Wednesday, January 7, 2009

Lending Guidelines in the Age of Subprime Fallout

LENDERS AND LOANS IN THE AGE OF THE SUB-PRIME FALLOUT

Apparently there are plenty of rumors going around with respect to what it takes to finance a mountain property purchase. We talked with Darlena Marmins, of Colorado State Bank and Trust, one of Landmark’s preferred lenders, to set the record straight on financing Summit County real estate.

Recently Darlena gave us advice on current lending conditions to give us good solid information and try to dispel some of the negative rumors that have been spreading about lending. It is still possible to get a loan!

Some of the more important areas that need addressed are down payment, credit scores, condos, and stated income.

DOWN PAYMENTS

Down payments require the following minimums: For primary residences, a 3.5% down payment is required for FHA financing and 5% for conventional financing. With some lenders, second home purchases require a 15% down payment but 20% is preferred. However we have a client who is doing an 80-10-10 right now. Investment property requires a 20% down payment, but again there are many varied options.

CREDIT SCORES

All non-conforming loans, or loans over $417,000, require a minimum credit score of 680.

Interest rates on conforming loans, those under $417,000, are now tied to credit scores and buyers will receive the best rate available if they have a score of 740 or better.

Summit County conforming loan limits were raised to $729,750 for 2008 and while the limit has not been set for 2009, it is rumored to be around $625,000. However, these higher loan limits do not necessarily translate into the same rates as if the loan is under $417,000, i.e. conforming.

CONDOS:

In Summit County, some lenders have been having difficulties lending on some condos because lenders are considering them “condotels” and therefore they do not conform to underwriting guidelines. Darlena says that her company still lends on normal Summit County condos. Her suggestion is try to remember the old definition of condo, (no maid service, no front desk, and no required rental pool). However if you’ve found your perfect mountain property and it is a condotel, that doesn’t mean you can’t get a loan, it just won’t be a traditional one. There are always options.

STATED INCOME

This dinosaur doesn’t exist anymore. Expect to provide all relevant documentation - tax returns, bank statements, etc.

When exploring lending options, remember that today’s rules may be obsolete tomorrow, and you really need to talk to a professional, and the ideal situation is to use someone extremely familiar and experienced with Summit County real estate. If you have questions, or want to explore obtaining a loan for a mountain property, please contact us at Landmark Real Estate Group or Darlena Marmins at Colorado State Bank and Trust at 970-668-2200.
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