I wandered the aisles at the supermarket last evening trying to come up with a last- minute dinner plan and finally stopped at the meat counter looking for inspiration. (Admittedly, "last-minute plans" typically aren't the best way to proceed.)
"Can I help you?" the butcher politely asked.
"Yes," I smartly replied. "You can come home with me and cook dinner!"
Left to my own devices, I would rather have popcorn, so I'm truly in awe of my friends who cannot only cook with ease, but can whip up a sauce and literally throw dinner together with little more than a chicken breast and whatever is available in their well-stocked pantries. (As if!) For me,"DINNER" is a four-letter word.
Still, I can't exactly argue with any meal that provides my family the opportunity to reconnect,if only for a few moments each day. Every parent can attest to the fact that as our children age, they are home less often, lured away by friends, sports, practices, part-time jobs, and school activities (usually in that order).
So while I don't entirely disagree with the concept of "dinner" per se, I'll be the first to confess that I'd rather do without. In fact, when it comes to dinners, I find the whole process nearly overwhelming. (What's so wrong with waffles for dinner?)
Unfortunately "overwhelmed" is the word most often used by many home Buyers facing the gauntlet of purchasing in today's current climate. Not only will Buyers be competing in what is certainly the most aggressive marketplace in more than a decade, they'll very likely need to establish credit as well. (And you thought finding the house was challenging.)
While lending institutions have certainly rebounded from the startling 2008 meltdown, the lending requirements post 2008 have remained incredibly restrictive at best, leaving many to wonder, "where do I begin?" (At the beginning, of course!)
So here's the skinny . . .
There's money to be had and at historically low-interest rates to be sure, but unless your credit history is well established, your FICO scores are above reproach, you have ample assets for the down payment, AND you can trace your income to the penny, you may find that borrowing the necessary funds is a bit of an uphill battle - especially if it's JUMBO dollars you seek. ("Jumbo loans" are defined as loans greater than $625,500.) And by "an uphill battle," what I really mean is: "a pain in the you know what!"
That isn't to say that banks don't want your business (they do) and to be fair, most loan officers are exceptionally good at their trade, but when seeking a loan, DO be prepared to turn over your entire financial history - and your first born as well. (You've probably got one you wouldn't mind trading anyway.) All kidding aside, with the exception of a root canal, there may be nothing quite as probing as applying for a loan - OR more painful.
"Julie, we'll need your and Cliff's last two year's tax returns," my loan officer requested. "A W-2 from your employers, a Profit & Loss Statement from each of you, your retirement accounts, your financial portfolio, signed affidavits, these 15 forms filled out right away, and oh, can you please explain that $30 mystery deposit from six months ago? (Uh, no I can't.)
Holy smokes, Batman!
My best advice? Select your lender as carefully as you choose your Realtor (I have some excellent recommendations) and then follow their orders and supply the documents they require in order to supply the necessary funds. (Remember, they are actually on your side.) Nobody wants to make your life miserable, but make no mistake, you'll EARN every dollar you request. Once more, without a pre-approval letter you won't even be in the game should you find the dream home you seek. In this market, you absolutely need a reliable lender, so don't put this off.
But why make it so tough?
That's an excellent question. The reality is that lenders have strict guidelines they must adhere to - especially in the wake of 2008 - and to be fair, all this paperwork and inconvenience IS having the intended effect of protecting the final investment . . . the equity in your home. Thus, those who DO qualify are far more likely to actually pay back their loans, and that (coupled with plethora of "ALL CASH" purchases) means we are far less likely to see the flood of foreclosures and dramatic value drops the market experienced not so very long ago. (Oh, that makes sense and 'cents.'.)
Moreover, because jumbo loans aren't government backed (as are conventional loans) each lender may have a different set of criteria to be met before final approval is granted. In other words, acquiring a jumbo loan can be bit of a moving target.
To further complicate the equation, where one institution will easily grant an exception, another will turn you down flat. (Ouch.) Finally, because underwriters are actual human beings (at least that's what they tell us) the underwriters themselves will ultimately judge the credit worthiness of an applicant, meaning that even within the same institution, each individual underwriter may have their own unique set of rules.
Oh brother! (I couldn't agree more.)
Like all things, the list of requests are best met by putting one foot in front of the other. (Not by exasperation; I tried that and it doesn't work, believe me.) With rates hovering between 3.625 and 4.250, it's well worth your time and energy to dig through your files. With pre-approval in hand, you'll be ready to attack the market with vigor AND you'll be in a position to win.
As a bonus, you may be so busy rifling through last year's bank statements, you'll have to order in pizza. (Finally, the silver lining!)
How can I help you?
(P.S. -You can follow my ongoing renovation on my new Blog: Renovation Riptide. I invite your comments and stories. )
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.