As a mortgage professional, I spend a lot of time keeping up on my industry. In the past few years, there have been hundreds of changes brought on by dozens of new state and federal laws and regulations. I read online newspapers for my profession, go to webinars, get memos, share gossip with my industry peers and take continuing education and admit it’s still hard to keep straight. I can only suggest to the consumer to not even try and keep up, and if you are wondering about can you get a loan or what type of loan is best to ask a professional. About the worst thing you can do is ask advice from someone who last got a mortgage more than a year or two ago, and don’t assume that the advice you get from your cousin’s neighbor’s brother-in-law who last got a mortgage in the 1990s is gospel. And don’t assume that your friend who got a mortgage a year ago and makes about the same money you do means that you could or could not get the same thing.
One point I get a lot of questions on is the impact of a foreclosure, or a near foreclosure on getting a loan. Back a few years ago, a lot of people were struggling with their home loans and many who did not have a foreclosure were so close that they were more than 90 days late. If you were more than 90 days late and the lender started foreclosure but did not complete it because you worked it out, then this event results in a code on your credit report that tells other creditors you reached pre-foreclosure status, meaning the paperwork had been filed but the default was cured. Generally there is a “9” somewhere on the line on your credit report about the mortgage. This means you were served with foreclosure papers but cured the default prior to a sale. The report may not say “foreclosure” but it will be viewed as such by future lenders.
Generally you do need to wait seven years after even a pre-foreclosure, although in some instances you might get a loan in as few as three years if you can put 20 percent down and there were extenuating circumstances such as illness or a divorce.
Another question I get a lot is how much does a homebuyer have to put down. The answer to that is it depends, on several things. Low to moderate income buyers purchasing anything but a condo can often get 97- 100 percent financing. Others buying a primary residence can often do so with 3-5 percent down payment. Second-home buyers will have to put at least 10 percent down. If you find walking in ski boots just isn’t your style and are scouting out cabins up in Bachelor Gulch, then you had best have 30-40 percent for a down payment for that cozy little mansion in the woods that requires packing a snack if you venture to the west wing.
One other question I get is about interest-only loans. Those were completely gone from the scene for several years, but they are starting to show up occasionally. These loans have been deemed to be “risky” to consumers by the Dodd Frank act (often referred to in the industry as the “Barney Knows Best Act”) and as such as dimly viewed by banking regulators, but if you really don’t need the money, I could probably find you one. While getting a mortgage loan is much more challenging than it used to be, it can be done. Our company is actually busier that we have been in some time and I would attribute that to knowing at least most of the options available for a borrower.
Chris Neuswanger is a mortgage loan originator with the Macro Financial Group Team at Mac5 Mortgage and can be reached at 970-748-0342. He welcomes mortgage related questions from readers.