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How to Mess Up Your Home Mortgage Approval

Those of us who have been involved in such loan and appraisal nightmares question whether these lenders are interested in actually doing any business. What is this "buyback" stuff I hear about the mortgage industry?

Read this article: "http://www.latimes.com/business/la-fi-harney-20100718,0,1118453.story?track=rss.

I have a personal story about this: I have been working to refinance my own home over the last few months (yes, months. It's excruciating).  The appraisal that was done in May came in at $688,000, which was fine for my purposes. Then it turns out that the lender did a review "desk-top" appraisal, which means they looked on the computer for all the sales numbers in Eagle Rock, kind of like Zillow does. So the lender hires a licensed appraiser who thinks my house is worth $688,000, and then they arbitrarily throw that number out. Guess what the value they decided to go with--$475,000!!! Without going into boring details, let's just say that is a ridiculous number for my incredible house.

Those of us who have been involved in such loan and appraisal nightmares question whether these lenders are interested in actually doing any business. They appear to have taken our bailout money and stuffed it in their vaults. Well, they have done that partly to show the reserves that they have to have to prove that they are solvent. There is Catch-22 all over the place here. By that, I mean that as the value of the properties has dropped, the value of the collateral they can claim if the mortgage defaults has dropped, and you have this vicious circle of declining values.

So what is the solution? Some people are just paying cash for properties. That's great for those who can afford it.  Also, some mortgage and real estate professionals are doing a good job of documenting the values and working with appraisers who know the area they are appraising and can give realistic opinions of value. The bottom line is that if you want to buy a house, work with the best people you can find, be patient, and do everything on your end to ensure as smooth a transaction as possible.

Here is a great article every home buyer should read: http://m.cnbc.com/us_news/37826133. These three moves have always had a bad effect on your smooth close of escrow, but with the "buyback" problem that this article alludes to, it has become a really critical issue. Briefly, if you are in the process of getting a mortgage to buy a property, don't do these three things:

1. Get a new credit card or auto loan
2. Increase your credit card balances at all
3. Change jobs

Have you had a smooth transaction in the last couple of months? Do you have any tips you'd like to share?

Home Buyer Tip #1
A lazy day

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