The recession has made difficult things even harder.
Here are three things in the mortgage market that have been altered by the financial crisis:
Jumbo No More
Before: Mortgage lenders offered lower rates for jumbo loans. Borrowers qualified easily without having to submit to stringent rules from community banks.
After: Qualification has turned much harder even for those with credit scores above 620. Banks usually require more cash on hand aside from the percentage of the loan in the form of reserves. Jumbo loans have increased their gap against conventional loans in terms of their borrowing costs too.
No Salary Documentation, We’ll Trash the Application:
Before: Borrowers, who are self-employed, can qualify for a loan even with no formal salary records. Through the no-documentation provision, lenders had more borrowers obtain loans even with the risk associated from the lack of solid proof.
After: Almost all lenders have headed the call for more severe rules in lending. Qualified borrowers are some of the casualties who cannot come up with salary documentation. In the end, they are forced to wait until this complication is resolved.
From 30 to 90
Before: The subprime borrowing has allowed even risky borrowers to secure loans, it cannot be denied that lenders verified applications even before the traditional 30-day processing.
After: In a good way, banks have lengthened the processing time for mortgage applications. However, some are reportedly deliberately delaying the approval of loans in order to refuse locking in low rates and thus gain from the anticipated hike in mortgage rates.