Home buying

[Ticker]

We are in the process of closing on a home and its really interesting how much the standards got tightened. Few years ago nobody asked us anything, this time around the underwriting process is real and very detailed. I'm very glad to see that finally happening...
The underwritters are actually going down to individual transaction on various accounts to figure out what happened etc. If they were doing this 5 years ago we wouldn't be in this mess.

T.

[littleroc02us]

If the bankers were all doing manual underwriting where they actually look at your past and your debt to income ratio, there wouldn't be a problem. The issue I have with the majority of banks is they only look at the stupid FICO score, which is a joke and we all know how that worked out in the last recession.

[Frugal]

I agree. However, we bought our first home five-six months ago, and it was an absolute nightmare. I think the underwriters are going overboard checking out people that actually have the resources to get the loan, that have the money. They seem to be trying to make up for a lack of oversight previously. We were doing a lot of loan paperwork until late at night, just to get it finished. On top of that, our underwriter kept "losing" paperwork and requesting it again. We had the loan finally approved while on our honeymoon, and were up until 11 pm. the night before our wedding attempting to finish the paperwork request they sent us the day before the wedding (although we both had been assured the loan would have been finalized by then). NOT fun! This actually happened to me. It was worse than I am even mentioning.

If you are going to take out a mortgage, be prepared to have every area of your financial life examined, even IF you have an excellent credit score and income and low debt ratio. The documentation requests can get crazy.

[KaleighMaeA]

I agree. However, we bought our first home five-six months ago, and it was an absolute nightmare. I think the underwriters are going overboard checking out people that actually have the resources to get the loan, that have the money. They seem to be trying to make up for a lack of oversight previously. We were doing a lot of loan paperwork until late at night, just to get it finished. On top of that, our underwriter kept "losing" paperwork and requesting it again. We had the loan finally approved while on our honeymoon, and were up until 11 pm. the night before our wedding attempting to finish the paperwork request they sent us the day before the wedding (although we both had been assured the loan would have been finalized by then). NOT fun! This actually happened to me. It was worse than I am even mentioning.

If you are going to take out a mortgage, be prepared to have every area of your financial life examined, even IF you have an excellent credit score and income and low debt ratio. The documentation requests can get crazy.

Agreed, I had the same thing happen to me when I bought my house. Getting the final approval actually took until the day before my 45 days I had to close. It was scary how last minute it got! Every other day they asked for something new after assuring me everything I needed to provide was in. I think the craziest thing they requested was this: they asked for 3 years worth of W2's, ok no problem sent those in. Two days before closing they asked me to get the past 3 years worth of W2's officially from the IRS office. That was nuts! I was 20 at the time and my mom was my co-signed. She literally had to leave work and find a IRS office on her GPS drive 1.5 hours away, and sit in the IRS office for 2 hours to get the paperwork they needed by the end of that day we were not informed of until that day. Whew, it was absolutely insane. Glad I wasn't the only one who had a similar experience. I also got a 10k bonus from the military, and I had to literally go to the bank and request a photo copy of the actual check I deposited proving it was from the military and not gifted to me by someone.

[littleroc02us]

I think the 2 stories that you guys have told is reissuring to the lending industry, because they seem to be looking at the numbers instead of a stupid credit score.

[thomsoad]

If the bankers were all doing manual underwriting where they actually look at your past and your debt to income ratio, there wouldn't be a problem. The issue I have with the majority of banks is they only look at the stupid FICO score, which is a joke and we all know how that worked out in the last recession.

But if they didnt do soley FICO then we wouldnt have had those wonderful Ninja loans where they gave people loans using only stated income and an LTV of 125% ... I mean whats wrong with that logic?

Think of all those MBA geniuses who developed that strategy.... its gotta be smart, right?

[Ticker]

Yeah, I was rather surprised how detailed they were. There was a minor check that was deposited a month ago and they got all insane trying to figure out what that was (3% earnest money from a failed transaction).
I think they are going a bit overboard right now but this is probably better.
Somebody asked me for loan info, its a California super-jumbo at 30 year fixed 5.6%-ish.

T

[canada94]

I just posted this in another thread:

Just wanted to get your feedback on something,here in the UK, our local government has been given a load of cash to help 'first time buyers' get on the property ladder.

I think its a good idea, but some folk are sayin why should they give help, they didnt get any.

Do you have this scheme in your country, if so, hows' it workin out.

Thanks

Kevin

[marvholly]

The scheme is OVER here in the US. It was a $8000 tax CREDIT if you met certain conditions. Those conditions are now coming back to bit people .........where they sit.

[frugalgirl]

We bought our house in 1995. We had to provide all of the information that you are reporting to have had to provide today. It was a mountain of paperwork. Our credit scores in no way at all were enough to qualify us for the loan. We had transferred monies from several bank accounts into one for the down payment and then had to go back to the original sources and get documentation where the money had come from. We had to each provide several month's worth of bank statements, our previous year's tax returns, paycheck stubs plus letters from our employers' Human Resources departments listing our salaries and employment status. Because I had just finished graduate school, the bank would not even consider my student salary or salary at my new job in their loan approval since I did not have enough employment history. In addition, PMI was required and very expensive so 20% down was almost a requirement to buy at that time. It seems like things have gone full circle....

[BMEPhDinCO]

While I agree that just looking at the score was not the best plan of action, all this additional requirement stuff now is too far to the other end.

For example, my husband and I tried to refinance our house recently. Our scores are very good (above 750 - all of them) and we have paid on time every bill (no lates). We had over $50k in the bank at the time and were trying to refinance a $100k mortgage. The house was worth $140-160k and we had originally put down 20%.

We weren't approved because we are in grad school and we couldn't prove income would be there for the next three years! To me, this seems a little extreme.

I think the trick is to look at every situation individually and not try to use one method to cover every applicant. Of course, this would mean more work and time and we all know that time is money. For right now, at least, it seems that you should have impeccable records, longevity of income, high scores, and a large downpayment.

Of course, people get lazy and lax...I predict we will have problems again, because, as frugalgirl said, house buying goes in circles.

[littleroc02us]

I want to know what I get out of the US govt's great idea to give people an $8000 tax credit to buy a home? I want my money back!

[MonkeyMama]

Interesting.

We bought our first home in 1999. With 20% down and decent FICO scores, it was no biggie. We had only been post-college employed a few months when we applied for a mortgage loan. I don't remember them scrutinizing our accounts or length of employment, anyway. Seemed like they had special rules for college grads, maybe. We had both been employed in college with one primary job for MANY years - so maybe we had pretty decent job history - though neither of us made much money in college. I suppose we showed we were very steadily employable - I don't know. My understanding was this was before loan standards loosened.

That said, we bought a second home and refied a few times. In 2001 (just 2 years later) we bought our second home with a no-doc loan. We probably refied once or twice no-doc. High Fico scores? 75%+ equity? Sign on the dotted line - no questions asked. Definitely different.

We refinanced in 2008 - it was documented, but they didn't really ask for much because we had equity. Steady employment, high FICO. Actually, it was the quickest closing we ever have done.

My broker really thinks we should buy rental real estate (with nothing down), and my sister just bought a 0% down house the day they both found a job after a long time of unemployment. They couldn't get approved, until the DAY they were both employed. One day of employment? Will do. Seems to me some lenders are still VERY loose, even today.

I find it interesting to see the extremes. Of course all this 0% down stuff are government FHA type loans. Sister is a veteran so had special loan options.

[Ticker]

Yes, this loan is rather larger then average (1M) so I guess that is why they were so an@l.

T

[Hector]

I agree. However, we bought our first home five-six months ago, and it was an absolute nightmare. I think the underwriters are going overboard checking out people that actually have the resources to get the loan, that have the money. They seem to be trying to make up for a lack of oversight previously. We were doing a lot of loan paperwork until late at night, just to get it finished. On top of that, our underwriter kept "losing" paperwork and requesting it again. We had the loan finally approved while on our honeymoon, and were up until 11 pm. the night before our wedding attempting to finish the paperwork request they sent us the day before the wedding (although we both had been assured the loan would have been finalized by then). NOT fun! This actually happened to me. It was worse than I am even mentioning.

If you are going to take out a mortgage, be prepared to have every area of your financial life examined, even IF you have an excellent credit score and income and low debt ratio. The documentation requests can get crazy.

Aren't you glad that they are making sure? For most people wedding or taking mortgage itself is a huge event and people stress out during that process. You guys did both things together. Impressive!