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# Mike Heayn: Easy home loans are gone as the real estate market cools
- URL: https://www.smdp.com/mike-heayn-send-comments-to-editor-smdp-com-real-estate-101-documenting-your-ownership-dreams/
- Published: 2007-11-07T16:00:00.000Z
- Updated: 2026-10-25T01:14:18.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

SOME BELIEVE THE REAL ESTATE PARTY is over and now it is time to pay the piper. Then there are those who believe the real estate market is simply going through a correction which will be over in the near future. Maybe the first group of people are right. Maybe the second group of people are right. Never the less, if you are looking at purchasing a home you have to understand the recent changes banks have undertaken for home loans.

Gone are the days of easy financing. Some nine months ago, you could walk into a bank say you make $250,000 a year, have $500,000 in liquid assets and no one would question or document these crucial facts, regardless if what you said was the truth. All that was needed was a signature. What about a down payment? Nope, you did not need one of those either. Banks would be happy to lend you 100 percent of the property’s value. Some lenders would even lend 103 percent, 105 percent or 110 percent. The extra money would be used to pay closing costs and/or to do improvements to the property. To say it was easy to get a home loan was the understatement of the year.

If you borrow 100 percent of your property’s value and the value decreases you are not able to refinance because you are upside-down in the property. Being upside-down is when you owe the lender more money than the property is worth. Being upside-down in your home is not in its self an awful thing. Sure, it hurts psychologically knowing your home is not worth what you paid, but if you can manage the payments you can wait out any reduction in value.

If you are looking to buy today and are going to use conventional lending from a bank, you should know current bank requirements. A low documentation loan is a loan where you do not have to show proof of income and down payment. A full documentation loan is the opposite, where you have to show all your cards.

So what do you need? If you are purchasing a home for the first time, you need to show the lender that you have enough income to cover the mortgage payment, property taxes and property insurance. Usually, this means showing your last three pay stubs and last two years of tax returns. A lender will take a percentage of your income, known as a debt to income ratio to see if you are able to support the financing. If you are able to support the financing, the lender will pull your credit. Credit score criteria have increased in the last ninety days. Now most lenders want to see credit scores of 680 and higher. This does not mean a lower score eliminates you from the mortgage market, it just means that you will pay a higher interest rate, which means a higher payment each month.

Finally, a lender is going to verify the down payment. Lenders want to see anywhere from two to four months of seasoning of the down payment so be prepared to show them this information two to four months trailing bank or investment statements.

Buying a house usually turns out to be someone’s greatest investment. If you are looking to buy a house today, make sure you are ready with all the documentation that a lender wants to see, so your dream becomes a reality.

MIKE HEAYN is a Washington Mutual Multi- Family Loan Consultant. He (310) 428-1342, or e-mailed at

*Originally published in the Santa Monica Daily Press print edition on November 7, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/110707.pdf?ref=smdp.com)