Mortgages in a Nutshell

In these challenging times it is easy to think that it is impossible to get a mortgage if you spend too much time watching the news. The truth of the matter is that there is still plenty of mortgage money still available, but the qualifying guidelines have changed somewhat. If you are considering purchasing property, but are wondering if you can meet the qualifying guidelines there are a few simple steps you can take to give yourself some confidence.

The first step for someone considering purchasing a new home and taking on a new mortgage is to consider the additional expenses they will be incurring. They need to determine the new Real Estate Taxes, Homeowners insurance, POA fees, and the mortgage payment. Once they have a reasonable estimate of this number they can evaluate for themselves if it is something they can handle. The best way to come up with this estimate is to work with a professional Realtor, like John Robinson, and a mortgage professional. John will help you figure out the taxes, insurance, and homeowners association fees, and your mortgage professional can help put together the mortgage numbers.

Once you have determined your proposed monthly expenses you can begin to pull together your financial documents to support your loan application. When you begin working with your lender they will review your information and be able to give you an idea if you are credit qualified. This means your credit score is acceptable and your income and asset document support enough income for you to mange the mortgage payments for the foreseeable future. If at this time you do not qualify, your mortgage lender will be able to help you identify the issues and help you make a plan to correct them.

In a nutshell, the most important thing for a prospective buyer is to know approximately how much their purchase will cost them. These costs need to be considered from multiple perspectives; funds at closing and monthly ongoing expenses. If the buyer is personally comfortable with these costs, they are most likely in a good position to qualify for a mortgage.

The Difference Between Pre-Qualification and Pre-Approval

Ben Russ, Vice President of Hilton Head Mortgage sent me the following pertinent information regarding financing for a home on Hilton Head Island.

Pre-qualification is the first step in obtaining mortgage financing.

A potential borrower answers a few questions to provide the loan consultant with a quick snapshot of the borrower's income, existing debt, accumulated savings and whether or not there is a co-borrower. Signatures allow the loan consultant to run a credit report and begin to determine what loans are good candidates for this particular client. However, there are literally thousands of loan programs available.

It is important for the loan professional to know the long-term financial objectives of the prospective homeowner.

Pre-approval is a written documentation that proves the borrower has full support of a lender.

It means the form 1003 Uniform Residential Loan Application has been completed and reviewed by an underwriter. Based on the borrower's income, debt ratio and savings, the underwriter will provide a dollar amount this borrower is eligible for.

Now the borrower has the convenience of shopping for a home in the price range agreed upon by the lender.

Pre-approval allows potential homeowners to shop as cash buyers, and that means negotiating power. The seller will take an offer from a pre-approved shopper much more seriously and may even accept a lower bid because they know the financing is in place and the deal is secure.

For more information regarding the home-buying lending process on Hilton Head Island, South Carolina, or for real estate information, email me with your questions at HiltonHeadJR@aol.com.

FHA Raises Loan Limits

Great News! The U.S. Senate recently voted 93 to 1 to raise the loan limits on government insured FHA (Federal Housing Administration) mortgage loans.

This is in response to the recent credit crisis and collapse of the sub prime mortgage market. The intention is that this will enable borrowers who deserve a mortgage to obtain one and at the same time allow those current mortgage holders to refinance their existing mortgages to lower payments.

FHA loans are frequently used for “first time homebuyers”. This is because these buyers commonly have decent credit, low monthly expenditures, but not a lot in the way of liquidity. An FHA Mortgage allows 97% financing with minimal out of pocket costs and more forgiving credit scores. FHA also offers attractive interest rates which is a big advantage over the high rates of previous sub-prime mortgages.

However, in the past FHA has been capped in Beaufort County at $284,000. With this increase in loan limits the new limit will be $387,500. This will allow more buyers to take advantage of home prices in Beaufort County and utilize the advantages of FHA Mortgages.

So what’s the bad news? At this point the Senate has only voted on this increase in loan limits until the end of 2008.

For more information on FHA Mortgages please call Tony Knapp from Mortgage Network at 843-341-0111.

Tony is a member of John Robinson’s Performance Team and a loan officer for Mortgage Network, Beaufort County’s largest and most respected mortgage lender.

Hilton Head Island Money Talk

Chances are that you have been watching with keen interest, the wild gyrations of the financial markets over the past number of days, and like me, wondered what in the world does all of this mean?

Are we heading into a Bear market or are we already through one and now into a Bull market? Is there a recession in our future? Job growth would indicate not. Is this instant tax credit that the democrats & republicans are working on really the answer, and if so, to what problem? It's allvery strange.

The only certainty out of all of this is that the Fed's aggressive move on interest rates is going to have a significant and positive impact on our nation's real estate issues, by providing relatively cheap money, similar to what was experienced back in 2002-2003 when we re-bounded from the economic hit brought on by 9/11.

Rates are changing daily and there may be another round of reductions by the Fed next week. If you need guidance on current rates, current conforming loan levels and availability on Hilton Head Island, I’ll be happy to assist.

But be assured that money is readily available for good quality borrowers and at very attractive rates for non-leveraged borrowers. Additionally, sellers are very willing to cooperate in buying down rates as part of the negotiating process.

If you've been waiting for a sign that the time is right to reconsider real estate on Hilton Head Island, we may have just witnessed it in the financial events of this most recent week. No better time, especially if you have been considering a property capable of generating income production, as we're approaching the start of our busiest and most profitable time of the year.

Give me a call and let me help get you started in your quest for that perfect second home on Hilton Head Island.

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Understanding Mortgage Lending

Many homebuyers seeking a mortgage are perplexed about the current state of available mortgage products. This is not surprising when considering all that has been in the media over the last several months.

At the heart of the issue are subprime borrowers and how they have affected global financial markets. Subprime Mortgages are a type of loan that is offered to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors which suggest that they have a reasonable chance of defaulting on the debt repayment. Over the past year many of these borrowers have defaulted on their mortgages which, in turn, affected financial markets worldwide.

Most U.S. mortgages are tied to global investment markets on Wall Street, where investment banks bundle them up and convert them into securities. These mortgage backed securities (MBS) are, in turn, sold to private and government institutions both in the U.S. and abroad. With the rise in mortgage defaults, a wave of financial loss has spread worldwide. This “crisis” has caused many mortgage lenders to go out of business including some nationally recognized companies that were deeply involved in subprime lending.

The good news now is that it is one of the best times in the last 40 years to secure a mortgage with interest rates at near historic lows. Homebuyers who can qualify for a conventional mortgage have a vast array of products from which to choose. Those who already have a mortgage will also find that now is a great time to refinance into a long term low interest mortgage.

Homebuyers should join with their REALTOR® and meet with a mortgage professional to obtain a pre-qualification for their mortgage. This will expedite the buying process and strengthen the buyer’s negotiating position. The procedure is simple and takes just a few minutes to complete. Decisions made by a quality lender are often provided in a matter of minutes. A reputable lender should also provide a “pre-qualification letter” to use for the home buying process.

Now is a great time for homebuyers to secure a mortgage.

Tony Knapp is a loan officer at Mortgage Network, Hilton Head Island’s largest and most respected mortgage lender. He is also a member of the John Robinson Team. For more information, Tony can be reached at 843-341-0111 or tknapp@mortgagenetwork.com.