The candid truth about who can get a mortgage for Las Vegas real estate, and some things you may not know.
I have a friend who works as a loan officer for a pretty big mortgage lender in Las Vegas. He called me today to ask me what I wanted for my birthday (yes, today is my 41st). I answered “dinner with Jennifer Anniston”. Then I said, “As long as we’re being honest, tell me what is happening in the mortgage industry. Who is getting loans right now?”
Here is what he said –
“The optimal person who is getting a loan right now is a person who does not own a house, (then he added) of course you know, everything is full doc1. There is not one stated income2 program around. If someone is calling a program ‘stated’, they’re lying. FHA loans have gone from 5% of our total pipeline3 to 50% of our total pipeline over the last year. A lot of buyers are going to FHA [loans] even though they have great credit scores or whatever, just because they are easier to close than conventional loans and you only need to have 3 1/2% down. If you have 20% down on a conventional loan, they’re lending on that; 25% down on investor properties, is going to be your best rate. We’re still lending a lot. I just did my pipeline report. I’ve got 5.5 million dollars in my pipe that is set to close before February. The sales manager that I work with, his pipeline is at 3.8 million dollars; so there are loans out there. There are definitely loans out there.”
Then he said
“If you own property right now, and you are upside down in it, and you want to buy another house, you have to be able to qualify [with proof of income] for both payments without using rental income from the one you are leaving.” [this is because people who are not behind yet, were buying a new homes, then ‘bailing’ on the one that they were upside down on. It did not take lenders long to get wise to this buy-n-bail scam]
Finally he said
“The other thing to be aware of the at the beginning of this year, the FHA loan limits in our market [Las Vegas] got changed to a maximum of $287,500 which is a purchase price of $295,000. Conventional loans in Las Vegas are very difficult to get. The mortgage insurance companies don’t want to issue policies. So now you have a gap between the conventional loan limit, which is $417,000, which dramatically decreases the number of borrowers who can qualify. In [his] personal opinion over the next year, [he] think you’re going to see values of homes in that zone [between $295,000 and $417,000] degrade into an FHA loan. If you are going to list your house for $310,000, why wouldn’t you drop the price to $295,000, so you have a bigger pool of potential buyers. If you don’t, you’ll have fewer offers, and if you do get an offer and the buyer ‘falls out’ because they can’t get conventional financing, you may go ahead and drop the price to $295,000 so that you can sell it.”
That’s what he said, and he’s on the front lines of the Las Vegas mortage industry every day and has been for a few years.
1 – Full doc: Short for full documentation – in other words, prove you have money, prove you make money, and prove that it is all legitimate.
2 – Stated or Stated income: When people with excellent credit history are allowed to just state how much they earn
3 – Pipeline: Loans that are in process that are likely to be approved for funding
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