Josh Harmatz

The american economy is still recovering from the mortgage crisis of 2007 as investors in the mortgage marketplace today are extremely cautious. Their apprehension to make another mistake on a mortgage loan is causing a continual tightening of the lending guidelines. However, it is not all doom and gloom. Loans are still being made and there are still very successful mortgage and real estate professionals whom are adapting to the changes to get deals done. The following five recent changes are important for every client looking for a purchase or refinance loan.
1. Down payment requirements have changed.
A conventional loan (Fannie Mae or Freddie Mac secured loan) requires 20% down for a mortgage loan for investors on a one unit property and 25% down is required for a two-four unit property. We have been running into issues with sourcing down payments regardless of the loan type. It is important that the down payment has been in the bank account it is coming from for 60days and that it is not a business account.
2. Debt Ratios are capped at 50% for a conventional loan.
Most lenders are going to stop at 45% for a refinance or purchase; however 50% is the actual tolerance with compensating factors from Fannie Mae. This is a significant change in the marketplace for these loans. In the past, with a DU approval, loans have been approved well above 55% and sometimes 60% of the borrower’s gross income.
3. Mortgage Rates are still at record lows.
If you are looking for a purchase home loan or a refinance, record low interest rates will make that payment much lower. Take advantage while you can as these low interest rates won’t last forever. With more equity in the property and credit scores above 740 you can help yourself qualify for the best loan possible.
4. New disclosure requirements will delay the closing.
With both regulatory changes; MDIA/HERA, and RESPA, increased disclosure requirements and waiting periods can make a 30 day close cutting it close. The key is that the loan is pre-approved properly at the beginning of the process, any challenges are discussed up front, and the client doesn’t change their loan program or terms. Working with the best mortgage lenders will help as well.
5. The Rural Development Agency is still offering 100% financing with no mortgage insurance.
It sounds too good to be true, however it is real. As long as the client doesn’t make too much for the area, and the home is in a rural area (most places in the country not in a metropolitan area), they can get a mortgage loan for a purchase with no money out of pocket.
While mortgage rates are still at all time lows making qualifying for a loan that much easier, tighter lending guidelines can make it that much more difficult. A seasoned mortgage professional working with the best mortgage lenders will be able to guide you or your clients through the myriad of changes that are re-shaping our industry.