Getting a vacation-home loan: no day at the beach
Some buyers are choosing all cash because loans are harder to come by
It’s still not easy getting a loan to buy a new vacation home.
Tougher underwriting requirements and other obstacles related to a property’s location have created borrowing challenges for even wealthy home buyers.
“In general, guidelines are tighter than they were a few years ago,” says Bob Walters, chief economist at Quicken Loans, an online home lender.
Many popular vacation-home destinations are in the same markets where property values tanked during the housing downturn and have yet to stabilize. Some lenders say they’re concerned about underwriting mortgages in areas where prices could fall further. In other cases, lenders won’t approve mortgages if they receive a shaky appraisal report—for instance, one that includes sale prices from other towns when there’s a lack of comparable transactions in the neighborhood the applicant is buying into.
Also, lenders often consider the financial health of the homeowner’s association that many vacation properties belong to. If existing owners are behind on dues or if many properties remain unsold, lenders say they’re more likely to pass on the loan even if borrowers have pristine credit and plenty of cash.
Tougher underwriting requirements and other obstacles related to a property’s location have created borrowing challenges for even wealthy home buyers.
“In general, guidelines are tighter than they were a few years ago,” says Bob Walters, chief economist at Quicken Loans, an online home lender.
Many popular vacation-home destinations are in the same markets where property values tanked during the housing downturn and have yet to stabilize. Some lenders say they’re concerned about underwriting mortgages in areas where prices could fall further. In other cases, lenders won’t approve mortgages if they receive a shaky appraisal report—for instance, one that includes sale prices from other towns when there’s a lack of comparable transactions in the neighborhood the applicant is buying into.
Also, lenders often consider the financial health of the homeowner’s association that many vacation properties belong to. If existing owners are behind on dues or if many properties remain unsold, lenders say they’re more likely to pass on the loan even if borrowers have pristine credit and plenty of cash.
Despite these issues, affluent buyers are buying luxury vacation homes in
larger numbers. In the Vail Valley, Colo., market for example, there were 51
luxury home sales last year each priced at more than $4 million, up from 40 in
2011, says Kathy Cole, a broker associate with Coldwell Banker Distinctive
Properties in Vail. Karen Ryan, broker owner of Weichert Realtors Coastal
Properties in Hilton Head Island, S.C., says nine $2.5 million-plus oceanfront
homes in the Sea Pines Resort community sold last year, compared with eight
sales from 2008 through 2011.
Fueling this demand are prices that are still declining or appear to have bottomed out. But as sales rise, some lenders say the percentage of buyers getting vacation-home mortgages isn’t going up. In Florida, for instance, “cash is more popular than jumbos today,” says Sandy Robertson, a senior vice president with Bank of America .
Some buyers choose cash because the local bank with which they have established a relationship is no longer willing to provide a mortgage for a property across the country, where the bank is less familiar with the market. Rules from the Department of Housing and Urban Development that went into effect in 2010 require lenders to provide borrowers with a standardized “good-faith estimate” of fees and closing costs—which vary by location—that will accompany their mortgage. The rules also say that if those figures are higher when borrowers reach the closing table, they can’t be charged more in most cases—instead another party, such as the lender or the appraiser, can end up paying the difference.
Fueling this demand are prices that are still declining or appear to have bottomed out. But as sales rise, some lenders say the percentage of buyers getting vacation-home mortgages isn’t going up. In Florida, for instance, “cash is more popular than jumbos today,” says Sandy Robertson, a senior vice president with Bank of America .
Some buyers choose cash because the local bank with which they have established a relationship is no longer willing to provide a mortgage for a property across the country, where the bank is less familiar with the market. Rules from the Department of Housing and Urban Development that went into effect in 2010 require lenders to provide borrowers with a standardized “good-faith estimate” of fees and closing costs—which vary by location—that will accompany their mortgage. The rules also say that if those figures are higher when borrowers reach the closing table, they can’t be charged more in most cases—instead another party, such as the lender or the appraiser, can end up paying the difference.
No comments:
Post a Comment