The New Mortgage Bazaar: Borrow More; Pay Less; Pay Later.
The roaring housing and home improvement industries are likely to continue flexing their muscles in 2006 and beyond, with some regional exceptions. Lenders have been experimenting with and launching new or modified programs to fuel this trend and increase their profits.A survey of the mortgage bazaar will reveal an astonishing array of products, some with easily digestible features and others that are so esoteric that they require an "initiated" mortgage consultant/broker for interpretation.
The best rate conventional loan limit jumped from $359,650 to $417,000. The hitherto lengthy, generous, thirty-year repayment period has been stretched in many cases to forty years, thus lowering the monthly mortgage. More and more lenders are getting bolder, offering an option to pay interest only up to ten years. They regard this feature as an icing on the cake to lure more customers; customers, however, should ensure that they are not skating on thin ice.
At the mortgage bazaar, borrowers are treated according to their credit scores: 700 has long been the magic number for best rates, least documentation and even an option to waive the appraisal. Scores of 720 and above literally gets one the magic carpet! Recently, several major players in the bazaar have lowered the magic number to 680.
On the other end, 580 was the general cut off number for a mortgage; this has now dropped to 500! Terms and conditions are naturally stringent, however.
Acronyms abound: NINA (No Income, No Assets disclosed on the application); NONA (No income, No Assets or even employment mentioned?a true No Doc Loan); SISA (Stated Income and Stated Assets but not verified); SIVA (Stated Income but Verified Assets); and so on. Zero down payment loans?100% Loan to Value (LTV) or Combined Loan to Value (CLTV) up to 100% are readily available for primary, secondary, and vacation homes, as well as investment/rental homes and multi-unit investment properties, with full, reduced, or alternative documentation.
A new bizarre turn in the bazaar is the TAX I.D. loan for Foreign Nationals (non U.S. Citizens) with a variety of visas with or without Social Security numbers or credit history but an assortment of income sourcesavailable up to 100% LTV/CLTV. We can rest assured that the mortgage bazaar has not gone berserk. What is constant is change and creativity. Failed creations are quickly withdrawn. Therefore, if you are contemplating buying or refinancing, start shopping for the right mortgage now especially if your ARM (Adjustable Rate Mortgage with varying short durations of 1 to 5 years) has broken or is about to break, or your HELOC (Home Equity Line of Credit) has become an albatross giving you grief!
Whether purchasing or fixing an ARM or your HELOC, a new mortgage with all the attendant costs is unavoidable. The borrower pays the closing costs directly or indirectly, at the closing table or over the life of the loan. Therefore there is no true "No Closing Cost" loan in the market. Your current lender may convert your ARM to a fixed rate for a nominal fee if you meet all of their requirements.
Mortgage Brokers have access to and expertise in all the offerings in the bazaar. Most will prequalify you without cost or obligation.
By Nizar A. Motani, Ph.D.
Nizar Motani, the "Mortgagewala," is a Senior Loan Officer with United Service Financial Corp., a commercial & residential mortgage broker, located at 3473 Satellite Blvd., Duluth, Georgia.
Tel: 770-925-9874
E-mail: nmotani@usfmortgage.com
[[from http://usfmortgage.web-loans.com/officers.aspx]]
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