What does the mess in the mortgage market mean to me?

I've had several buyers recently ask me about the mess in the mortgage market. With lenders shutting their doors right and left, and the media dogging us with constant doom and gloom on the subject, it's a fair question. How does this affect me?

Well, for the Realtor, the answer is simple...Now is the time to get even more proactive. As a buyer's agent, make sure your clients have a recent pre-approval. My preferred lenders are telling me that loan programs are changing on a daily basis now. Where they were getting program updates weekly, things are changing so quickly, it is quite difficult to keep up with them now. Talk to your buyer and their lender (make sure it's a reputable one!) about the loan programs they are considering...do they have money down? how's their debt/income ratio? credit score? You certainly don't want to spend weeks driving clients around only to find that they are no longer approved for a loan. Talk early and often to them about financing.

As a listing agent, check in with the selling agent and buyer's lender with the same questions. Is the file out of underwriting? Is their loan locked? I had a client that settled last week whose lender told me that if they would have locked 3 days later, she would have needed an additional 5% down because the bank eliminated the loan program she was using. Make sure the deal is solid before accepting a contract and follow up religiously through settlement.

As a buyer, how does the mortgage market mess affect you? Well, it depends on your financial situation. Do you have money to put down? How is your credit history? What type of employment do you have? It is becoming harder and harder to do 100% financing, especially for jumbo loans (anything over $417K), which is most of the DC Metro market. Stated loans (or "liar loans" as they are so affectionately referred to as) are also going away. More and more documentation is being required and loan guidelines are getting more strict. It is now more important than ever to make sure your credit is in the best shape possible.

And as a seller? Unfortunately, the tightening of loan guidelines means that there are less eligible buyers out there right now. Make sure your listing agent is heavily scrutinizing any offers that come in and following up with lenders to check the status of loans.