Take the Fear Out of Mortgage Financing
by Drew McKenzie
Trying to make sense out of mortgage guidelines today can make your head hurt.
My advice is to avoid the aspirin, do not make assumptions, do NOT read the dramatic press.
Interest rates are the lowest they've been in 3 years and true opportunities exist, so make sure you communicate your specific circumstances to your mortgage broker early in the process. There has never been a better opportunity for buying a home.
A few recent changes to be aware of in order to manage your expectations:
• Several banks now realize that they were overly enthusiastic about approving credit lines. As these banks try to reduce their risk exposure, some homeowners are getting notifications that their line of credit has been reduced or even cancelled. Banks are concerned about what your home is worth and about your ability to verify your income, credit and assets.
• Investors are very concerned about the future of certain industries and the future of the continuance of Bonus and Commission income. In the past, such income was averaged for 2 years for qualifications; don’t assume the same is true today. Best to get this checked out BEFORE starting your home search.
• Buyers no longer have the option to have two mortgages at closing (i.e. 80/10/10 loan) to avoid paying Private Mortgage Insurance (PMI) or avoiding a certain loan amount for lower rates. For mortgages of $500,000 or less (depending on the investor) and less than 20% down payment, guidelines now require PMI. Your mortgage application now needs approval by the Lender and the PMI provider.
• Mortgages greater than $500,000, with most Lenders, now require at least a 20% down payment.
• Bridge loans are extinct today. Investors are not allowing most borrowers to close on their new purchase without closing on the sale of their current home. This means either you get a larger mortgage if you have the down payment in the bank, or plan to close on the sale of your current home the same day as the purchase of your new property. Either way, you should sell your current home before purchasing another one. It makes you a stronger buyer in the seller's eyes too.
Renting your current home without selling it and buying another primary property is scrutinized unless you have at least 30% equity in the home you will lease.
• For refinancing, you need to have at least 20% equity today based on today’s bank appraisal. There are now 40 year mortgages and Interest-Only payment loans, which could assist with lowering your monthly payments. Your lender can help you with your options. Keep in mind, the presence of a second mortgage or line of credit (and today’s bank appraisal of your home) could impact or limit your options.
NOW FOR THE GOOD NEWS & WORDS OF ENCOURAGEMENT….
There are many worthy borrowers and there are mortgage funds available today at very low interest rates (30 year fixed today at 5.5%)! There are guideline changes but they may or may not impact you directly! Don’t assume or let the press intimidate you --- you could be a very worthy borrower who is in position to take advantage of this (housing) market and interest rates!
Sue and her team sold 7 houses in November, and financing was not an issue.
Drew McKenzie is a Senior Mortgage Consultant with Real Estate Mortgage Network with 16 years of lending experience. Please contact Drew with your questions or comments. He is licensed everywhere in the country to provide mortgage financing.
Phone: 973.271.8025
E-mail:
dmckenzie@remn.comhttp://www.drewmckenzie.remn.com/ Labels: morrtgage financing guidelines, PMI, refinancing
