Mortgage lenders dispel myths during economic downturn.

Loans available at great rates


By H.M. Cauley

For the Journal-Constitution

Keeping up with the current financial news can be challenging and depressing. When it comes to mortgages, in particular, potential buyers are getting caught up in a few myths that Jeff Brown spends a lot of time dispelling.

“Some of it blows me away,” said Brown, the vice president of mortgage lending for Bank of America Mortgage. “I hear from so many people who believe that banks have tightened up so much that you can’t get a [home] loan, that banks have quit lending money. It’s just not true.”

Sandra Dunn, president of Duluth-based Five Star Mortgage, said would-be buyers will find that mortgage money is available and at amazing rates.

“Interest rates are at a historic low,” said Dunn. “When you drop below 5 percent for a 30-year, fixed loan, it’s almost unbelievable. I also have some lenders who have come back into the marketplace with jumbo loan products [more than $500,000] that I didn’t have six months ago. And in January, I will have a 100 percent loan available again through a special grant program for qualified, first-time buyers.”

“Qualified” is the latest lending buzzword. Whether you can get a traditional 30-year, an adjustable or a 100 percent loan depends largely on how solid your credit and income are.

“Things have gone back to where they were years ago,” Brown said. “As long as you have reasonably good credit, some down payment and verifiable income, you can get a loan. But you have to demonstrate that you can afford to repay the mortgage.”

One fact that many buyers may not realize, Dunn said, is that the creative financing plans of the past are gone.

“There are no 80-20 combo loans with zero down; no stated income loans based on whatever you tell the loan officers; and no more three-payment option plans where you pick from three payment amounts each month,” he said. “They’ve really fallen out of favor because they had very high default rates.”

One long-established program that is gaining popularity is the basic Federal Housing Administration loan. This government-insured plan has been around for 40 years, but it fell out of favor when other lenders stopped requiring detailed documentation. For an FHA loan, buyers have to produce two years of tax and income records.

“Last year, about 3 percent of our business was FHA loans; now, it’s almost 70 percent,” Brown said. “It’s a great plan that allows a 3.5 percent down payment, has more flexible credit guidelines and allows the seller to pay up to 6 percent [toward] closing costs.”

There is one big restriction: The FHA loans are limited to a max of $320,850. “But by far, it is a great option for anyone buying a home that’s $330,000 or less,” Brown said.

Lenders are also seeing an uptick in the number of homeowners who want to refinance, Dunn said.

“If rates trend as low as they have been, there will be more and more people with equity in their homes who can benefit from a lower rate,” she said. “I like to say if there’s a point difference from your current rate, it’s worth the refinance cost, which is about 3 percent of the loan.”

Dunn’s outlook for the 2009 lending landscape is bright. “There are some very good loans out there that consumers can qualify for,” she said. “There is flexible financing as well. The bottom line is, money is available.”


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The trend today, you can't see people who has no credit or dept it makes them challenging and depressing also.