MORE BORROWERS BEING REJECTED FOR LOANS
HOME LOANS, TIPS FOR BUYERS, TIPS FOR SELLERS
January 25th, 2009
For many months I have blogged about the need for homeowners and buyers to get their financial house in order before applying for a loan or refinance. An article in Friday’s Washington Post cited anecdotal evidence that the rate of turn-downs has increased significantly from the last refi boom. In response, increasing numbers of borrowers are applying to more than one lender simultaneously. According to the article written by Dina Elboghdady only about half of the borrowers applying for a loan are being approved.
In response, she states “a growing number of borrowers are applying to more than one lender to increase chances of getting approved for refinancing.” The surge in refinancing has been ignited by falling interest rates. In previous refi booms, 60-70% of borrowers were approved. Rates for a 30-year fixed rate loan average 4.96%, down from 5.96% a year ago.
The obstacles for borrowers are poor credit scores, lack of sufficient equity and tightened loan underwriting standards. In fact, according to the article, a recent study by Inside Mortgage Finance found that loans sold to Fannie Mae had an average credit score of 748 out of a possible 850.
This strategy employed by borrowers is referred to as “double-apping” according to Christopher Cruise of GOTeHomeLoans.com. Lenders usually discover this when they pull the buyers credit report and see a credit inquiry from a competitor. Lenders frown upon this practice because they diligently process the loan only to find out later the client secured financing from someone else. Adding insult to injury, the lender loses money “when they lose a loan they have already locked in with investors.”
Lenders are trying to regain control by charging upfront application fees to discourage borrowers from jumping ship. These fees can be as high as $500 and some tack on an appraisal fee from $350-$450. Borrowers are pitting lenders against each other to negotiate the lowest rate and fees possible. This is overwhelming lenders that lost loan processors due to layoffs during the slowdown the last couple of years.
Search my past posts for tips to improve your credit if you are considering a purchase or refinance. Or better yet, email or give me a call. I’m here to help!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
