Qualifying for a loan and getting approved for a mortgage in 2010 is not as easy as it used to be. The real estate market and economy both affect the behaviors and requirements of mortgage lenders. This is why every home buyer needs to meet with a mortgage planning specialist. Kabir Mahadeva is a certified mortgage planning specialist in Asheville, NC. He has worked as an expert in the mortgage industry since 2001 and in the following interview shares his thoughts on a number of thought provoking real estate questions. Q. What are the biggest changes in the mortgage industry since 2008? A. There are three major changes I observed. First, qualifying for a loan is more difficult—higher credit, lower debt ratios and larger down payment requirements all affect potential buyers. Second, the new Good Faith Estimate disclosure requirements and regulations governing appraisals are active. Third, there are far fewer loan originators still in the profession. Since 2008 many companies have closed their doors. Q. What strategies can potential buyers use to put together a plan to qualify in the future if they don't currently? A. Working with a mortgage specialist that understands a buyer's current financial situation and can help them get to where they want to be is the best strategy. I began working with a young couple last May that needed higher credit scores and some savings for a down payment and closing costs. After counseling them for almost one year, they're closing on a home in a few weeks. If buyers work with an experienced mortgage planner they can overcome obstacles more easily and quickly. There are really only a few basic mortgage types, and a professional mortgage planner helps borrowers choose the right product for their situation. While a low rate is important, most people need to focus on the total cost of a mortgage over the time frame that they will have it. The majority of people do not have the same mortgage loan for more than 5 years. Also, if negotiating a purchase, sometimes using seller contributions properly can make a dramatic difference in a mortgage. Q. What are the advantages of working with a mortgage banker instead of a mortgage broker? A. A broker is a middleman between the borrower and the lender; the broker helps the borrowers choose a loan program, takes their application, then submits the application and other documentation to a lender who makes the loan decision (underwriting) and closes the loan (funding). The mortgage banker works directly for the lender. Just like the broker, they counsel borrowers, and take applications. However, mortgage bankers are more closely tied to the loan because the underwriting and closing take place within the same company. Appraisals are ordered as well. Mortgage bankers can also broker loans if necessary, but the primary advantage of working with one is that the accountability for the loan stays within the same organization, with no middleman. Q. Is it better to find a lender online or contact a local lender? A. Getting a loan is very different from buying anything else. Each loan is unique and is customized to suit the homebuyer's individual needs, and all loan applications have specific issues and problems that require attention. Working with a local lender who is familiar with the area, local business practices, and local mortgage resources can mean the difference between closing on time, or even closing at all. A local lender is more personally accountable to you and other professionals helping you with the purchase. Q. What is the most important advice you have for homebuyers? A. Consider making the move before April 30 so you can take advantage of the tax credit (check with your tax adviser about eligibility). Mortgage rates are expected to increase this spring since the Fed will no longer purchase mortgage-backed securities, which have kept the rates down so far. Move-up or former homebuyers are able to afford more house now than possibly this summer due to increases in rates and monthly payments. Also, talk to an experienced mortgage planner before you go shopping. People like me can help you know what you can afford for a payment, how this translates into a sales price, and how much money you will need to have on hand before making an offer. Kabir Mahadeva is a mortgage planning specialist in Asheville, North Carolina. For more information visit www.KabirM.com.
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