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Not long ago, people applying for a mortgage in the Vail Valley essentially needed a pulse and a stopwatch. Times have changed.
When people with “subprime” mortgages started defaulting on those loans en masse — albeit mostly in four states: Florida, California, Nevada and Arizona — the days of the easy-to-get home loan ended. Loans got a lot harder to land, even as interest rates fell.
Unfortunately for Vail Valley home buyers, the “stated income” loan was among the first type of mortgage to go. That loan, which basically allowed applicants to declare their income without proof, was popular among the self-employed, people with jobs that changed with the seasons and people who live on tips.
“There are a lot of people with income they can’t count,” said Chris Neuswanger of Macro Financial Group in Avon. “Now, that income doesn’t count to qualify for a mortgage.”
The problem with stated income loans wasn’t really local, Neuswanger said, but in other parts of the country.
“In Denver or Cleveland, someone working at Wal-Mart could claim they made $100 an hour and get a mortgage.”
While prospective loan applicants have to bring a lot more paperwork to the process, the industry has also let those applicants have more household debt. The “debt to income ratio” used to be lower than 40 percent, said Jay Gould of Vail Valley Mortgage. Now, he said, he’s seen mortgages accepted where the ratio is 67 percent.
Even with that change, “it seems like lenders are looking for reasons not to lend,” Gould said.
Besides the difficulty, it’s taking a lot longer to get a loan approved, Gould said.
“You have maybe one-third of the banks that were in business two years ago making loans today,” Gould said. “There are a lot fewer people working on loans.”
As buyers have left the market, so have people who want to tap their home’s equity for renovation work, college tuition or other spending.
“There can be as much as a half-point hit for a cash-out refinance,” Neuswanger said.
Still, plenty of people are refinancing.
“I’d say 95 percent of my business is people looking for better rates,” Neuswanger said. Today’s lower rates can be worth the time and trouble, though: Neuswanger has a customer ready to close on a refinancing of a $700,000 loan that will save the borrower about $800 per month. That’s nearly $10,000 per year.
While mortgage loans are still available for people with good credit scores and a lot of patience, one area where lending has become much harder is for loans of more than $730,000, known as “jumbo” loans.
“Very few lenders are doing jumbo loans these days,” Gould said. The standard loan-to-value ratio for a jumbo loan used to be 80 percent, meaning a borrower had to bring a 20 percent down payment to the closing table.
“I’ve seen it as low as 50 percent,” Gould said. The debt-to-income ratio is lower, too. “I don’t know anyone who’ll go more than 45 percent,” he said. “I’ve seen loans rejected at 45.1 percent debt to income.”
For people who still need big loans, though, Jimmy Brenner of Blue Sky Mortgage can find the cash. Brenner, and his father before him, have a small pool of “portfolio” lenders in the Midwest. These are banks that buy mortgages and put them into their own investment portfolios.
“I’ve never known any of these lenders to package these loans and re-sell them,” Brenner said.
But, Brenner added, the standards are tight even for this small group of lenders. These lenders prefer property closer to the resorts, whether in Vail, Aspen or Telluride.
Locally, Brenner said expensive homes from about Wolcott east will qualify. But, he added, his lenders are also interested more in single-family homes or duplexes than condominiums or townhomes.
In a valley where it’s not hard to find a $5 million condo, that can make finding a loan even more difficult than it already is.
And, Brenner said, just about every loan he writes these days — and he’s still mostly writing loans for home purchases — is an individual negotiation.
“I’d say we’re putting five to 10 times more work into every loan,” Brenner said. “But I’ve been here 35 years now. I think I’ll survive.”
Business Editor Scott N. Miller can be reached at 970-748-2930 or smiller@vaildaily.com.
When people with “subprime” mortgages started defaulting on those loans en masse — albeit mostly in four states: Florida, California, Nevada and Arizona — the days of the easy-to-get home loan ended. Loans got a lot harder to land, even as interest rates fell.
Unfortunately for Vail Valley home buyers, the “stated income” loan was among the first type of mortgage to go. That loan, which basically allowed applicants to declare their income without proof, was popular among the self-employed, people with jobs that changed with the seasons and people who live on tips.
“There are a lot of people with income they can’t count,” said Chris Neuswanger of Macro Financial Group in Avon. “Now, that income doesn’t count to qualify for a mortgage.”
The problem with stated income loans wasn’t really local, Neuswanger said, but in other parts of the country.
“In Denver or Cleveland, someone working at Wal-Mart could claim they made $100 an hour and get a mortgage.”
While prospective loan applicants have to bring a lot more paperwork to the process, the industry has also let those applicants have more household debt. The “debt to income ratio” used to be lower than 40 percent, said Jay Gould of Vail Valley Mortgage. Now, he said, he’s seen mortgages accepted where the ratio is 67 percent.
Even with that change, “it seems like lenders are looking for reasons not to lend,” Gould said.
Besides the difficulty, it’s taking a lot longer to get a loan approved, Gould said.
“You have maybe one-third of the banks that were in business two years ago making loans today,” Gould said. “There are a lot fewer people working on loans.”
As buyers have left the market, so have people who want to tap their home’s equity for renovation work, college tuition or other spending.
“There can be as much as a half-point hit for a cash-out refinance,” Neuswanger said.
Still, plenty of people are refinancing.
“I’d say 95 percent of my business is people looking for better rates,” Neuswanger said. Today’s lower rates can be worth the time and trouble, though: Neuswanger has a customer ready to close on a refinancing of a $700,000 loan that will save the borrower about $800 per month. That’s nearly $10,000 per year.
While mortgage loans are still available for people with good credit scores and a lot of patience, one area where lending has become much harder is for loans of more than $730,000, known as “jumbo” loans.
“Very few lenders are doing jumbo loans these days,” Gould said. The standard loan-to-value ratio for a jumbo loan used to be 80 percent, meaning a borrower had to bring a 20 percent down payment to the closing table.
“I’ve seen it as low as 50 percent,” Gould said. The debt-to-income ratio is lower, too. “I don’t know anyone who’ll go more than 45 percent,” he said. “I’ve seen loans rejected at 45.1 percent debt to income.”
For people who still need big loans, though, Jimmy Brenner of Blue Sky Mortgage can find the cash. Brenner, and his father before him, have a small pool of “portfolio” lenders in the Midwest. These are banks that buy mortgages and put them into their own investment portfolios.
“I’ve never known any of these lenders to package these loans and re-sell them,” Brenner said.
But, Brenner added, the standards are tight even for this small group of lenders. These lenders prefer property closer to the resorts, whether in Vail, Aspen or Telluride.
Locally, Brenner said expensive homes from about Wolcott east will qualify. But, he added, his lenders are also interested more in single-family homes or duplexes than condominiums or townhomes.
In a valley where it’s not hard to find a $5 million condo, that can make finding a loan even more difficult than it already is.
And, Brenner said, just about every loan he writes these days — and he’s still mostly writing loans for home purchases — is an individual negotiation.
“I’d say we’re putting five to 10 times more work into every loan,” Brenner said. “But I’ve been here 35 years now. I think I’ll survive.”
Business Editor Scott N. Miller can be reached at 970-748-2930 or smiller@vaildaily.com.
