If anything that has changed to complicate the underwriting process it is Loan to Value. Today the LTV's as they are affectionately known are all over the board. LTV's used to be as high as 90 to even 95% but with the advent of the sub prime debacle, loan to values have been reduced precipitously.
Where a land loan used to be at a 75% loan to value which means if the property appraised at $1,000,000 the bank would lend you $650,000 today we would be lucky to find a bank lending $550,000 for a straight land deal.
Also the loan to value that many lenders are quoting will affected by the CAP Rate of the property as well as the net income. If the net income cannot support the needed debt service coverage ratio, the lender will lower his loan amount to meet the DSCR, and thus LTV will also fall accordingly.
I cannot blame these lenders from lowering the amount they loan, but what I fault them for is allowing the current foreclosure market to dictate what a property is really worth. by using comps from foreclosed and short sale properties, which is bringing down the amount of value that borrowers without credit problems have for their homes that they want to use as collateral.
More about this issue another day. To understand collateral you must understand What CAP Rates
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