• No matter what is being said in the popular media and especially CNBC, credit access for the mortgage markets is not getting better. Guidelines are tightening.
These are just a few of the recent changes for some of our lenders (please note that each change does not necessarily apply to all of the lenders we use):
1. Elimination of lending to partnerships, S-corps, LLCs or life estates;
2. One lender has stopped lending in California all together.
3. Maximum of 4 properties besides the primary residence (still, only one primary residence is allowed).
4. The security instrument or Deed of Trust here in Virginia, requires a pledge to use property as a primary residence within 60 days of purchase and “occupy the property as their primary residence for at least one year after the date of occupancy.”
5. Borrowers are permitted to have only one second home.
6. If rental income from the subject property is used to qualify, the following requirements must be met:
Landlord History: Borrower must have a two-year history of managing rental properties. Two years tax returns are required for verification.
Rent Loss Insurance: Property must have a minimum coverage of six months rent loss insurance.
(with certain income strength we can get these requirements waived)
7. One lender has a max 70% LTV for investor 30 year fixed rate mortgages.
8. The applicant’s income must be reasonably expected to continue for at least the next three years.
9. An IRS-4506-T must be signed on all files. This gives the lender the ability to request copies of your tax returns directly from the IRS.
10. Handwritten pay stubs or W-2s are no longer acceptable.
11. Lottery winnings are still acceptable as income as long as you expect to receive it for another 3 years and did not receive a lump sum payment.
12. For a self employed individual a profit and loss’s income can be used for generating income history as long as it accompanies audited financials for at least one year and is consistent with that prior year.
Not a lot has changed but it is still changing and it is getting tighter – not less restrictive.
And yet, with all that, Risk-taking is back for banks 1 year after crisis. So the risks are being taken, just not with mortgage origination.