Recently, I’ve been reminded of how challenging getting a mortgage can be for even the most qualified buyers.
Forget how difficult it can be right now even to get an accepted offer on an apartment!
Once contracts are signed, buyers are simply not prepared, emotionally or otherwise, for
the mortgage process that awaits.
Whether buying a condominium or a cooperative, here are five things to prepare for, so that when you go INSANE, and you will, you will know that you’re not the only one:
1) The Heart Attack Fedex:
Whatever you’re buying, lenders are bound by significant lending rules, set down from on high by Washington DC by our friends at Fannie Mae.
As soon as you proceed with the mortgage process with a lender, you can expect to get a FedEx envelope from them.
DON’T OPEN IT!!
But of course you WILL open it, as did Pandora.
What do you find when you open the envelope?
Something called a Good Faith Estimate (GFE), which includes all of your potential closing costs on your purchase, along with another 100-200 pages of wasted paper.
This sounds nice, except the GFE will include every closing cost in the purchase, including seller costs.
I strongly suggest you open this envelope at a time of day when you can call your mortgage broker or real estate agent, so you don’t freak out and have nowhere to vent until morning.
Unless you’re buying in a new development, you will likely see this GFE show costs of 2-3% of purchase price HIGHER than what they actually are.
You’ve been warned.
2) The Appraiser Black Hole:
Odds are, if you live and work in New York City, you are held to a very high standard professionally, and therefore hold others to the same high standard.
You’re the person who is surprised when the cashier can’t always do the math to give you the exact change right away.
So, of course, you expect the same level of service across the entire mortgage process, what would jibe with the terrific mortgage broker you have.
Often, due to Dodd-Frank rules, there is a firewall between lender and appraiser.
In theory, this is supposed to allow the appraiser to operate independently to give proper valuations of apartments.
We’ve seen how well this works with Moody’s and S&P valuations.
It’s no better in appraisals, but if you’ve been reading these you know that I’m a little more realistic than some.
So, when all of a sudden 1-2 weeks disappear after you have a signed contract on an apartment, and an appraiser hasn’t called the listing broker, know that it’s due to this firewall.
It used to be 1-2 days.
You may have begun to lower your expectations a bit by this time in the process.
Don’t get lulled into ever thinking it gets easier…
3) The Digital/Paper Divide: The wonder of the times we live in is how digital devices have made our lives easier.
We scan business cards, faxes have nearly been replaced by PDF, Uber is a click away, Food Delivery language barriers are gone- nearly everything can happen on your smartphone (why is it still called a phone anyway?)
Yet, likely as not during the mortgage process you’ll get an email that you’re reading on your iPhone around 5pm, which is when all mortgage-related items reach you by email (or at the time when you are wrapping up your day and are about to go to an appointment, kids thing, whatever)- telling you to begin gathering a bunch of PAPER.
Not only the normal bank statements, etc, which can normally be emailed.
You’ll be asked for things that you haven’t used paper for in years.
Like copies of CHECKS.
For instance, a lender will ask you to send them copies of every rent check you’ve sent to your landlord in the last 1-2 years.
Then you realize that you haven’t MAILED a check to anyone, much less the landlord who lets you charge your rent and get miles on your credit card!
You should push back just a little with your mortgage professional.
Often their requests are a little ridiculous.
And sometimes, just sometimes, you can tell them you refuse, and they will relent.
Not often, though.
4) Mortgage Tourism in NYC:
Buyers sometimes make the mistake of thinking that their banking relationship outside of New York City will make their process easier.
THIS IS WRONG.
Your banking relationship with your private banker in Boston, Chicago, Houston, etc will almost always mean that highly professional, lovely people based somewhere else will try to help you buy a coop in New York- and will FAIL miserably.
This will ALWAYS slow the process down by weeks, if not longer.
It’s hard enough to pick the bank that has their process streamlined and does lots of condo/coop deals in New York.
Bringing in a lender who doesn’t do lots of apartment loans here will be a disaster.
You’re trying to save time and money- use a lender here.
You’ll also keep your solid relationship with that professional intact.
Also, the second mistake buyers make it to think that everyone working on their deal is based in Manhattan in a building somewhere on the island.
BIG MISTAKE – think Pretty Woman as in the photo above.
Just because your mortgage broker is here, he or she still usually relies on a team of underwriters based elsewhere, professionals who are often handed inane rules by Fannie Mae, but also who create ridiculous rules themselves.
Their primary interest is to make sure their employer can sell your loan to Fannie Mae.
They won’t care that you have other things to do, that you’re in a different time zone, that you can’t “Just fax something” or that you’ve already gone Open Kimono with the cooperative board in your interview or board package.
So be prepared for last minute requests that feel just plain mean, like resending lots and lots of bank and brokerage statements, unusual liquidity requirements that pop up last minute (Cash in the bank over above coop requirements, for instance), or bizarre things like copies of passports, etc.
You have a busy life, and yet Bill in Des Moines DOES NOT CARE.
Oh yeah, you won’t know 100% that you’re “clear to close,” nor will you have all of your closing costs until 4 hours before the closing.
Take your meds, take a breath.
It’s too common.
5) The Last Minute Employer Call:
This is my favorite stressor, the one that no one expects.
A day or two before your closing, the lender wants to inflict maximum pain on you and hit your where it hurts.
Someone in Sioux Falls calls your HR department, unbeknownst to you, and asks them if you still work there and if they can prepare some new written statement to that effect.
Does your HR department think you’re leaving?
Have you been arrested?
Did your HR team take DAYS to get you your first letter of employment?
Again, a total disconnect between what seems to be “easy” from the vantage point of
Cedar Rapids and what can be accomplished by an HR department who went to key-coded HR letter access 5 years ago.
Remove all expectations, stop thinking logically, and go to your happy place.
Everything that will drive you nuts is, unfortunately, totally normal.
I’m glad I’m not a mortgage broker.
Would you like to get on a call to discuss the buying process?
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