Unlike the Manhattan real estate market of the past decade, many of today’s transactions include mortgage contingencies for buyers. And until last week, it had been quite a long time indeed since I had a buyer request an extension to obtain a mortgage commitment from a bank. The typical 30 day period granted in most contracts to get a mortgage wasn’t enough for 2 separate buyers last week as one buyer’s agent called our office pleading for an extra day (received that commitment yesterday) and the other asked for another 2 weeks (still waiting on their bank). Obviously this makes sellers uneasy in such a shaky market but it seems to be a result of multiple factors:
- Banks are "allegedly" inundated with refinance applications with interest rates at historical lows (for loan amounts below FHA guidelines).
- Banks have also seen an increase in new purchase applications as a result of the same low interest rates as well as the fact that buyers are often encouraged by "price-chopped" deals they see in the market place.
- Underwriting guidelines are much more strict than in the past with an increase in liquidity and income requirements as well as credit scores.
- Banks are also checking and re-checking buyer information throughout the lending process all the way up to the closing day (ex. employment verifications being done 24-48 hours prior to closing).
- Mortgages are not only more difficult to obtain, but there are also fewer banks providing them.
It has always been important, but never as much as it is in today’s market to determine a buyer’s qualifications prior to accepting a bid and going into contract. But don’t sweat the delays as they are par for the course in this bizarre lending world.