Sometimes, when I sit down to write my column, I struggle to find a topic that I’d like to write about. Other times, like today, I have a clear idea of what I’d like to say.
For the most part, I love what I do. I enjoy meeting and working with my clients, and there is something to learn every day. Many days I come across a new product or lender, changing guidelines that offer better solutions for my clients or ways to enhance my process.
The last few months have been challenging for everyone in the mortgage world. With rates continuing to rise and no noticeable drop in housing prices, many clients are finding it tough to qualify to purchase a home. More troubling for me is seeing more families struggling to make ends meet.
I feel like many lenders are hunkering down and tightening their belts. Some are running short-handed or operating with many new staff members who are trying to learn the ropes.
Over the last few weeks, I’ve had conversations with two of my favourite lenders about changes behind the scenes.
On overall strong files (not high-ratio insured files) there are lenders that will consider exceptions if the numbers are not where they need to be. What that means is that in cases where clients have significant equity in their home and a clean credit history, these lenders will allow the numbers to go a little higher than their published guidelines.
Over the last few weeks both of these lenders have had policy changes limiting the exceptions they can ask for and approve.
Files I would have been confident submitting even two or three months ago are now being declined if the ratios are out of line. I understand the logic, these files are a higher risk to the lender. However, particularly with refinances, the new mortgage payment will actually put the clients in a far better position with respect to cash flow.
Equally frustrating, it feels like lenders are becoming even more particular with their document requests. As an example, specialty programs designed to provide solutions for high net worth clients require every document you can imagine, plus a pint of blood. (The pint of blood was not really asked for, although I did have one client comment who figured a full cavity search was coming next.)
Being the intermediary between a client who doesn’t want to provide any more information and a lender that requires it is a balancing act. I understand how clients can feel the document requests are over the top and intrusive.
Putting myself in the lender’s position, I understand why they want to be confident in their clients before handing over mortgage funds. They have no interest in foreclosing on properties – their income comes from collecting interest on their mortgage funds.
When I start working with clients, I do my best to explain how particular lenders can be with respect to the documents they ask for. I find it very frustrating to have to explain and justify what we are asking for.
The other challenge with staffing levels at certain lenders is it can take them four or five days to review and sign off on documentation submitted. There are some lenders that are easier to work with in terms of documentation, but the tradeoff can be higher rates or slower turnaround time.
The mortgage world is certainly challenging right now but the positive news is lenders are constantly looking for better options for their clients.
My suggestion is to have all of your paperwork organized and a mortgage pre-qualification in place well before you move forward with writing an offer to purchase a home. Take your time and educate yourself as much as you can.
Choose a mortgage professional who is able to help educate and support you as you navigate your mortgage application.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.