Special Feature: What Moms Should Know About Mortgages
Today's mom needs to know how to take action in the family's money matters. The most important investment most families ever make is their home. Many have questions about buying a new home in this economy. Gain insight with my special feature, The 2010 Real Estate Market & What Moms Should Know About It.
This week you will get in-depth tips about mortgages from Ryann Thornton, the top mortgage consultant in Arkansas.
Ryann Thornton is a home mortgage consultant and a mom. She is the top Mortgage Consultant in the state of Arkansas for Wells Fargo and one of the top 3 mortgage consultants for her region (AR, LA, AL, West Memphis,TN). Ryann was also featured in the Wells Fargo Annual Report for 2009 for her excellent results. She has been in finance for five years, and in her current position for two years.
Katja Presnal: What kind of shift have you seen in the housing market / home loans in the past six months, if any?
Ryann Thornton: The tax credit really helped to boost home sales and new mortgage loans in 2009 and the first quarter of 2010. This boost helped to absorb some bank forclosure inventory, and also lend some improvement to the general market conditions. However, when the tax credit ended in April, we started to see purchase loan applications decline significantly and fast. If I remember correctly, I believe it was Yahoo News which reported a 27% drop in applications in May, and another 30% decline from the month of May to June. Rates dropped to historical lows again.
I attribute the drop not only to decreased purchase applications but general economic conditions world wide. Refinance applications have increased as a result of the low rates, but due to declining property values, many buyers are unable to refinance. There are some special programs through VA, FHA, Fannie Mae, and Freddie Mac, but not everyone will qualify for these programs and some servicers do not offer them. Forclosures continue to rise and home sales continue to decrease.
Presnal: The economy reflected on many people's credit scores, do you have any tips how to get them up, and what helps to get a mortgage?
Thornton: There are companies that offer credit repair (not to be confused with credit counseling). For a fee, they will council you on what to do to rebuild or establish good credit, and work towards clearing derogatory records from ones credit report. When I counsel borrowers on rebuilding credit, I tend to suggest staying away from using secured credit cards. The reason being is that simply paying credit card bills on time does not always guarentee good credit reporting. Your revolving debt ratio has approx. 35% of the bearing on your credit score. When you charge and carry a balance over 20% of your total limit, it can begin to negatively affect your score, regardless of your payment history.That said, most secured cards allow a limit of $250-$500, and one trip to the grocery store can put you over 50% of your limit.
I suggest borrowers invest in CD loans (many banks will allow you to open a CD with as little as $250-$500). You can secure a loan against your own money without having to credit qualify (because your funds are the collateral), and when you make the monthly payments, it will report as good payment on an installment account. You don't have to worry about getting in trouble with exceeding your limit like you do on a credit card. I had a borrower in the last 6 months do exactly this and their median score came up 100 points and it was enough to purchase a home on an FHA loan with an interest rate of 5% fixed for 30 yrs.
Presnal: Is now a good time to buy a house? Why or why not?
Thornton: Regardless of the current market status, home ownership is always a benefit. We all need a place to live. Granted, renting is less commitment, but ownership affords you benefits that renting can not. Not only the tax incentive, but having something you can call your own. As far as timing is concerned, rates are at historical lows, home prices are the lowest they have been in a decade, and you can actually buy a nice 3 bedroom, 2 bath home in many areas and pay less in mortgage premiums then you would in rent for a two bedroom apartment.
Presnal: Who should especially be thinking about purchasing houses right now, and how difficult it is to qualify for home loans?
Thornton: Again, home ownership is something that anyone can benefit from, and qualifying is not as hard as many would think. There are many programs still available for borrowers with less than perfect credit and there are programs that require little to no money down in many cases. Several investors have special programs designed to provide incentive to buyers to purchase their REOs (real estate owned) offering lower down payments and a willingness to pay closing fees if you use their financing programs. Department of Housing and Urban Development (HUD) offers $100 down payment with a full price offer on their REOs and will pay up to 3% in closing fees, and Fannie Mae offers a program that allows you to put as little as 3% down with no Mortgage Insurance, also offering to pay closing fees in many cases. These are two examples of great programs available to buyers. Again, not all lenders offer these programs, but most retail lenders (like Wells Fargo) do.
Search Results offers $100 dollar down payment with a full price offer on their REOs and will pay up to 3% in closing fees, and Fannie Mae offers a program that allows you to put as little as 3% down with no Mortgage Insurance, also offering to pay closing fees in many cases. These are two examples of great programs available to buyers. Again, not all lenders offer these programs, but most retail lenders (like Wells Fargo) do.