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The national mortgage industry has experienced unprecedented change during the past two years, which has resulted in a number of popular consumer misconceptions regarding the availability of home financing.
Mortgage Misconception #1: “There’s no money available for home loans.”
While it’s true that the recent credit crunch temporarily affected the mortgage markets, the 2009 credit market has progressively improved for homebuyers.
In fact, many established homeowners have already seized upon the opportunity to refinance to lower interest rates. These refis prove that savvy consumers can do more than survive in a tough market – they can improve their long-term financial outlook and save thousands over the life of their home’s financing.
Mortgage Misconception #2: “The days of low down payments are gone for good.”
While it’s true that “no money down” loans are almost exclusively restricted to VA loan qualifiers with full entitlement, FHA loans with down payments beginning at 3.5% are available and popular. Some FHA loans allow borrowers to use gift funds from family members, friends or employers to help cover the down payment.
Mortgage Misconception #3: “Buying a home in a high-cost area is almost impossible.”
Real estate prices on the West Coast have traditionally been some of the highest in the nation, which translated into a need for a large percentage of non-conventional Jumbo loans over $417,000.
Although jumbo loan figures fell in 2008, similar to many other financial statistics, perhaps surprisingly, they’ve made a comeback in the first quarter of 2009. According to a recent issue of Inside Mortgage Finance®*, the Jumbo sector’s production figures were up 109% over the 4th quarter of 2008. While credit requirements for Jumbo loans have become somewhat more restrictive, they’re still available for qualified borrowers.
Mortgage Misconception #4: “In today’s market, closing on a loan is difficult and complicated.”
The majority of loans closing in 2009 are no more complex than they were in the past. Keep in mind, even in boom times, there were still a great number of disclosures and necessary paperwork associated with closing a conventional “full doc” loan. This hasn’t changed.
Although first time homebuyers may find the process a bit overwhelming a first, the truth of the matter is, most of this paperwork is mainly designed to protect the consumer. A reputable lender will take the time to go over all closing documents with buyers before the day arrives, making the experience as fulfilling and exciting as any other major life event should be.
Mortgage Misconception #5: “Low interest rates are a thing of the past.”
Even though mortgage rates are beginning to creep upwards, today’s numbers are still some of the lowest in years. As of August 5th, 2009, Bankrate.com’s weekly Interest Rate Roundup reported that the average 30-year fixed rate for mortgage lending rose nine basis points, to 5.65%* – still a highly competitive rate.
Green Mortgages Equal Larger Loans and Efficient Homes
Tired of heat and energy prices skyrocketing out of your budget? Now you can do something about it…and your mortgage can help!
Energy-efficient improvements, such as installing double-paned windows and additional ceiling insulation, can save you money every month, not to mention pay for themselves in the long run. But how do you come up with the cash to pay for those projects up front or to buy a slightly more expensive house that already has them? One way is with a “green mortgage.”
What is a Green Mortgage?
Green mortgages actually come in a couple of different formats. Officially these loans are classified as either Energy Efficient Mortgages (EEMs) or Energy Improvement Mortgages (EIMs).
An Energy Efficient Mortgage essentially allows you to purchase a home that is already energy efficient – even if the price of that home is larger than you would normally qualify for under your debt-to-income ratio. Energy Improvement Mortgages, on the other hand, allow you to take out a larger loan to make energy efficient repairs and improvements to a house that is not currently rated as energy efficient.
The main benefit of both of these mortgages is that they help you to qualify for a larger loan amount and help make it possible for you to live in a better, more energy-efficient home. The basic principle behind this type of financing is that the money you save from the more efficient home will offset the larger mortgage payments.
Qualifying for a Green Mortgage
To qualify for a green mortgage, you typically need to have a Home Energy Rating conducted. This rating provides the lender with an Energy Savings Value, which is the estimated monthly energy savings and the value of the energy efficiency measures.
Depending on your unique circumstances, you may qualify for a conventional, FHA, or even a VA green mortgage. Each type of loan is designed to fit specific situations and, therefore, each loan has specific requirements that must be met.
You can learn more about the differences between conventional, FHA, and VA green mortgages at the Energy Star website. And for more details about green mortgages in general, visit the HUD website.Whether you’re looking to add energy-efficient improvements to your current home or want to purchase a new energy-efficient house, green mortgages offer benefits that are definitely worth looking into. Call today to discuss your options in more detail.
Dani McDonough, CMPS®
Certified Mortgage Planning Specialist
First Horizon Home Loans | Magnolia
Phone 206.251.7976
The “Broker Out” Advantage
The current mortgage world is truly a stormy sea. Rates rise and fall in nauseating waves. Loan programs crash and splinter like wayward boats crushed against rocks. Promising policy announcements turn out to be like false sightings of land after queasy months in the open ocean. As a home buyer, a potential refinancer, or as a realtor helping a seasick shopper, where do you find a safe harbor?
Me.
Why? Because as rough and as shark-ridden the home loan waters may become, I have the resources to guide you safely to a great loan product. The McDonough Group has given me two big advantages: 1) Great rates and great service on the loans we do well, and 2) Broker-out ability to find the right lender for out-of-the-box transactions.
Here are some observations from my “crow’s nest” at The McDonough Group:
-Conforming Fixed Rates while violently unpredictable are really quite good right now! The McDonough Group’s in-house safe haven takes the form of fixed rate loans under $417,000. Our rates are great, our service is superior, and in this calmer part of the mortgage world our local processing and closing gives us a great edge over our competitors. My advice to anyone: LOCK YOUR RATE! If you’re buying or refinancing and a see a rate that works, don’t even try to second guess this volatile rate environment.
-Rate Watcher Tool is my way to keep an eye on rates for you. Let’s analyze your situation and I’ll use an Excel spreadsheet to keep track of daily rate movements. When (if) we get to the rate you need, I’ll contact you, or better yet, we’ll make a pre-determined plan to take action. Call for details.
-5/1 and 7/1 ARMs have disappeared like ships in the fog. For market reasons that are beyond my comprehension, the secondary market recently collapsed around “intermediate” ARM loans. Last night my research showed that almost all major lenders charge a higher rate for a 5/1 ARM than they charge for a 30-year fixed, effectively eliminating the intermediate ARM as a viable program. But stay tuned, these ships could re-emerge at any time!
-Jumbo Rates are high, qualifying guidelines are tight, but several lenders offer unique and very competitive solutions for the customer needing a loan over $417,000.
-Rising “Conforming” Limit thus far appears to be mostly a false hope. We’ve been waiting eagerly for Fannie Mae to raise the bar for “Conforming” loans to $567,500 in King County. Instead, they’ve created an intermediate tier of loans in King County from $417,000 to $567,500 and it appears that these loans will be priced significantly higher than loans under $417,000. If you fit in this category, we’ll find the lender offering the best terms for you.
-Fed Action to lower short term rates almost always causes fixed mortgage rates to RISE! It seems crazy, but long-term mortgage rates rejoice in bad news, the type of stuff that causes inflation to go lower. When the Fed lowers short-term rates, the stock market usually rejoices, but bond investors fear inflation and often bid the mortgage rates UP rather than down.
If you find yourself sailing in the waters of a new home purchase, or are lost trying to navigate your refinance, don your survival suit and give me a call (206) 251-7976. I’m glad to throw you a life ring, and will put our in-house and broker-out resources to work for you!
Finally, some GOOD NEWS from the Mortgage World!
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Suffice it to say, I certainly have been working my RESILIENCY
muscle a lot over the past few months. Thankfully, we have found
a new source for LOW RATES on Jumbo loans ..but this is for a
select group. The “Over Qualified!”
* 700+ credit scores
* Strong assets
* Full Documentation
* Owner Occupied
Today I was able to secure a loan for $1,000,000 at
4.75% on a 5 year fixed rate mortgage. What a deal!
From all the research I’ve done….this is substantially below
market.
