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Mortgage Money IS Available…For Now

One comment that I hear from real estate agents and lay people alike is that “it’s hard to get a mortgage; so hard, in fact, that no one can get one”.  This is just NOT true!  In reality, lenders are lending at a healthy pace.  Interest rates continue to cooperate and there are many programs for customers.  It’s just that lenders, for the most part, only approve borrowers now that can demonstrate their ABILITY to repay (via income verification)   and their WILLINGNESS to repay (via credit scoring and automated underwriting systems).

That being said, as I look ahead, the mortgage product menu is looking a bit blurry:

Let’s start with FHA…rumors are stronger about increasing the minimum down payment from 3.5% to 5%…there is also talk of cutting back the allowable seller’s concession from 6% to 3%…but further, the maximum loan limit allowable under FHA was inflated to assist in the housing recovery and that is set to expire later this year. Predictions vary on the cut range, but I think a $100,000+ reduction is likely. Is the government trying to lessen demand for FHA insured financing? Seems like they are.

Well, what about Conventional loans? Conforming products (typically underwritten to FannieMae or FreddieMac guidelines) seem okay for now, assuming the GSEs stay in business. But, Jumbo loans (those in excess of the $729,250 amount for a one family home) are facing the 5% Risk Retention requirements being brought on by QRM Rules. How will lenders price loans where they need to set aside 5% of the loan amount in reserve?

At the same time, Jumbo lenders are starting to explore different options for qualification. I am hearing things like “average monthly deposits as support for income when tax returns might appear insufficient” and such. This looks like more aggressive lending beginning to reappear in the non-conforming world.

With inflation starting to heat up, and rates likely to move higher, look for lenders to start offering more adjustable rate mortgages to help people qualify.  It is the standard reaction when the hike in rates either scares buyers back to their apartments or puts unlocked loans which are in process in jeopardy of not remaining approved.

My advice stays the same.  Pigs get slaughtered.  If you can get a mortgage today, at these rates, and with these guidelines, TAKE IT.  Too many people will regret missing this wonderful opportunity that 2011 has presented them.


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9 replies
  1. Theresa
    Theresa says:

    I usually share your articles but as a Realtor I don’t agree that Real estate Agents are saying it is hard to get a mortgage. For this reason I will not post this article.

    Reply
  2. Steve Harney
    Steve Harney says:

    @Theresa
    I’m glad you understand what’s truly taking place. However, some agents have even told me that mortgage money is ‘almost impossible’ to get. Yesterday, even NAR said: “unnecessarily tight credit is continuing to restrain the market”. Dean is just trying to shed some light on the issue.

    Reply
  3. Ron Siegel
    Ron Siegel says:

    @Theresa–
    You are correct that money is available. As Real Estate Professionals we still have to combat the un-informed agent that is spreading mis-information and media who sell ratings instead of facts. I was in a heated Social Media debate earlier this week over some Television News Stories that were spreading misinformation in the Palm Springs, CA area. The public NEEDS to hear from Professionals like you.

    Reply
  4. Debra
    Debra says:

    Shared your article on our Facebook page as always. Buyers need to understand that credit IS tightening up. It may not be HARD in some agent’s minds but it is MORE DIFFICULT to get financing than it used to be. Buyers are having to produce more and more documentation especially if there is any credit issue. Buyers need to be prepared to work cooperatively with their lender in getting those documents in and realize it is not a personal affront but it is the lender working with the underwriter to get their loan through. With all that being said, at least in the Phoenix market, we are seeing a major improvement in the number of buyers and the homes we’re getting off the inventory. Thanks for keeping us up to date and giving our clients great information.

    Reply

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