Frustrating: That’s what it is. At a time when homes — especially second homes in some regions — are dropping in price, it’s getting harder to get a loan to buy one. Banks, naturally skittish after this year’s mortgage crisis, are tightening their purse strings, and it takes a lot to tug them open.
By Billie Cohen, November 28, 2008, NYT

“The interesting part is that you’re going to get some of your best buys in your second-home markets right now,” said Marc Schwaber, president of Preferred Empire Mortgage, a Manhattan-based brokerage. In his own search for a property in Florida, Mr. Schwaber has found prices that have dropped 50 percent in the past two to three years. “The second-home market in many ways holds its value really well, and people want second homes. But banks can’t seem to ease up on their guidelines.”

The caution is understandable. “Look at it from a lender’s perspective,” said Eric Tyson, a former financial adviser and co-author of “Home Buying for Dummies.”

“It all comes back to what is the risk of defaulting on the loan? And worried lenders are finding out today how high the default rate can be on homes in which people live. If it’s a second home, and not even your primary residence, there’s potentially even more temptation and ease to walk away from a property.”

But, Mr. Schwaber added, “It doesn’t matter if it’s a primary or second home.” To him, the more pressing concern for banks is: Does the client fit the ratios?”

“I’ve been in this business since the mid-’80s — the old rule of thumb was called 28-36, which meant that you could spend 28 percent of income on primary housing expenses and 36 percent of your income over all,” Mr. Schwaber said. “Is it easier for primary or secondary? The answer is your secondary home has to fit into a certain ratio. Each bank these days sets guidelines for their ratios, and there’s no such thing as 28-36 anymore.”

Instead, he continued, banks look at a range of factors, including income, assets, credit and post-closing liquidity. “If you have a tremendous amount of post-closing liquidity, and can put a good amount of money down,” he said, “would that not qualify you differently than someone who may be able to put a lesser amount of money down or have less money after the transaction is complete? The banks are starting to use common sense underwriting again.”

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