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Seven Things Your Phoenix Area Agent Should Know About Your Mortgage Approval

While most experienced Phoenix real estate agents have a general understanding of the mortgage approval process, there are a many important details that frequently get overlooked which may cause a purchase to be delayed or denied.

New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary underwriting guidelines, rescission deadlines, the type of home you are purchasing, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.

With today’s volatile lending market, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.

Either way, we’ve listed a few of the top things your agent should keep in mind while showing you new properties:

Caution – Agents Beware:

Property Type –

High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.  Do not assume all criteria are the same.  In fact, they vary from Type to Type.  Be careful!

Residence Type

Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city?  What if I’m buying a home for my children to live in, it is still considered an investment property?  Can I call it a Summer Home?

These are just a few of several possible residence related questions that should be addressed by your agent and loan officer at the initial loan application.

Rates / Locks

Mortgage Rates are typically locked for a 45 day period, and one of the only ways to get a new rate is to switch mortgage lenders.  Rates also have certain adjustments for property / residence type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.  Beware, switching lenders can have a negative effect on your credit score.

A 1% increase in rate could literally mean the difference between an approval or denial.

Headline News / Employment

Underwriters are aware of the ecomic situation in the Phoenix area and are quite in tune with your situation.  Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.

Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.

Be prepared to produce documentation on any type of changes.  The Underwriters mantra is DOCUMENT, DOCUMENT, DOCUMENT!!

Title / Property Flip –

In Maricopa County, AZ, a Flip, or Flipping, is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 90 day period.  Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.

While it seems like a perfectly fair transaction, many lenders, and each lender can vary,  have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.

These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.

Homeowner’s Association Insurance

Some lenders require Condos and Town House communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.  They may also require coverage to cover the interior of the Condo or the Townhome

It may also take a few weeks and cost up to $300, which is non-refundable, to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.

Appraisal Ordering Procedures

Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.  Your real estate agent or loan officer in the Phoenix Metro area no longer can have contact with the appraiser.  This is to ensure an unbiased appraisal.

Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.

VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.

For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.

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October 17, 2012 by · Leave a Comment

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About Patrick

My name is Pat and I have been a member of Signature Home Loans since 1993. I have experience in all facets of the mortgage industry including Manufactured Homes, Conventional, FHA Mortgages, VA Mortgages, Jumbo Loans, Investor Loans, Reverse Mortgages and Second Mortgage Loans.

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