Real Estate Trade Secrets

Here are some tips I learned from a seasoned California mortgage banker who successfully funded over 100 loans during the tough transitional 2007 real estate market. These tales from the trenches can prevent your deal from the shrapnel of a loan decline or last minute tighter “prior to document or funding” conditions:

• Most conventional (up to $417k) and non-conforming (Jumbo) loans above $417k require Desktop Underwriting approval
• Conventional secondary financing is very difficult to obtain. A maximum of 90% loan-to-value (LTV) ratio should be relied upon from the buyer
• Jumbo interest rates are currently at least 1.375% higher than conforming loan interest rates
• Secondary “seller carry-back” financing is a great sales tool strategy. In some cases 100% total loan-to-value will be allowed with the first loan at 80% LTV or less
• Beware of “declining market” underwriting guidelines –
  • A 5% reduction on the guideline is required by most lenders, so if the buyer is applying for an 80/10/10 loan, the underwriting guideline would have to meet or exceed 85/15/5 underwriting guidelines
  • Be sure to work out these important details in advance during the loan “pre-approval” stage instead of in the middle of a transaction!
  • All of California is now considered to be in a “declining market”- check with your lender to see how your local market is rated

•  Credit scores of less than 620 will not pass

• Appraisal reports are submitted to underwriting
  • Underwriting runs an Automated Value (AVM) which almost always comes in low
  • Desk/Field appraisal review is then ordered
  • Make sure the appraisal is always signed off by the underwriter within a reasonable amount of time

 One more thing…don’t forget to wear your flack jacket in this ever changing lending environment.