New Rules of Mortgage Lending: Introduction (1 of 5)

Are you thinking about refinancing your home to take advantage of today’s incredibly low interest rates?  Or maybe you’re getting ready to buy your next home?  Well, you’ve probably heard that there have been a lot of changes when it comes to how people are getting approved for a mortgage today. For example: Are you ready to meet the new requirements about documenting your income?  Do you know which documents to have ready? Do you know the new standards about your credit and savings?   Today’s economy has definitely changed the rules for mortgage lending, but even with all the changes, there’s no reason you need to be confused about what it takes to qualify for your next home loan.  

My name is Dave Cary and I’ve been a licensed California mortgage broker since 1993. You know, small matters in your application can make a big difference in how much you pay for a mortgage or even whether you get the loan you want at all. But I’d like to share with you a simple way to make sense of the lending process so that you can feel well prepared and confident the next time you apply for a home loan.  If you’ve been feeling a little more confused than empowered, take a deep breath and relax.  You’re about get an entirely new outlook on how you can secure a hassle-free home mortgage.

Unless you’ve been vacationing on the moon over the last couple of years, you surely know that we’ve all been through plenty of turmoil in the housing market, including a full blown credit and banking crisis. You’ve probably heard that there’s been a lot of changes in how home loans get approved, and you’re right. But if you take the time to watch this short video series, I will show you a simple way to make sense of the mortgage underwriting process so that you can know what to expect upfront, avoid wasted time and energy, and put yourself on the path to getting the loan you want. This video series will also give you an opportunity to see that maybe your ducks are not in order today, but you’ll learn where to focus your energy and attention to get prepared for the future and avoid last minute disappointments.

Let’s start by separating some myths from the facts. With all the drama and negative news reporting about the housing and credit crisis, there’s been plenty of opportunity for misinformation to spread around. Many people have the idea that: banks aren’t lending anymore, banks don’t have any money to lend, or that banks are looking for reasons to deny loans. But the truth is that: There’s plenty of money to lend. Banks must lend money in order to make money. Many home loans are made every day to people who are qualified.
So if there’s plenty of money available and banks are actively lending to qualified applicants, the key question of course is:
“What does it mean to be qualified?”  That is the subject of this video series so please stay tuned!
Now if you’re feeling confused about the new rules and standards in mortgage lending, you are certainly not alone. You or someone close to you may have a story about getting turned down for a request that would have sailed through only a few years ago.

It’s not surprising if you feel confused because we just came out of period of really easy mortgage money.
Let’s call it the Easy Money Party of 2002 to 2007.

During the Easy Money Party, the lending industry basically threw out the rule book and traditional mortgage underwriting standards were largely ignored.
And people pretty much got all the mortgage money they wanted.
Now that the party is over and lenders have sobered up, we have the New Rules of Mortgage Lending.  Because the new rules feel very conservative compared to the easy money party, some people have the idea that banks do not want to lend or aren’t lending at all.  But really we’ve have simply returned to a more normal lending environment based on traditional underwriting standards. You might say that the New Rules are not really new at all…in fact they are the old rules. But for many people, today’s lending environment feels new and different as compared to what it was like and what was required the last time they refinanced or bought a home.

The new rules affect everyone: Whether your loan is $200 thousand or $2 million or more. Even if you have excellent credit. This is not simply a “sub-prime” credit matter. And it is not a temporary phenomenon. It’s worth learning new rules because likely to be with us for quite a while.
So if i do my job here, i hope to demystify the mortgage approval process and help you see the big picture.
What are banks looking for when you request a mortgage loan?  A good way to think of this is to use a simple analogy of a chair.  Chairs come in many shapes and sizes, but they all have four legs. Every chair needs all four legs to stand straight and serve its purpose. Well, like a chair, mortgage loan approvals are based on four legs too. Each leg is an important and necessary component for loan approval. Let’s name the legs, they are: your income, your credit, your savings, and your equity.
Now if a chair has 3 really strong legs, but one leg is really weak or missing, the chair fails. So it is with mortgage applications under the new rules. It simply not enough to have 3 of the 4 legs. It takes all 4 legs to support a chair and it takes all 4 elements to support a mortgage approval today.

The next videos in this series will explore each leg of our chair analogy, one at a time, so that you can understand in plain language, what the banks need to see.

And whether you’re looking to buy a new home or take advantage of today’s incredibly low interest rates by refinancing, you can can feel well prepared and confident the next time you apply for a home loan.

Thanks for watching this first video in the series.  I hope you enjoyed it.  Please feel free to leave a comment or question below.  I’d like to hear what’s on your mind.  In the next video, I’ll show you the key things you need to know about your income when it comes to getting your next home loan.  So click the link for Video #2 and I’ll see you there!

Related posts:

1. New Rules of Mortgage Lending: Income (2 of 5)