With interest rates still relatively low and home prices favoring buyers, now is a good time for potential homebuyers to get pre-approved for loans, says Elizabeth Kollar, Sr. Vice President Mortgage Lending at Fifth Third Bank.
“Get all your ducks in row and work with your loan officer to get yourself pre-approved so that you can use that as a negotiating tool when placing your bids on homes,” says Kollar, who’s worked with many borrowers in the East Toledo market.
However, some things have changed, according to Kollar:
- Is there now more scrutiny on appraisals and comparable homes than before the collapse in 2007-08?
Yes. The scrutiny behind the collateral is tougher. Appraisers spend more time looking at like-type properties within a six month period that have sold within a short distance to be sure that the value is reflected by the surrounding market. It protects the borrower from purchasing too high and protects the lender from lending on a property for too much money in the event a lender ends up taking the property back. They want to know they can sell it for what is owed.
Condition and safety bear a greater weight on non-government loans as this was usually more of an FHA/VA stipulation. We now look at that for all products. Again, it protects the borrower from buying a house and possibly having large ticket items needing to be fixed before the home is livable or safe. The agencies and lenders see this as allowing borrowers to stabilize their finances and adjust to the new debt structure before having to put on a new roof, for example.
One significant change is that foreclosures and distressed sales are used as market comparables where in the past appraisers might have been able to work around those properties and still adequately support market value. In the recent past and today’s market, those foreclosures, sheriff’s sales and distressed short sales are too prevalent to ignore and in some cases compromise a market value in a given neighborhood.
- How would you compare income verification policies today to what they were before the collapse?
Income requirements are essentially the same, however, the paper trail leaves no room for doubt, gaps, speculation or assumptions. This risk associated with overstating a client’s income is great so we take all precautions to be sure that we are not putting people into loans in which they can’t sustain the payments.
- What are down payment requirements like now compared to the same period?
Not really all that different. There are still zero down loans, but there are less of them and they have tight parameters. You can still do 95/5 loans, 90/10 loans and 85/15 loans. But the credit and ability to repay, including job stability, all come into play.
- How have requirements for mortgage insurance changed?
The requirements have tightened simply in documentation just as the creditor/lender’s has.