March 6, 2013
An ironic outcome of the financial crisis of 2008 is that, while interest rates are at historic lows, refinancing or obtaining a mortgage is more difficult than ever. Recently several of our clients experienced trouble while trying to refinance their existing mortgages. Either the bank wanted information that proved difficult for the client to provide (proof that a company pension would continue at least 10 years) or the process took so long that the client got frustrated and walked away. These experiences are not unusual, according to several mortgage lenders I have spoken with recently. Because of all the bad loans out there, banks are being very stringent with their requirements. They want to be sure that any loan they approve will pass FHA inspection (so they can sell it to the FHA and get if off their books) or is strong enough to keep on their books. On the whole this is a good thing – those “no income” loans of old are gone for good, we hope. But it is making life harder for even those with good credit histories and steady income.
To qualify for the best mortgage rate one’s credit score needs to be on the very high end, 740 or better. Difficulty can arise in the case of a divorce, as alimony or child support may not always qualify as income for a mortgage. Banks are demanding a paper trail for gift money, asking to see proof of who donated the gift money and sometimes asking for an explanation of where the donor generated that money. These are just some examples of how lending practices have tightened up in recent years.
In the past we readily suggested homeowners contact their current mortgage lender, or their local bank or credit union, to obtain a mortgage. After seeing the trouble our clients have been running into, we more readily suggest contacting a mortgage lending company. They seem to take the time to understand the client’s situation and work together with the client to get the best loan possible. ~Jill