Is credit lending still tight?

[kev374]

I was talking to my Uncle who is an appraiser here in Southern California and he insists that getting a mortgage today is extremely difficult and one needs 20% down in most cases. I did not think that is the case at all.

I brought up the point that there is FHA, but he claims that FHA is not easy to obtain anymore and there is a huge amount of pushback and red tape with getting an FHA mortgage and even if the downpayment is small the cost of the mortgage has become very expensive.

Any truth to this? What is the reality?

[spdrun]

I read that average d/p is something like 22%. Obama’s pet stooge, Mel Watt, is trying to change that (at least for Fannie/Freddie) but changes are slow and incremental. Hopefully the GOP congress will do their best to obstruct and retard.

There’s no reason why it should change. People without skin in the game will find is easier to walk away, and if you buy at 3% down, you’re close to being underwater from day 1. 20% down was the standard till the 90s(?). It was also the de-facto standard in jurisdictions that didn’t bubble up or down much. Read: Texas, under their homestead act, and NYC apartment buildings.

[kev374]

Totally agree… if it was the standard in 90s and before and the housing market did just fine then why is it suddenly necessary to go to 5% down? It makes no sense.

In addition I also think that those who have 20% saved up have demonstrated the discipline required to save and be financially responsible.

[poorgradstudent]

It’s tighter than the bubble and looser than 2009.

Part of it depends on how much of a rate premium you’re willing to pay, along with suffering PMI. FHA loans are way less attractive than they used to be thanks to increasing fees.

My understanding is once the amount borrowing crosses into “Jumbo” loan territory, it becomes much trickier to get a loan. I think that limit in SoCal is 625,000? So it’s possible if your uncle is appraising a lot of North County McMansions, 20%+ is going to be the norm.

[Anonymous]

I was talking to my Uncle who is an appraiser here in Southern California and he insists that getting a mortgage today is extremely difficult and one needs 20% down in most cases.

__________
NOOR

[spdrun]

As it should be. In a volatile market like Southern CA, some cushion to keep homes from ending up underwater should be required.

[joec]

I think instead of “tight”, the better term maybe “must follow guidelines”.

If you don’t fit in the box that they can sell your loan off to, you will have a tough time. Even if you are a multimillionaire, using the computer program conventional underwriting terms, you may not qualify (think Ben Bernanke…) unless you get a custom terms loan and some lenders won’t even bother with you.

If you are self employed, good luck…

When we bought in 2009, I pretty much told the lender guy how much did you need me to put down to get the loan? Some didn’t or won’t even work with us or spend the time of day at all. This is even if we came in with > 50% down.

It’s all pretty silly.

Seems like a good deal for anyone if you loan them 50%, they default, you just got the house for 50% off.

[svelte]

Guidelines aren’t as tight as you would think.

http://www.broadviewmortgagelongbeach.com/home-loans/fha-mortgage/

Note the 46.99% front end and 56.99% back end, min credit score 640.

[HLS]

If you qualify, it’s easy to get a loan.
If you don’t qualify, putting 70% down won’t help
(unless you go to a hard money lender)

For some people, it’s never been easier to get a loan.
Having $10 million in the bank doesn’t make it any easier to qualify for many loan programs.

If you make $300,000 a year and only have one credit card and no mortgage loan history, you could have a hard time getting a loan, even with 30% or 40% down.
If you have crappy credit, and can qualify, you can buy with 3.50% down,
If you have good credit and can qualify, you can buy with 3% down.
There are loan limits and different guidelines/costs for various programs.

20% down avoids mortgage insurance, not necessarily easier to get a loan with 20% down.
It’s only ‘easier’ because your payment will be much lower.

I did a refi for an appraiser recently, he’s a great appraiser but confused about mortgages.
Your uncle is wrong. It’s not ‘extremely difficult’ IF you qualify. For many people it’s simple to qualify.
He is correct that FHA is not cheap with mortgage insurance but many people don’t care.
They just want to buy a house and will pay whatever they are told.
If interest rates were higher, many people wouldn’t qualify.

[phaster]

I’m trying to refi a property (to take advantage of rates I’ve been told just dropped)

anyone ever heard of, or had experience with:

https://www.umpquabank.com/locations/california/la-mesa/la-mesa/

[Clifford]

HLS,

How hard would it be for someone who has the following credit profile to get a mortgage (conventional, not jumbo):

– Had a mortgage 10 years ago (currently has no mortgage)
– FICO score ~700
– Has only 2 credit cards
– Has no debt
– %50 down payment

[spdrun]

They’ll still have to take your debt to income into account unless you’re getting a portfolio loan for a non-owner occupied property.

[HLS]

[quote=Clifford]HLS,

How hard would it be for someone who has the following credit profile to get a mortgage (conventional, not jumbo):

– Had a mortgage 10 years ago (currently has no mortgage)
– FICO score ~700
– Has only 2 credit cards
– Has no debt
– %50 down payment[/quote]

Relatively easy as long as you qualify based on income.
You would not want FHA.
Do you qualify for a VA ?
For conventional there are 2 loan limits ($417K & $546K in San Diego County) and 5 down payment tiers for a purchase. (3% 5% 20% 25% and 40%)
There are pricing hits based on credit score bucket AND down payment. It’s a cut & dried matrix table, no exceptions, no excuses, no explanations.

They always use the middle credit score of the 3 bureaus, the highest & lowest are ignored.
If 2 people are needed to qualify, the use the lowest borrower’s middle score.

In many cases this presents a problem, but if a borrower’s income is not needed to qualify I suggest considering only 1 person on the loan, spouse can still be on title which is the ownership part.

Let’s say there are 50 conditions that have to be signed off before a loan is approved.
Nothing gets overlooked because of a higher credit score OR larger down payment.
All 50 conditions need to be signed off.

Having a larger down payment on a purchase (OR more equity on a refi) doesn’t make it any easier to qualify for a loan, other than the fact that your payment is lower.
They DO NOT say “there is 50% equity, we won’t lose money, let’s just fund the loan”
they are not looking to foreclose and there are many obstacles to doing so.

Credit scores generally need to be at least 620 but you will have a higher rate OR cash price to pay to get what someone with a 740+ score will get.

Most people don’t grasp that there is not one rate that fits everybody. In most cases a mid score above 740 gets you the best pricing. It doesn’t make it any easier if your score is 800 or 840.

feel free to contact me privately if you have specific questions.

Approvals don’t care about how much debt you have, they only look at minimum monthly payments on a credit report.
Many people are not aware that they can raise their credit scores relatively easily & quickly.
It seems like your score should be much higher than 700~ but it depends on your history.

Just because someone has 50% down, zero debt, an 800 credit score and $1 million dollars in the bank, it doesn’t mean that they can qualify for a conventional loan.
In many cases it’s easier for someone with 3% down, other debt, no cash other than down payment and a much lower credit score to qualify.
………It’s simply idiotic.

[CA renter]

[quote=HLS]

Just because someone has 50% down, zero debt, an 800 credit score and $1 million dollars in the bank, it doesn’t mean that they can qualify for a conventional loan.
In many cases it’s easier for someone with 3% down, other debt, no cash other than down payment and a much lower credit score to qualify.
………It’s simply idiotic.[/quote]

Wow, that really is idiotic. I didn’t realize that these things (especially large down payment) don’t necessarily make it easier to qualify for a loan. If I were the lender, down payment would be the #1 qualifying factor, followed by debt/income ratios, and then FICO scores.

[spdrun]

Down payment does make it easier to qualify for a loan once you move outside of the domain of conventional lending.

[Author]

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