Getting a mortgage is a complicated process, but now there are constant changes to the lending requirements. NY1's Real Estate reporter Jill Urban filed the following report.
Getting a mortgage is a complicated process, but with the constant changes to the lending requirements, many buyers are left with misconceptions.
"Banks are imposing many rules and restrictions that weren’t in place before," says real estate attorney Ron Gitter, a founder of CoopAndCondo.com. "As a result, borrowers need to do as much due diligence on the bank as the bank does on them."
With a mortgage, a good rate is not the most important thing. Buyers need to do their homework to find the bank that best suits you and the building you are looking in.
Gitter and Jason Auerbach of First Choice Bank say many buyers make assumptions about the process that are inaccurate and could cost them the deal. For example, many think a the commitment letter is a guarantee, but its not.
"Loan commitments aren’t what they used to be," says Gitter. "In the old days, once you had a satisfactory appraisal, you were on the way to the closing table. Today, loan commitments have so many conditions attached to them that the borrower has to make sure they are able to satisfy those conditions in order to obtain the loan."
Gitter advises buyers to include a financing contingency in the contract, so they are protected if the bank does not follow through.
Also, many borrowers do not realize that while they may be the perfect a candidate for a loan, the building may not be.
"What do the financials look like? Do they qualify for the bank? Also, does the bank continue to lend in that building?" says Auerbach. "For example, if you are in a 40-unit building and that bank is already lending to 10 units, that bank may not be willing to lend any more."
Most lenders judge a building based on Fannie Mae guidelines. If a building a buyer is looking at does not qualify under those guidelines, the buyer will have to look for a portfolio lender, which is a bank does not sell to Fannie Mae.
Also, find out what appraisers a bank uses, because an inaccurate appraisal can often kill a deal.
"Make sure the appraisers they work with know the marketplace," says Auerbach. "You don’t need somebody coming from outside New York City and asking what does this coop looks like?"
To learn about some other mortgage misconceptions, visit coopandcondo.com.