Home sales up, but financing complicated
By David Sharos For The Sun November 1, 2012 11:10PM
Updated: December 3, 2012 6:03AM
The surge in home sales during the past few weeks has been welcome news for the real estate community, as well as a sign that the local economy continues to move along.
But home sales more often than not require a loan, and when they do it can still be a complicated process.
Here in Naperville, those connected with the banking industry such as Tom Miers, president of the Naperville Bank and Trust, say that loan applications are indeed on the rise, but that the process is muddled by a number of variables that include those buying new homes versus refinancing and the “highly regulated market.”
“People that are buying are sort of treated as a priority given that they have to secure a mortgage within a certain number of days in order to buy the house,” Miers said. “Those looking to refinance usually take longer and people get frustrated because the value of the home has to be verified and some are not happy with the appraisal. It’s fair to say the time period people may wait with a ‘refi’ is double what it used to be.”
Miers adds that the banking industry as a whole has been through tough times and has faced extreme scrutiny, which means that today “all the I’s have to dotted and the T’s crossed” and that some loans “even seem to require a DNA sample.”
“We might be facing ‘over correction’ after what we’ve been through, but we continue to be highly regulated,” Miers said. “We also are seeing more cash transactions than ever before.”
Credit Unions such as NorthStar Credit are continuing to process loans and may offer more individualized products than banks. Lisa Kleven, vice-president of lending for NorthStar, said regulations have boosted credit score levels making it difficult for some to get loans.
“Today, I think you’re looking at needing a score of 740 or higher and some people have really taken a hit on their credit score because of the economy and having lost a job or from credit card debt,” Kleven said. “Our appraisals and underwriting are still being completed in a timely manner, but some aren’t able to refinance because the value they were hoping for isn’t there.”
Unlike banks who Kleven said have sometimes abandoned the home equity market, NorthStar continues to offer equity products.
“Some banks have really elected to hunker down and not deal with equity loans any more, but we still have good borrower products for our members,” she said.
Wintrust Mortgage in Naperville is enjoying a more balanced market these days with business evenly split between purchases and refinancing deals. Residential loan specialist Dave Buckman said issues today involve greater documentation “based on the rules handed down from Fannie Mae and Freddie Mac” who have been asked by Congress to “reduce exposure and risk.”
“There are no more ‘stated income’ loans where someone could come in and tell you what they made each year and get a loan based on what they said along with their credit rating and assets,” Buckman said. “Today everyone has to show their tax returns from the past two years and their income is determined based on that. It really hurts retired people and those who are self-employed, because legal write offs means the income shown isn’t really what they’re making.”
Recent buyer Bill DeNichols, 55, said he closed on a condo recently in Naperville on Village Green Road and that, in essence, would-be buyers or those looking to refinance better buckle up tight for the ride.
“I’ve bought four other homes here in Naperville and despite buying less house and putting more down than I ever have before, securing this loan was the most difficult of all my loans,” DeNichols said. “The hurdles you had to jump because of the regulations are overly involved. The bank did a great job shielding me from a lot of it, but they’re basically under the gun to satisfy the regulations as well.
“If I had any advice to give people, it would be you better have a clean slate as far as your credit scores go,” DeNichols added. “That and the banks are going to require a lot of documentation.”