Soviet dystopian physician loan nightmare with KeyBank, please help!

[uksho]

Add me to the list of people who is comfortable renting for the time being then pouncing on depressed list prices in the $700k range with cash when mortgages go to 10%. I imagine that will buy much more house in a few years than it does right now.

Not many Americans are going to be able to afford $700k houses with 10% mortgages.
Right now we have an anomaly with middle class people living in 3/4 million dollar houses because they have the fluke of 3% 30 years. The handful of people who took ARMs are totally hosed.

I am not able to decide ( buy or not ). Don’t know what’s the right thing to do as I can’t predict the future

but when the mortgage is 10 percent , most people will not default on the loan due to the strict lending criteria

I am assuming current owners with low mortgage rate would not want to sell . So, where are the houses going to come in the market from? Looks like working from home is the new thing for some jobs .

regarding the ARM, you don’t think things will calm down in next 10 years?

[Nash22]

I am not able to decide ( buy or not ). Don’t know what’s the right thing to do as I can’t predict the future

but when the mortgage is 10 percent , most people will not default on the loan due to the strict lending criteria

I am assuming current owners with low mortgage rate would not want to sell . So, where are the houses going to come in the market from? Looks like working from home is the new thing for some jobs .

regarding the ARM, you don’t think things will calm down in next 10 years?

New housing starts are back up to high levels right now (I don't think most people realize this). Potentially could dump a lot of new spec construction on the market without interested buyers later this year when we are entering into a recession, throwing fuel on the fire. The market knows this. Look at what homebuilder stocks have been doing recently.

I am aware the problem of massive interest-only lending to subprime borrowers isn't there anymore. I hear this a lot. That we are safe because of that. That there is no way we can have another housing crash because there are no subprime loans this time. I don't buy it. Certainly, there are other things that could cause owners to have to dump their houses and flood the market with supply thus crashing values.

There are still other potential problems:
- Real estate held by institutional investors and trading of derivates based on these holdings
- The potential of lost jobs in a recession. Even if you were a qualified borrower and managed to get a $750k house with a 3% mortgage, it doesn't really matter if you lose your income and blew through your savings during an inflationary period
- The inflationary period itself. Buyers have a tendency to buy as much house as they can possibly afford at the time, anticipating that their incomes will grow as their careers progress. If their incomes aren't keeping up with inflation, which they aren't, then making that monthly payment becomes harder, and again, despite their very low mortgage rate, they risk default.

Regarding the ARM, taking a 10/1 ARM right now is probably fine for many people. The people who are hosed I mean are the ones who took a 3/1 or 5/1 ARM within the past few years. I realize that isn't a lot of people, but they are out there. I personally always used ARMs for my houses, but that was because I knew I would be in them for less than 5 years (med school and residency).

[CordMcNally]

OP, sorry if missed this , but why can’t they give mortgage based on your current salaries ?

I wonder if the bank knowing they won't have those jobs in a few months affects this.

[Tangler]

I guess this is another reason to wait until you have worked at a job for a period of time before buying a house. Selling and buying a house not to mention moving has a lot of moving parts that can go wrong.

yes, i should have mentioned this. best to work for a while and ensure job is stable prior to buying.
Not something you want to do more than necessary.

[uksho]

New housing starts are back up to high levels right now (I don't think most people realize this). Potentially could dump a lot of new spec construction on the market without interested buyers later this year when we are entering into a recession, throwing fuel on the fire. The market knows this. Look at what homebuilder stocks have been doing recently.

I am aware the problem of massive interest-only lending to subprime borrowers isn't there anymore. I hear this a lot. That we are safe because of that. That there is no way we can have another housing crash because there are no subprime loans this time. I don't buy it. Certainly, there are other things that could cause owners to have to dump their houses and flood the market with supply thus crashing values.

There are still other potential problems:
- Real estate held by institutional investors and trading of derivates based on these holdings
- The potential of lost jobs in a recession. Even if you were a qualified borrower and managed to get a $750k house with a 3% mortgage, it doesn't really matter if you lose your income and blew through your savings during an inflationary period
- The inflationary period itself. Buyers have a tendency to buy as much house as they can possibly afford at the time, anticipating that their incomes will grow as their careers progress. If their incomes aren't keeping up with inflation, which they aren't, then making that monthly payment becomes harder, and again, despite their very low mortgage rate, they risk default.

Regarding the ARM, taking a 10/1 ARM right now is probably fine for many people. The people who are hosed I mean are the ones who took a 3/1 or 5/1 ARM within the past few years. I realize that isn't a lot of people, but they are out there. I personally always used ARMs for my houses, but that was because I knew I would be in them for less than 5 years (med school and residency).

Only time will tell if we made the correct decision. Over the last 2 years, not buying seemed to be a very wrong decision.

[catch22]

Thanks so much for the advice folks!!! I really appreciate the perspective and reassurance. I had several long conversations with the hospital and bank. It sounds like maybe the bank expected very specific language from the hospital, but the hospital has a much more nuanced view of physician onboarding and was providing more detail than the bank needed or wanted to know. It's like the underwiter may have been expecting some "magic words" rather than the nitty-gritty of employment conditions but they weren't telling the hospital what they wanted. After many conversations and emails, I'm hoping this goes through this time.

But holy moly, this current housing market is utterly unsustainable and scary! It's terrifyingly difficult to buy a house in this market. It's like a frenzy. We wanted to buy in this specific town because it has great schools, is walkable, and diverse. I can't imagine how difficult it would be for a middle class family trying to buy in this town if they want their kids to have a good upbringing and lifestyle. It seems like at the middle class to upper-middle-class price range, a lot of homes are being bought with cash offers (and if my experience is anything to go by, I can see why you'd want to avoid a bank!). If you have a family income of $140K, which is the average income of the area we're moving, I can't imagine trying to buy the more median $400-500K house that is going for $50K over with 20 offers, many all-cash, and now with rising interest rates. It's nuts. We are doing something extremely wrong in this country if finding housing is this difficult and I'm worried for the future. We have high incomes, assets, family support, and work in one of the fields with greatest job security, yet we are going through ************************ trying to buy a house. We also have the advantage of being able to afford a house for well above the median price which means we didn't have to compete with other offers. I can't imagine how insane it is right now to buy in broken markets like California or the Boston metro area.

Keep your fingers crossed for us!

[eyecandy]

Mortgages are the worst. KeyBank also almost screwed me back in 2017 when I bought. New construction, closing date was known for months in advance and the broker almost dropped the ball by not having 1 document verified, making the excuse that it's ok if it closed 1-2 days later. Not OK, my contract with builder stated they could sell at current values (6mo after my negotiated purchase, in a hot market the value was already up) and could drop the deal if financing didn't come through that exact day. I calmly told her NO she must get the paperwork to me to sign that day. Of course its Friday 4:45pm. I'm West coast and told her to call her Alaska and Hawaii colleagues to get this done. Long story short a manager on vacation in Park City had to take care of the documents and sent them to me that evening at 11:30pm for me to sign before midnight. Absolute insanity.

I don't have all cash yet, but my next house I'm considering using Flyhomes or something of the like to buy in all cash and deal with mortgage afterwards. Anyone else used their services or something similar?

[catch22]

Mortgages are the worst. KeyBank also almost screwed me back in 2017 when I bought. New construction, closing date was known for months in advance and the broker almost dropped the ball by not having 1 document verified, making the excuse that it's ok if it closed 1-2 days later. Not OK, my contract with builder stated they could sell at current values (6mo after my negotiated purchase, in a hot market the value was already up) and could drop the deal if financing didn't come through that exact day. I calmly told her NO she must get the paperwork to me to sign that day. Of course its Friday 4:45pm. I'm West coast and told her to call her Alaska and Hawaii colleagues to get this done. Long story short a manager on vacation in Park City had to take care of the documents and sent them to me that evening at 11:30pm for me to sign before midnight. Absolute insanity.

I don't have all cash yet, but my next house I'm considering using Flyhomes or something of the like to buy in all cash and deal with mortgage afterwards. Anyone else used their services or something similar?

Yikes!! I also thought the communication really wasn't good. We didn't know that they were expecting additional documentation, and once we indirectly found out they needed more (because the seller's agent complained the mortgage commitment letter hadn't come), we couldn't figure out how the hospital could satisfy their need for employment conditions to be met. Hopefully this is the final step. Anyways they're now reassuring me that the new employment verification letter has been submitted to underwriting so hopefully it'll get approved and done this time. What's really comical is that they now have our job contracts and not one, not two, not three, not four, not five, but SIX letters from the hospital assuring them that we are gainfully employed physicians. The mortgage coordinator we have right now has been really communicative so I think things have been getting better but I'm not holding my breath until the home actually closes.

That FlyHomes company seems interesting. I like their concept. I briefly looked through their website and they don't serve our area, but it seems like a great idea to smooth out the inefficiencies of the mortgage lending process.

[Nash22]

Only time will tell if we made the correct decision. Over the last 2 years, not buying seemed to be a very wrong decision.

If you plan to stay in the house as your primary residence until retirement and it was not significantly more expensive than renting, then I don't think it was the wrong decision.

I think it's the FOMO people that are going to get burned and paid 1.2M for an ugly outdated 1400 sq ft house built in 1978 that last sold for $375k in 2012 because it was literally the only thing available. The room for that property's value to potentially drop to is staggering.

The realtors are culpable in this -- telling people they need to do whatever it takes to buy something, anything now because prices will be double in another 1-2 years, which is obviously insane. Of course, the realtors and builders have absolutely crushed it because of this with record commissions and margins. And why would they stop until they were forced to? However, the universe tends to balance things out, especially in the real estate business. I think the music will start to fade then suddenly stop.

[Tim]

Nash22
”The realtors are culpable in this -- telling people they need to do whatever it takes to buy something, anything now because prices will be double in another 1-2 years, which is obviously insane.”
This is absolutely insane! Misinformation, deception, completely false! Reckless if not slander!

99.9% of realtors have a fiduciary responsibility to the seller ONLY! Get as high of price possible on terms and conditions that are written in a contract with any verbal crap completely irrelevant.
Seller’s Agent does not work for any buyer UNLESS the buyer has a specific contract, which is very rare.
Any advice given to a buyer by anyone is hot air and should not be relied upon. You get what you pay for, zero.
The seller, by default has an army of professionals trying to extract as much as possible and pays AA heavy price. Complain as much as you want. 3% to listing agent and 3% to selling agent. DIY home buyer is at a disadvantage by choice.
Culpable? It is a legal fiduciary responsibility.

[Nash22]

Nash22
”The realtors are culpable in this -- telling people they need to do whatever it takes to buy something, anything now because prices will be double in another 1-2 years, which is obviously insane.”
This is absolutely insane! Misinformation, deception, completely false! Reckless if not slander!

99.9% of realtors have a fiduciary responsibility to the seller ONLY! Get as high of price possible on terms and conditions that are written in a contract with any verbal crap completely irrelevant.
Seller’s Agent does not work for any buyer UNLESS the buyer has a specific contract, which is very rare.
Any advice given to a buyer by anyone is hot air and should not be relied upon. You get what you pay for, zero.
The seller, by default has an army of professionals trying to extract as much as possible and pays AA heavy price. Complain as much as you want. 3% to listing agent and 3% to selling agent. DIY home buyer is at a disadvantage by choice.
Culpable? It is a legal fiduciary responsibility.

Are you a realtor? My point was that they are financially incentivized to pump real estate sales and benefit greatly from over-inflated values and fast sales. It is a cutthroat industry fueled by greed, and if it's boom times they will just want more, and they do. Yeah, I'd say realtors are culpable. There's a moral argument to be made when you are basically lying to first time home buyers stretching for a down payment and pressuring them into buying an obviously overpriced property in a market that is clearly not sustainable in the near term, and we hear a lot of that going on. (and I've had numerous bad experiences myself, both on the selling and buying side -- basically every experience I've had regardless whether I've been a seller or a buyer has not had my agent working in my best interests).
I sold my last house FSBO. I have used buyer's agents when buying houses. The seller has paid their commissions.

This is a very well-written article summarizing our current situation noting things I don't think many are aware of.
U.S. Housing Market Is A Dead Man Walking | Seeking Alpha

Note the section on growth of realtors.
This is a cyclical industry. The party will stop. It always does, and many of the realtors will be looking for a new get rich quick schemes or ways to just make a living, and the builders will be back to hoping to find contracts with just average profit margins and remove all of the take-it-or-leave-it price escalation clauses giving them carte blanche to pass on delays and costs to the client and have that be a widely accepted practice in new home construction.

[Zaphod]

This all sounds extremely normal to me. This happens every time even if totally standard close. Your underwriter changes, they dont know your case, and they always reup info closer to due date, as you'd expect, it makes sense.

Buying a house you need to get in a zen mode or you go crazy, stay on top and instantly have these things ready to get back to them. It sucks but this is how it is.

[Tim]

Are you a realtor? My point was that they are financially incentivized to pump real estate sales and benefit greatly from over-inflated values and fast sales. It is a cutthroat industry fueled by greed, and if it's boom times they will just want more, and they do. Yeah, I'd say realtors are culpable. There's a moral argument to be made when you are basically lying to first time home buyers stretching for a down payment and pressuring them into buying an obviously overpriced property in a market that is clearly not sustainable in the near term, and we hear a lot of that going on. (and I've had numerous bad experiences myself, both on the selling and buying side -- basically every experience I've had regardless whether I've been a seller or a buyer has not had my agent working in my best interests).
I sold my last house FSBO. I have used buyer's agents when buying houses. The seller has paid their commissions.

This is a very well-written article summarizing our current situation noting things I don't think many are aware of.
U.S. Housing Market Is A Dead Man Walking | Seeking Alpha

Note the section on growth of realtors.
This is a cyclical industry. The party will stop. It always does, and many of the realtors will be looking for a new get rich quick schemes or ways to just make a living, and the builders will be back to hoping to find contracts with just average profit margins and remove all of the take-it-or-leave-it price escalation clauses giving them carte blanche to pass on delays and costs to the client and have that be a widely accepted practice in new home construction.

I am not for or against anyone. Cyclical or or not, the game has rules. Contract with price escalation clauses? How about negotiating liquidated damages instead?
Like a day late you owe me $5k and each and every day after. Fixed price.

I have a property that is a 1930's house that is functional, but a terrible place. I am waiting until is becomes available. Maybe put in 4 to 6 condos or sell it or partner with someone that is a builder. Sure, I probably missed the cycle. Real estate agents have a low moat. It's just business. I want as much as possible.
Culpable or what?
Blame the suppliers, builders, real estate agents, sellers or buyers?
These types of arguments are similar to those that blame physicians for healthcare costs. You can't blame it on one factor.
It is 100% normal. The way a free market works.

As far as the mortgage approval, sounds like a lot of poor services and lack of knowledge. Not unique or limited to mortgages. One phone call and one letter would have worked. In any underwriting the underwriter will not read a contract and interpret. If would help if they had a sample letter or a list of key points they need confirmed.
Note: it is highly dependent on the loan processor and the underwriter.

[Nash22]

I am not for or against anyone. Cyclical or or not, the game has rules. Contract with price escalation clauses? How about negotiating liquidated damages instead?
Like a day late you owe me $5k and each and every day after. Fixed price.

Ah. So you are involved in real estate, ok. Probably no point getting in a back and forth.
I stand by my argument that professionals in any industry, whether it's health care or real estate have a responsibility to behave morally and advise their clients honestly even if it does not result in the most dollars in their pockets. You seem to think it's just a free market and you do what it takes to maximize your profit at all costs. That's one way to look at it, and you're not alone.

However, if you think a fixed price contract with liquidated damages for being late with a builder is going to happen right now, you are living on a different planet. I have literally been told by builders that the days of fixed price contracts are over and they really don't even see themselves going back to standard cost plus contracts either. They want to have total control to change the terms whenever and however they want, and right now they are getting it. The reality is that when there is no longer a 2 year waiting list for buyers of new homes, they will have to adjust their expectations to meet what the market will bear.

The insane real estate market has allowed both realtors and builders to behave in ways they never could have in a normal market.

Simpsons nailed it 25 years ago...

Lionel Hutz explains "The Truth" - YouTube

[Tim]

Ah. So you are involved in real estate, ok. Probably no point getting in a back and forth.
I stand by my argument that professionals in any industry, whether it's health care or real estate have a responsibility to behave morally and advise their clients honestly even if it does not result in the most dollars in their pockets. You seem to think it's just a free market and you do what it takes to maximize your profit at all costs. That's one way to look at it, and you're not alone.

However, if you think a fixed price contract with liquidated damages for being late with a builder is going to happen right now, you are living on a different planet. I have literally been told by builders that the days of fixed price contracts are over and they really don't even see themselves going back to standard cost plus contracts either. They want to have total control to change the terms whenever and however they want, and right now they are getting it. The reality is that when there is no longer a 2 year waiting list for buyers of new homes, they will have to adjust their expectations to meet what the market will bear.

The insane real estate market has allowed both realtors and builders to behave in ways they never could have in a normal market.

Simpsons nailed it 25 years ago...

Lionel Hutz explains "The Truth" - YouTube

"This is absolutely insane! Misinformation, deception, completely false! Reckless if not slander!" Again.
"you are living on a different planet." Your words and conclusions about me both from an ethical, legal and moral point of view are unhinged. You are projecting your experiences directly at me personally and it is ridiculous.
I am not in real estate, but I have bought homes and built one. Let's leave it at that.