Now is a great time to sell your house in Los Angeles.
It's still hard to sell your house in Los Angeles. Yes, the market is definitely heating up. The one downside to the current market is the ultra-conservative lending standards. It's actually hard to close a purchase loan quickly.
What is a purchase loan?
A conventional (or FHA or VA) loan that is used to buy a property is a purchase loan. What does this mean to you? It means that if you are going to sell your house in Los Angeles to buyers who need to get a loan, you may be looking at a long escrow period and potentially no sale.
According to new statistics from Ellie Mae, the mortgage-origination software provider, the average time to get through the lending process is 47 days. That is a 12% increase since March 2012. The lending process includes the time it takes to process, approve and fund a purchase mortgage.
There are two main reasons why the processing days have increased since last year. And both reasons are likely to remain in the future. As you can see, it is hard to sell your house in Los Angeles, even with the increase in activity.
First, mortgage rates are extremely low.
These low mortgage rates have reduced the costs of homeownership across Los Angeles. This means that even renters are looking to buy. With these low interest rates, who wouldn't consider the American Dream of homeownership. The number of applications for home loan purchases is at an all-time high. But that doesn't mean that everyone who applies will qualify.
Second, mortgage brokers underwrite loans very differently today then they did even yesterday. The strict government regulations require that each and every loan be reviewed with a fine-tooth comb. These loan applications must be 100% complete and must meet strict guidelines for lending. These strict rules have made the timeline much longer than before. A year ago, a loan underwriter may have been able to work on 8-12 loan applications in one day. Now, with the strict attention to every single detail, an underwriter may only get through 1-2 loan applications.
And for any number of reasons, a loan application can be sent back to the mortgage broker for additional detail. Every time that happens, it adds another 3-5 days to the process. And even though the buyers are willing to jump through the hoops to get all the necessary documentation to the underwriter, sometimes, it's still not enough. Denials are common, even when a loan application looks great at the beginning.
So, if you are considering selling your house in Los Angeles, look into a cash purchase. It will avoid the hassle of a buyer's loan approval. We don't know how long the market is going to be strong, so timing is everything.