans are over…the pendulum has swung pretty far in the other direction. Many lenders right now are back to requiring 20% (or more) down.

There are other loan products available but here’s an obvious fact, for the time being you’ll need to really have your ducks in a row if you’re buying right now. For quite awhile almost everybody could go from the idea stage to closing in a relatively short amount of time. If you’re thinking of buying now you really need to have, and work, a plan. You have to have an adequate down payment (and it needs to be your own money). You have to have a good credit score. You need adequate cash reserves and your debt to income ratio has to conform to lender’s standards…which actually keep getting tighter.

All of this is good too! We desperately needed to get back to some form of sanity. It’s OK if you can’t buy a property for 6 months or more. If you’re ducks are actually in a row you’ll find it much easier to handle that mortgage payment. If you’re kicking around the idea of buying, even if that involves a move up and the sale of a property it’s a must to spend plenty of time with a mortgage professional to create a successful game-plan. Once you do that you’ll greatly reduce the stress of the escrow process and close on time.

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