Mortgage Credit's Demise Greatly Exaggerated

Mortgage Credit's Demise
Greatly Exaggerated

One can hardly read a news report about the housing market today without finding some mention of a lack of mortgage financing. True, lending standards have tightened since the days when just about anyone could get a mortgage. However, with a couple of exceptions, the average borrower with decent credit and some down-payment savings should be able to obtain a mortgage with relative ease.

In a May 10 article in U.S. News and World Report, Keith Gumbinger, VP of mortgage information web site HSH.com, said, "Borrowers have a little bit of a misconception that you can't get mortgage financing. The mentality of 'It's going to be too hard for me to get financing, so I'm not going to bother even looking,' is persistent."

In fact, it appears the pendulum has swung back to the middle after reacting harshly to the loose lending standards that led to the nation's housing crisis.

According to Chicago-based Guaranteed Rate, one of the nation's largest independent mortgage lenders, the overriding sentiment in the mortgage market today is "clean loans and clean lending", but there are definitely options for all sorts of borrowers and home-buying needs.

Following is an overview of some popular loan products and mortgage scenarios. Contact me to discuss your specific needs and to find a mortgage broker to help you meet them.

Conforming 30-Year Fixed-Rate Mortgages: Many options exist and loans are fairly easy to obtain for borrowers with good credit. Even those with imperfect credit (the minimum threshold for most lenders today is a FICO score in the mid 600s) can get a loan but will pay a higher interest rate.

Jumbo Mortgages: Lending standards on jumbo mortgages (in Illinois, these are loans above $417,000) have opened up considerably during the past six months, and rates have come down as well. Rates on some jumbo ARM products are below 4%. Most loans require a 20% down payment, but there are alternatives for borrowers putting down less. Loans over $1 million may require two appraisals.

Low Down Payment Mortgages: In addition to FHA mortgages, which allow for as little as 3.5% down, private investors have come into the market offering alternative low-down-payment programs. Qualified borrowers can purchase with only 3% down while avoiding some of the upfront fees that accompany FHA loans. Private mortgage insurance (PMI) still applies.

One group that's still encountering some challenges is self-employed borrowers. Because these borrowers can write off large amounts of income and/or business losses, their tax returns and debt-to-income (DTI) ratios don't always reflect their true borrowing power. For these individuals, a private bank or wealth manager may be able to provide a mortgage solution.

The important thing for all borrowers to remember is that the mortgage market is incredibly fluid. Rates are changing and products are coming and going.

Meanwhile, current interest rates are fantastic. So if you're considering buying or refinancing, this could be your best opportunity for years to come.

As always, I'm here to help, so don't hesitate to call. And please keep me in mind for referrals. I appreciate your business.

Source: Guaranteed Rate

Dave Straub @properties 773.255.3180