Remember the days of no document loans and other exotic lending practices. To review, you could purchase a home without providing any financial information. Stated income! Not anymore of course! Recently, I had coffee with a mortgage broker and we discussed some of those programs. To be honest, no document loans really got a bad rap. It was a good loan program for the self employed individual who had many deductions that they couldn’t “show” much income. Financially, they could perhaps purchase the home but their tax returns (numerous deductions and depreciation) told a different story. A key with no document loans was the borrower had to have an 800 credit score. In theory, somebody with that high of a credit score must be a worthy borrower. Unfortunately, some in the industry put people into homes knowing they could not afford them. Abuses and greed ruined an otherwise beneficial program for the self employed borrower.
Today, there is so much regulation and tedious paperwork it’s difficult for many to get a mortgage. Transactions where borrowers are asked for a copy of their masters degree, multiple appraisals needed on the same home, to sellers being required to pay for an appraisal on their own home. Very intrusive, everybody is fearful. I was talking with a veteran real estate agent last week. According to him, contract to close used to take no longer then 2-3 weeks. Today, closer to 45 days!