Lenders Continue To Tighten Programs

As lenders continue to retreat from losses, many mortgage programs are being rapidly modified or eliminated altogether. What this means is the days of easy qualification for the minimum down buyer are numbered, at least for now. As always, the pendulum swings, and these programs will be back eventually. That's the bad news, the good news is that we still have excellent VA financing and, in targeted areas, we have the USDA rural housing program available, both of these loans offer zero down options. Another change we are seeing is revised requirements for mortgage insurance as a response to present market conditions. Because of the difficulty in obtaining mortgage insurance, one of our lenders just sent out a vendor profile eliminating half of the mortgage insurance companies that they will allow us to utilize and some other lenders have eliminated the use of mortgage insurance completely.

Watch for rapid changes as lenders drastically tighten standards for loans on condominiums. Some lenders have withdrawn from the condo market and others, as a response to losses, are moving to a much more conservative position concerning their loans on condominiums. As an example of these revised condo standards, many lenders are now requiring that at least 90% of the total units have been sold and recorded and control of the HOA has been turned over to the unit owners and the project or conversion is complete and not subject to additional phasing or annexation. In the past we could often obtain exceptions to these items but not so anymore. In addition to these changes, we are seeing tightened credit standards including loan-to-value restrictions not to exceed 80% for primary residence or 75% LTV for second homes. As always, there can be no litigation pending within a project or HOA and no more than 15% of the units may be delinquent on their HOA dues for more than 30 days. Some of these requirements are not new, but flexibility has gone away.

This blog was written by Brian Leavitt, a Licensed Real Estate Broker and Licensed Mortgage Broker representing Northstone Real Estate Inc, and Northstone Mortgage.

Brian serves clients within the Northwest Multiple Listing Service.

You can contact Brian directly by phone at 800-806-3145 or by email at brian@northstone.net. Click here to view his client newsletter.

Brian is licensed with the Washington State Department of Licensing and the Washington State Department of Financial Institutions License number 510-MB-19802 and is a member of the Seattle King County Association of Realtors and Northwest Multiple Listing Service.