My wife and I close on a house here today. It is our fourth house--we bought two in Madison, and one in Washington, and then one here in LA.
The first three houses were a piece of cake to buy; this one was a lot harder. In the process of doing it, I think I spoke with half a dozen lenders, including CNB, the bank that is funding the mortgage. The experience included:
(1) a broker who tried to get my business by trashing his competitors
(2) a broker who dangled an impossibly low interest rate loan from a lender whose balance sheet is in such bad condition, it is likely not able to make loans anymore
(3) a bank that told me that investors are not much interested in California
(4) lenders are reluctant to count any income beyond salary income for underwriting purposes.
The last point is almost certainly true, as rates on California mortgages seem to be about 50 bp higher than in other parts of the country.
In the end, CNB was quite professional, but I have to say that the level of scrutiny--particularly with respect to the appraisal--was mich higher than I had ever experienced before. Perhaps in general this is a good thing. But if conditions remain this way, potential homebuyers are going to have to understand the need to keep excellent documentation about their income (keep those W-2s!) and buyers and sellers are going to need to understand that transactions will take longer than it did a couple of years ago. And to get the housing market unstuck, lenders are going to have to think about how to underwrite self-employed people, rather than just rejecting them.
Prof,
ReplyDeleteDid you try either an "upfront mortgage lender (UML) or upfront mortgage broker (UMB)?
It would be interesting to hear your impression if so.
It was important to make sure that California efforts to reform the mortgage market are consistent with the current federal efforts to regulate subprime loans. New federal rules have been proposed and will likely become effective this summer. These rules will apply to all lenders, whether they are organized under state or federal law. Any laws passed in California that conflict with federal law would only serve to promote litigation and drive lending prices in California much higher than they are today.
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rodney
California DUI
I'm sorry about all the trouble you had in dealing with your fourth purchase. Did you ever consider looking online for a California mortgage rate? I know quite a few people who have found some really good rates that way. Maybe next time?
ReplyDeleteThanks for such a detailed process though, that's bound to help anyone in a situation like yours.
Best regards,
Jack
Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness.
ReplyDeleteMake sure to know the state of your finances before contacting your lender. Determine how much income you're bringing in each month, how much you're paying in bills and where you can cut costs. Just a tip!
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