The tight credit market has been well documented. Commercial deals are falling apart, large companies are not buying smaller companies and fewer real estate transactions are taking place.
The first step in the home purchase process is to consult a lender to see how much you can afford. This friendly conversation consists of a one-sided interrogation about your work history, financial history, bank balances, familial relations and taxes. At the end of the conversation you will get an indication from the lender about your chances to qualify for a loan. It is a tough environment right now and lenders are understandably cautious.
So let’s assume that this first conversation (pre-qualification) went well. You would then get busy with your Realtor (me!) in finding a new, great place to live. Once this happens (sometimes this takes awhile), a whole new set of deadlines and documents comes into your life. There are application deadlines, appraisal deadlines, loan condition deadlines, inspection deadlines etc. No problem right? As long as the dates are reasonable you are protected (this is where a good agent comes in).
But here is the rub. The dates as we have known them for the last half decade or so are out the window. It takes longer to do everything right now. Last summer the mortgage companies trimmed their staff, lean and mean awaiting the real estate trough. Their prediction was pretty good one over the winter but come spring the interest rates plummeted and a refinancing boom …well boomed. And when it boomed it didn’t take much to clog up the arteries. Then came some real estate transactions. What used to happen in 10 days is now 15 days. Appraisals now have to not only come in but need to be reviewed. A file goes through underwriting not once but up to seven times. Lenders are being careful, very careful and their caution is leading to much angst in making a deal happen on time.
The problem right now is that lenders are making their money right now on refi’s with no specific deadlines and no angry and impatient realtors calling asking about the status of a loan which was sent to underwriting last week. They would rather us go away for a little while, but that would be short sighted now wouldn’t it?