Real Estate Licensees Need to Know Financing Options

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Making a living with a real estate license has had its challenges over the last few years. With all of the changes in financing guidelines that are happening, it is more important now than ever for real estate licensees to be aware of what mortgage options are available to be successful.

October 4, 2010 the FHA is making changes to their guidelines that will make securing an FHA backed mortgage more expensive for buyers. These changes and the pending stabilization of the housing market will soon clear the way for other low down payment mortgages with  conventional lenders and private mortgage insurance (PMI). The most successful real estate agents and brokers in today's housing market will be those who can guide their buyers toward the right mortgage for them.

The Mortgage Banking Association has reported that there has been a significant increase in the number of delinquent FHA back mortgages as of the third quarter 2010. Due to this increase the FHA reserves are down, prompting changes in the cost and requirements in FHA lending. While the cost of the required upfront mortgage premiums will drop from 2.55% down to 1%, the monthly premium will increase. For loans with a loan to value of 95% or less the premium will be .85%, and loans with a loan to value of greater than 95% will have a .90% premium. The minimum credit score required to qualify is 580.

The appeal of FHA backed loans has often been the low down payment requirements, but the FHA can be quite rigid in its guidelines. When working with an underwriter in the private mortgage sector there is more flexibility than having to remain within predetermined ratios. Buyers, particularly those with high credit scores, will benefit from exploring all of their options for financing.

In the past real estate licensees could count on the lender they work with to have all of the financing information that their buyers needed. To be successful in a post mortgage meltdown real estate market, you need more than real estate training; you must educate yourself on the ins and outs of the ever-changing lending practices.  You must also be sure that the lenders that you work with are also well informed and on top of all of the changes in the industry as they are implemented.

If you earn a living with a real estate license you know that knowledge is crucial to your success. With financing remaining on of the largest obstacles for potential home buyers, it is good business for real estate licensees to know what financing options are available to their buyers.

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David Goldstein


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Jeff Craig
Hang Me Up Photos - Jamestown, NC
Greensboro Area Real Estate Photography

We should be aware of all of the financing options and help guide our clients, but it's the lender's job to know all the ins and outs and match the buyer to the best loan product.

Oct 10, 2010 06:48 AM #1
Rodney Mason
Guaranteed Rate NMLS# 2611 - Atlanta, GA
VP of Mortgage Lending - AL, FL, GA, SC, & TN

If an agent wants to truly succeed in today's market and going forward, they will pay more attention to the lending guidelinesof today, not last year, ans not pre-2007.  Yesterday's guideline's are are just that.  Old news.  They are gone.  For someone wanting to get approved for a mortgage in today's market, there are minimum guidelines that must be met. 

You mentioned that 580 is the minimum credit score for FHA.  That is true.  Some agents still believe that a borrower can easily get a mortgage with a 581 FICO.  The reality is that the industry minimum credit score for the last 1-2 years has actually been 620+.  Before the end of this month, you will find that most all of the industry will have moved to 640+ as the new minimum score for FHA.  Lender/Secondary Market overlay always trump agency guidelines. 

Instead of arguing with us over how "crazy" a condition is, just do it.  That is, unless the agent wants to lend the buyer their own money.  If they do, then they can set their own guidelines.  Until then, the guidelines rule.

Oct 10, 2010 07:27 AM #2
Robert Bob Gilbert
Berkshire Hathaway HomeServices Anderson Properties - Katy, TX
Your Katy TX ( West of Houston) Real Estate Expert

A real Esatate agent does and should not be a mortagage expert but an agent know enough to guide their clients. If the mortage professional you use is not keeping up with the current environment find a new mortage person or find several in case the same thing happens.

Oct 10, 2010 08:36 AM #3
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