Northern Michigan Mortgage Industry: Outlook good – for the first time in years
At long last, there's enough good news in the mortgage industry to fill a TCBN column. The 200 mph pendulum swing that took us overnight from seemingly unregulated to seemingly strangulated was remarkable. Most logical folks agree that something needed to be done, but those same logical people would likely agree that the strict "consumer protection" guidelines that went into effect were too much – making it difficult, if not impossible, for many people to obtain financing. What good were historically low interest rates when so few people could get them?
The good news: There are signs that the pendulum may have started to swing back toward a reasonable place. To be clear, not everyone is going to qualify for a mortgage today, but with a five-minute phone call a qualified mortgage professional can let you know if your scenario offers options to access today's new "even-lower-than-the-last-historically-low rate."
The details on a few different scenarios that are happening now:
Good News for Home Buyers:
Contrary to rumors, mortgages are still available with as little as 5 percent down. Yes, Private Mortgage Insurance (PMI) can come into play if you have less than 20 percent down, but a knowledgeable mortgage professional will offer you legitimate options to avoid PMI and save you money. Add in the low rates and reasonably priced homes, and right now is the new "best time to buy." For those who meet the income, loan-size, and location requirements, other options include the Rural Development zero percent-down loan or Federal Housing Administration's 3.5 percent-down loan.
Good News for Refinances:
Smart money people always look for ways to get ahead. With today's lower-than-low rates, it makes sense to see if you can apply this to what's likely your largest debt: your mortgage. Here are some things to consider:
The Fannie Mae and Freddie Mac refinance programs are excellent options in which, if you qualify, you can refinance – even if you owe more than your home is worth. With these programs, sometimes appraisals aren't required, making the process much easier. It takes about two minutes for a mortgage professional to let you know if you qualify.
Some lenders today are allowing you to set the term of your loan to match the payment you're seeking. For instance, someone with a 30-year mortgage may like today's super low 15-year rate and the idea of paying off their loan more quickly, but can't quite afford that higher 15-year payment. No problem. You can choose almost any term you want. A 19-year loan? A 23-year? They're all possible and enable you to match your desired payment to the term that best positions you for the fastest repayment.
For some, it makes sense to borrow from your 401(k) to pay off your home equity line because doing so enables you to lower your home's loan-to-value ratio enough to qualify for a refinance. This way, instead of paying interest on a loan that was previously preventing you from refinancing to a lower rate, you're paying the interest to your 401(k)(i.e. yourself) and are able to refinance your first mortgage, saving significantly. Keep in mind that 401(k) rules vary, but the idea is that with rates this low, it's worth looking at every option to see if there's a financial benefit for your scenario.
Jumbos, Second Homes, and Vacant Land:
Some lenders simply no longer offer financing for vacant land and/or jumbo loans (loans greater than $417,000), but the lenders that do offer that sort of financing seem to be providing excellent rates and fees and are relaxing some of the more extreme guidelines they'd implemented over the past four years. These types of loans, along with second homes and even investment properties, are worth taking another look at if you were turned down recently.
Today's Mortgage Broker:
The mortgage crisis has a bright side. Today, no industry is more closely monitored and scrutinized. The crisis has helped to force out those who made a living originating bad loans for their clients out of greed or ignorance.
As a result, those still standing in this field feel an obligation to work harder to earn the public's confidence back from the damage that was done by the bad actors. In short, the mortgage brokers still working today are an excellent resource for home financing; they typically have access to a variety of lenders, can find the best rates available, are able to provide many programs, they're typically compensated by the bank to whom they deliver their loans, and their process has now become virtually transparent to you, the consumer.
Is It Worth the Effort?:
The loan process today is really no more difficult than it was when your parents applied for a home loan in the '70s or '80s: Providing W-2 forms, pay stubs, bank statements and proving a reasonable credit history were and are still part of the process. For those that see the value in accessing these ultra-low rates, some paperwork and time is a small price to pay for something that can save tens of thousands of dollars or more.
A good mortgage broker will not charge you anything to get pre-qualified. He or she will, however, give you an idea of whether or not you will qualify, how much your payment will be, and what challenges to expect with your loan.
Durbin is the owner of Bay Mortgage in Traverse City. He is a licensed mortgage broker with the State of Michigan and registered with the National Mortgage Licensing System. 231-933-9400 or email@example.com.