Mortgage Rates Are Down
(But not everyone is eligible)
by Laure Feld, CMPS

Overall, mortgage rates are at their lowest levels since late-2005.  Despite rates falling, however, not everyone can take advantage.  This is because mortgage lenders started to tighten the guidelines of what they will lend and to whom. 

Not so very long ago, there was a saying in the Lending profession:  “If you can fog a mirror, you can get a mortgage”.  Well, it’s not that easy any longer.  We finally gone back to the basics in mortgage lending and here are some of the requirements:

1)      You have to have solid employment for the last 2 years.  Job changes are acceptable, even outside your normal line of work.  Years ago, you were required to have had 2 years in the same profession, but that is not an issue today (but I wouldn’t be surprised to see that return in the future…. Stay tuned!)  Job gaps are deal KILLERS.  And what exactly is a “job gap”?  It’s a gap in employment of greater than 2 -3 months.  So if you’ve been collecting unemployment for 5 or 6 months, don’t plan on buying or refinancing.  If you are a seasonal employee, and typically get laid off in the winter, that is completely fine!  (isn’t that weird?)  If you get laid off every year, we can even use the unemployment income to qualify you financially!  But you have to be back on the job in order to close the loan.  The longer you hold a job, the more stable you income is and that is an important consideration.

2)      The payments on the home must be affordable.  That is still a moving target….”affordable” and the definition thereof.  The traditional definition of affordable is determined by “expense ratios” and every loan program has it’s own criteria of what is acceptable.  Generally acceptable is when the house payment,  including taxes and insurance, is 29% to 31% of your GROSS income.  Total expenses (credit cards, car payments but not utilities) should not exceed 43% of your Gross income.  These are considered the standard expense ratios for Government Guaranteed Mortgage loans which include VA Loans, FHA Loans and USDA Loans.  Government “backed” loans are much less restrictive and I’ve received approvals with expenses over 50%!

3)      Your credit history must be acceptable.  Perfect credit is great!  But not everyone has a perfect credit history.  A glitch in your credit is not as difficult to overcome as an entire credit history full of late payments.  Your credit report really paints a picture of how you pay your bills over time and that is the real issue…. Do you have bad habits?  Or did you have a situation that caused you to pay late?  And how long did that last?   Bankruptcy can even be ignored in some circumstances, if it can be documented as an acceptable cause ie. Death of a spouse or medical bills which are the two most acceptable reasons. 

4)      How much equity you have.  What is equity?  If you sold the house tomorrow, and you paid off your mortgage, how much cash would be left?  That is your “equity”.  Again, another moving target in the mortgage finance world.  There has been a lot of finger pointing in this latest mortgage implosion, and some of the fingers are pointing at Appraisers, accusing them of over-valuing homes and allowing Borrowers to finance too much… giving a falsified sense of equity to the Lender and to the Borrower both!  Today, to get the very best mortgage rate, you should expect to have 20% equity.  In other words, if you home is worth $100,000 then you would not want a mortgage of more than $80,000.  I’ve seen the most tightening in this area of equity or “Loan to Value”.  Loan approvals at higher loan to values have less appealing interest rates or other “add on” expenses such as PMI (private mortgage insurance).

Are 100% loans gone?  There are still 5 very affordable, low interest rate,  100% purchase loans available for borrowers that I use:

1)      My favorite is the USDA.  The US Dept of Agriculture has a very aggressive 100% PLUS purchase loan, but it is “area” restrictive.  In other words, you can’t get this loan in Chicago!  But you would be surprised at how many areas actually DO QUALIFY. 

2)      VA has a very low interest rate, 100% loan for qualifying Veterans and should be considered if you are a Veteran.

3)      Fannie Mae still has their 100% FLEX loan.  It’s been around for some years now and they are tightening up on credit and income criteria, but it’s still a very good, affordable loan.

4)      My Community, a Fannie Mae product, has reduced PMI (private mortgage insurance) costs if you are considered to be of moderate income for your area.  You can actually make too much money to qualify for this loan!

5)      One of my favorite Lenders has their very own 100% loan and its not restricted by area, or income limits.  Interest rates are very low and can also be used in a refinance as long as you are not taking cash out on the refinance.

If you have credit issues stopping you from buying or refinancing, you may need help.  Give me a call and I can teach you how to clean up your credit history.  I will tell you what to do to buy that home, or refinance at the lowest rates GUARANTEED !

You can reach Laure at American Mortgage Lending, Inc.  3709 N. Sheridan Rd, Peoria, Il  61614  309-688-5568 or at www.FinanceLady.Net

For help with your Home Mortgage, Please call me
toll free at 866-451-7057

For a NO OBLIGATION,  FREE CONSULTATION.

We work with “less than perfect” credit.

       Email: LAURE@AMLENDING.NET