Mortgage Misconceptions in California
To hear about mortgage misconceptions and the challenges that potential homeowners face in California, Finance Monthly talks to broker and owner of Mortgage Express – Carole Ryan.
What are the key misconceptions among buyers in relation to mortgages?
Buying your first home should be an exciting and fun endeavour, but I think a lot of potential first-time homebuyers are held back by misconceptions of the loan approval process and the fear they may not qualify. Two of the biggest misconceptions are that they need 20% down and perfect credit. But not anymore - Fannie Mae’s, HomeReady mortgages, and Freddie Mac’s
Home Possible® and Home Possible Advantage® mortgages are new and innovative conventional programs that bring a whole new set of underwriting guidelines to help more low to moderate-income borrowers realize their dream of home ownership. Down payments of 3%, FICOs starting at 620 with most lenders, and higher debt-to-income ratio’s in some circumstances.
Another change by Fannie and Freddie that took effect on 1 January 2018 will also help buyers buy more with less down. The conforming and high-balance loan limits were increased. Now buyers can put 3% down on loans of up to $453,100, whilst in high-balance areas, from $453,101 to $679,650, the minimum down is 5%. The bottom line here is that if you are seriously interested in buying a home, there are options out there to help your achieve your dream of homeownership. The only thing that you have to do is to take the first step - find a good lender and get preapproved.
What are the key challenges that your clients face before applying for a mortgage and how do you help them overcome them?
As a broker with over 25 years of experience in mortgage lending, I work with all types of buyers. I find that almost all of the clients that I advise face challenges revolving around what I call the BIG 3 - income, credit and funds to close. If we have a debt to income issue, we look at adding a co-signor, and/or paying off debt, or as a last resort - buying less. I help borrowers resolve minor credit issues that don’t keep them from getting a loan, those with major issues, I refer to a great credit restoration company I work with.
There are several solutions for funds to close. The easiest one being a “gift” from a family member, a lender credit, based on the interest rate chosen, a seller credit, a loan against or liquidation of a 401K, and of course a variety of down payment assistance programs.
What makes your company unique when compared to your competitors?
What makes me and my company unique is very simple - I’m able to provide incredible hands on service to my clients, built around their schedules and needs. Mortgage Express is my company and I handle all of the loans that I work on personally - from pre-approval to close of escrow. This allows me to oversee my files, keeping everyone involved in the transaction updated and being sure we’re always on track to meet the closing date. I meet with borrowers on-line in a unique screen share, based on the time of day, night or weekend that is convenient for them, whilst they can attend from the comfort of home. This allows me to show them, in real time, how their income, debt and assets affect the loan they can qualify for, as well as ways to restructure the loan in different ways, based on their needs. All of this as they watch, ask questions and request changes. It’s also a great opportunity for me to educate them about the processes we will be going through so they know exactly what to expect, including our time frame and the items I will need them to take care of. No screen share would be complete without an explanation of how lenders pricing works, showing them the different interest rates, and how pricing adjustments affect the options they will choose from. We wrap up with me preparing an estimate of funds needed for closing. The real magic starts when they get an accepted contract and escrow is opened. In a matter of a few days, I have the loan submitted, appraisal ordered and our initial loan approval. My average closing time is 21 days.
