Lenders are tightening their loan requirements in light of the corona chaos. Prospective home buyers are flocking to lenders in pursuit of those low interest rates, but lenders are not making it easy to qualify for loans, especially in higher-cost regions like The Bay Area.
It’s not difficult to understand lenders’ concerns amidst job losses and general economic instability. However, if you were preapproved for a loan in pre-corona times, it’s likely your lender has slapped some new requirements on that approval.
One of the biggest requirements is mandated cash reserves. For example, one major lender historically wanted to see a year’s worth of reserves for a single-family home purchase with a jumbo loan. This bank now wants to see a buyer having 18 months’ in reserves, and 24 months for a multi-unit building.
Lenders are also requesting higher credit scores and larger down payments. You can expect continuous employment and income verification, too, so make sure you have your HR department on speed dial.
I recommend you get fully preapproved for a loan prior to starting your house hunt. There’s competition for single-family homes and desirable condos, so you can have the option of waiving a loan contingency if the bank’s underwriting department has already greenlighted your loan. You’ll also need a current preapproval letter, in many cases, if you want to secure a property showing.
As always, it’s good to be prepared for your house hunt if you want to ensure success.