By Rob Jupille
Contrary to popular belief, the entire mortgage market is not in crisis. Freelancers and others believe that the subprime lending crisis has made all types of mortgages difficult to arrange. But the reality is that most mortgage products have not been hugely affected, and mortgage money is still abundant at historically low rates.
In fact, conventional mortgages are alive and well. You�ve probably read that major mortgage lenders expect to originate fewer mortgage loans in 2008. Rest assured, conventional mortgages aren�t disappearing, just the �liar loans� and lenient underwriting standards that permitted people to buy more home than they could comfortably afford.
In recent years, many freelance professionals used �stated income� or �no doc� loans for their convenience and lack of scrutiny. These loans are now all but history and fewer exotic mortgages are being written. Lenders are going back to basics. If you want to buy a home, they will look very closely at your credit score and repayment history, then W-2s (employees) or tax returns (freelancers). A lender may ask for proof that you have enough cash reserves to cover two-to-six-months� worth of mortgage, insurance and tax payments, depending on the size of the loan. You also will need to accept the fact that it will take longer for your loan to be approved.
If you�re a first-time buyer and you have great credit history, you may be able to buy with nothing down through Freddie Mac and Fannie Mae (if you need a loan of less than $417,000) or with help from the FHA or VA. In addition, the FHA may undergo a real transformation. On top of the FHA Secure program designed to help those with ARMs refinance, FHA loan limits could be raised as well.
On September 18th, the House of Representatives passed legislation introduced by Rep. Maxine Waters (D-CA) and Rep. Barney Frank (D-MA) that would, among other provisions, raise FHA single-family home loan limits. The Bush Administration, however, is opposed to the higher loan limits.
The mortgage industry is healthier than publicized. You still have choices. In this financial climate, the brokers who have strong relationships with the largest lenders or good, credible contracts with Freddie Mac or Fannie Mae will likely provide you with the widest range of options. The consumer perception of today�s mortgage market differs markedly from the reality.
Rob Jupille is president of RTJ Financial Management and can be reached at (310) 587-3370 or [email protected].
Written by Rob Jupille
