According to All Western Mortgage marketing manager Derrick Strauss, even some of the nation’s most well-heeled homebuyers are facing challenges buying property in a post-recession economy, despite slightly loosened credit requirements and ample liquid assets.
It seems a little backwards, says Derrick Strauss, but wealthy homebuyers may face some of the biggest hurdles in a post-recession economy. The problem is not their ability to pay for mortgage but the lack of a steady income. According to Derrick Strauss, many of the country’s richest residents are being denied mortgages—often for second homes or vacation properties—because they have no annual income statement.
Derrick Strauss points out that those with plenty of resources can usually qualify for a first mortgage without problem. However, most banks want to see an income and put very little weight on reserved funds.
Property appraisals questioned
Another problem with wealthy buyers is that they tend to purchase expensive properties, says Derrick Strauss. While in the past banks welcomed these high-value homes with open arms, they have learned their lesson with the foreclosures of countless overvalued properties. Property appraisers today are subject to strict oversight by lending agencies. Historically, luxury homes had few comparable properties to assess against, leaving their value open to interpretation. Derrick Strauss says that banks are no longer willing to accept a property’s assessed value without plenty of data to back it up.
Banks beginning to thaw lending freeze
After the housing bubble burst in 2008, banks seemed to stop lending, recalls Derrick Strauss. As the market regains its footing, some lending institutes have begun closing loans once again, instilling confidence in buyers and sellers alike. Wealthy borrowers, points out Derrick Strauss, have seen the most benefit from the slightly less stringent requirements, but first-time homebuyers and those with moderate incomes may still have a rocky road to home ownership.
Derrick Strauss does point out that most banks and financial institutes have eliminated interest-only and no-documentation loans, which were considered major culprits in the overactive foreclosure market.
Bad loans still filtering through market
Though the foreclosures have slacked a bit in the last year, Derrick Strauss says there are still plenty of bad loans for lenders to focus on. Many properties are still in litigation or sit vacant as a testament to long-term irresponsible lending practices. Derrick Strauss points to the high profile case of Teresa and Joe Giudice of TV’s Real Housewives of New Jersey. The couple, despite adequate finances today, was recently charged with data tampering on home mortgage paperwork dating back more than 10 years. This goes to show that banks are trying to make right the wrongs that led to the crash, says Derrick Strauss.
Shopping around an option
Like any major marketplace, Derrick Strauss points out that the mortgage lending industry is a competitive one. Derrick Strauss explains that one mortgage lender’s requirements may be different than another’s and encourages all potential homebuyers to shop numerous providers to find the right mortgage for their situation.