The Tough Stuff Series: Loan Approval

I’m sure if you have bought or sold a home before then you know that Real Estate isn’t all sunshine and rainbows.  There is some tough stuff to deal with!  (All the more reason to have a professional helping you – I’m just sayin’ )  But in this market, things can be even tougher! 

The Bad News:  Lately it seems like each deal has at least one obstacle to overcome. 

The Good News:  Not one of those deals has fallen through…we’ve made it work!  Nearly every challenge has a solution, you just need someone on your side to think creatively for you!
I’ll go over a 1 challenger here, but stay tuned for future posts in the Tough Stuff Series, for additional challenges and how to overcome them!

Loan Approval: 

The Challenge - Due to the mortgage lenders tightening their guidelines of who gets a mortgage and for how much, many (and I repeat MANY) people have trouble getting qualified for the amount they want in order to get into a house they are comfortable with.   We will house hunt and house hunt and house hunt some more, but despite all the inventory out there, they may not find what they are looking for. 
The Solution – Brainstorm with your lender and Realtor about different loan programs.  A 30-Year Fixed Mortgage is pretty typical in this market, especially since people are scared make that terrified of the Adjustable Rate Mortgage programs.  But those programs have stipulations now that make them not so terrifying.
Scenario – Just recently, one of our buyers was looking for a home in the $195,000 range.  With no out of pocket money to put towards repairs, she was having trouble finding something that didn’t need a TON of work. So we got creative with a 7/1 ARM loan and was able to qualify for $10,000 more!  That’s a huge difference when you look at homes! 
Details – What is a 7/1 ARM?  Basically if you qualify, you can get a low interest rate for 7 years.  Then after 7 years, the interest rate would adjust every year until it hits a cap that they have previously determined.  For example, if you started out at a 3% interest rate and the cap was 6 additional points, then the highest your rate would go would be 9%.  PLUS, you’d have the chance to refinance during those “adjustable years” if the current market rate were better than your adjusting rate.  One caveat to that would be that you’d have to pay your closing cost for that refinance (either out of pocket or rolling it into your mortgage if there is enough equity).

Bottom line?  There are different programs out there than just a 30 year fixed mortgage.  Don’t walk away from buying a home frustrated until you make sure you and your team of professionals have looked at all the options!  And as with everything else, make sure you talk to your mortgage lender and Realtor about all the details so that you know the ins and outs before signing the docs!  Beware of anything that has the words balloon payments or pre-payment penalty!

So one challenge down and many more to go!  Come back to hear about other challenges and how to overcome them.  We leave no stone unturned here.  I don’t care what they say, owning a home is still the American dream and a great way to invest your money long term. 

As always, feel free to comment and share your expertise and experience!