Lending Tips to get you the best Loan

I’m a lender. (Said with the same cringe a lawyer feels when he says “I’m a lawyer”.) In the joke department, lawyer jokes vs. lender jokes, lawyers have us beat. Same stigma though. Nobody likes us, but sooner or later, everybody needs us. Like a lawyer, my job is to represent you and bring you to the best possible outcome. Although I present you before an underwriter instead of a judge, a judgment is made just the same. The judgment, is your willingness and ability to pay.

Like a lawyer, I’m most effective when I know every fact and nuance about your situation. Once I do, I’ll find the program offering the best legal avenue for you to obtain financing. What’s that? Oh, you noticed the word “legal”? Ahhh.. Good. Glad you’re paying attention, because the investors are. They weren’t before, but they are now.

Real estate, as all markets do, is taking a breather. Nothing goes up forever. Remember the “Tech Bubble”? Same church, different pew. Just like people who loaded up on “Pets.com”, there are lots of people looking for chairs now that the music has stopped. As with the Nasdaq, the people hurt most in real estate were the ones who were out of their depth in the first place, playing a game they didn’t understand and avoiding the sound financial principles of decision making. Same old feeding frenzy. Frustrated at watching “everybody else” making money, they take the leap, over-extending themselves to get in on the action. Encouraged by realtors and, dare I say, even by some lenders who care only about closing the transaction, they’ll use light documentation or “no doc” loans to fudge a little (or a lot) on their income, or get an ARM with a “teaser rate” that turns really ugly at some point in the distant (or near) future. Using maximum leverage, they’ll finance as much as possible, putting as little of their own money as they can into the purchase. Why? To buy more house than they can afford, thinking they’ll make a big profit when they sell it. Oops.. No buyers? Bummer. Can’t afford it? Too Bad..

And while the last ones in are usually the ones left holding the bag, the catch is, the real owners of the collateral emerge when foreclosure occurs. Meet the investors, Fannie Mae and Freddie Mac and they don’t want to hold the bag. The recent, massive waive of foreclosures resulting from abuse of light documentation loans has caused credit guidelines and verification procedures to tighten dramatically. The resulting mantra? What used to be shrugged off by some realtors and lenders as “bending the rules to get the deal done”, is now being accurately viewed as “Loan Fraud” and they don’t think it’s funny. They will prosecute.

The best loan is the one that can’t get you into trouble. How do you get the best loan? Don’t lie on your loan application. Be honest with your lender and you won’t need a lawyer.