Monday, October 10, 2011

Mortgage Woes

There has been a lot of talk about how low mortgage rates are today--the lowest in memory--but much less talk about how hard they are to get approved.  We have found that buyers may wait for weeks with promises of commitment, only to be told after a long period of time that they are being denied.  The annoying part--actually, make that one annoying part--is that the denial is frequently for something that you would have thought that the bank had known all along.  This is true of delays as well.  We have had closings delayed multiple times, with some delays being for things that should have been settled well in advance. 

I suspect that some of the problem lies in confusion at the banks, and probably understaffing.  The bigger issue may be that no one has the authority to pull the trigger on anything, so things have to wend their way up a ladder of approvals.  Just to be clear, all of the blame does not belong with the banks.  Governmental changes in policy have caused all kinds of changes, and sometimes at the last minute.  The feds are always trying to protect us against the last problem, so many of the rules seem largely unnecessary.  This is one of the situations where we can groan when we hear that "we're from the government, and we're here to help you."

Buyers can contribute to the delays also.  Anyone who has gotten a loan in prior years may be amazed at how much information is demanded on today's applications.  Some people waste time trying to argue their way out of requirements.  Since most are imposed on the banks, as opposed to by the banks, this is a delay not worth taking.  The one I hear frequently is this:  "I don't need to get a loan.  I could pay cash.  If they just look at my bank balance, they won't ask for all this paperwork."  Not true.  Get over it, or go ahead and pay cash.

The statistics from the CT Multiple Listing Service show closing times of around 60 days.  That's not so far from the 30 to 45 days of the past, but should be noted, especially as almost 40% of sales are for cash these days, and therefore have no delays.  The time frames may get worse as we near the holiday season, so plan ahead to avoid disappointment.