Today’s Lending Climate

A panel of lenders spoke to our local Realtors last week.
Their message to REALTORS®: Right now, it’s a buyer’s market and a good time to buy a home, but make sure your clients have good credit, act fast and get pre-qualified and pre-approved for a loan, and fully complete all the required documents immediately. They advised that if we have clients waiting for some magic interest rate to appear, they may be waiting a long time. Locating financing can be very difficult right now, especially for borrowers interested in jumbo loans. Clients need to be diligent with financing because lenders are unpredictable and can change policies and requirements at short notice. They said that getting financing in place and fixing the interest rate can be an inflation hedger, as once the economy improves, we could face inflation.
FHA loans have become a useful tool, even in high-priced Silicon Valley. The FHA loan option has more requirements, could even require two appraisals, but it’s worth looking into since it allows extremely liberal gift financing (no limit on money gifts from relatives) and a lower credit score (620 is considered acceptable). But the FHA loan process can also be difficult to work with and may require extra time.
55 percent of closings in the state of California these days are FHA loans.
While it may be a difficult lending climate, there are tools available for borrowers. They advised REALTORS® to have their clients start the lending process early, get pre-approved, lock in the interest rate, have all documents in place and have legible copies of contracts. Any question will cause a delay in closing or could even result in a buyer losing the opportunity to get the loan in time.
As for buyers currently sitting on the fence, waiting for prices to hit bottom, the panel advised REALTORS® to make their clients aware that now is a good time to buy a home, while buyers are in the driver’s seat and can negotiate. And while no one can predict when prices hit bottom, once that happens, roles will change and sellers will have lots more control.