Following the credit crisis of August 2007, many mortgage lenders closed down. Those that are left have cut their staff due to low demand for mortgages. Also, it’s now necessary to actually qualify financially for a home mortgage. This adds time to the loan approval and funding process.

For most mortgages, home buyers are now required to have good credit. They need to provide verification of employment (W-2s or tax returns), verification of the funds needed to close (down payment and closing costs) and verification of reserve funds.

If the funds haven’t been sitting in your bank account for a few months, some lenders require proof of where the money came from. Be prepared to provide brokerage statements, and any other supporting documentation that will validate you as a bona fide borrower. Buyers who own other real estate will need to provide even more documentation.

HOUSE HUNTING TIP: It’s a good idea to start pulling together all of your financial documents as soon as you’re serious about buying a home. Ideally, the paperwork required by the lender should be forwarded to your loan agent or mortgage broker within a couple of days of contract acceptance. You can’t wait until the last minute to provide the lenders what they need and expect to close on time.

Before you write an offer, check with your mortgage person to find out how long it will take to process and fund the mortgage. Some lenders are taking 35 to 40 days from acceptance. So, you wouldn’t want to commit to a 30-day closing, if this is the case. Make sure that you allow sufficient time in your contract for the appraisal and formal lender underwriting approval. This could take two to three weeks, depending on the lender and on how diligent you are about supplying the documentation.

Your lender or mortgage broker will order the appraisal of the home you’re buying. It should be ordered as soon as possible. If you end up not buying the house, you might owe an appraisal fee. However, waiting to order the appraisal could cost you time.

Many lenders require a review appraisal, which is a second appraisal to confirm that the first one is accurate in terms of market value. Ideally, this should be done before you remove your appraisal contingency. If it can’t be done within that time frame, ask the seller for an extension.

Before August 2007, it was common practice for lenders to prepare the mortgage documents for the buyers to sign even though all underwriting conditions had not been met. For instance, the lender might have needed proof that you paid a charge-card account down to a zero balance.

Today, many lenders won’t issue the mortgage documents until all of the pre-funding conditions have been met. So, you need to be prepared to provide additional documentation that the lender might request, even if it’s at the last minute.

Work with a good loan agent or mortgage broker who will help keep you on track throughout the process. And, as outrageous as the lender’s requests might seem, don’t let it get to you.

Lenders have a lot of due diligence work to do to restore their credibility with investors. The housing market is dependent on investors buying mortgages so that buyers can buy homes.

THE CLOSING: Properly qualifying buyers for mortgages is long overdue.

For the storms to pass…

Its about learning

How to dance in the rain…

Needless to say, you need to work with the best real estate professionals you can find in your area. In most cases, it takes a team effort to put a home-sale transaction together and see it through to fruition.

HOUSE HUNTING TIP: Successful negotiations usually require give and take by both parties. It has been said that the sign of a successful negotiation is one where both parties walk away feeling they have won. It has also been said that the key to a mutually acceptable agreement is that both sides feel a little wounded.

A must in this market is a commitment to exhaust all possible ways to put and keep a deal together before calling it quits. Recently, it looked like a purchase contract was about to fall apart. The buyers had originally offered a price that seemed insultingly low to the seller.

The seller set his personal feelings about the price aside and countered the buyers’ offer at a price he felt was reasonable. The buyers accepted. As it turned out, the price was one that was halfway between the seller’s list price and the price the buyers offered. Splitting the difference is often a winning strategy.

The house in question had been well inspected before the buyers entered into contract to buy it. However, when it came time for the buyers to remove their inspection contingency, they requested a large monetary credit from the seller. Not only did the buyers discover a few health and safety issues that weren’t covered in the previous reports, they also developed a serious case of cold feet.

These buyers were able to find jumbo financing at a good interest rate. However, to obtain this financing, they had to make a larger cash down payment than anticipated. This left them feeling cash-strapped.

The seller refused to credit the buyers the amount of money they requested. However, he was willing to credit some money. Or, he would carry a second mortgage for the buyers so that they didn’t have to put so much cash down.

Flexibility gives the parties to a negotiation a way to explore options for making a deal or for keeping one moving forward. In order for the buyers in this case to feel comfortable closing the sale, they needed a concession from the seller in order to ease their financial strain. By offering to carry a second mortgage against the property, the seller found a way to free up more cash for the buyer.

As it turned out, the buyers elected not to take the seller-financing offer and accepted a monetary credit at closing.

Credits at closing require approval by the buyers’ lender. Most lenders have limits on how much money a seller can credit a buyer at closing. It is often equal to 3 percent of the purchase price, but cannot exceed the actual amount of the buyers’ nonrecurring closing costs. These are costs paid for the buyers on a one-time-only basis at closing, such as title insurance or a transfer tax.

A seller carry-back would also need lender approval. The lender in first position would want to ensure that the terms of the second mortgage were reasonable and would not be likely to put the buyers in financial jeopardy.

THE CLOSING: Sellers should carefully consider whether it makes good financial sense to carry financing for a buyer who is making a relatively small cash down payment.