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 2010 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% 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.