As a result of the credit crisis in 2007, the lending world has undergone enormous changes over the past few years as we have seen the choice of loans dwindle from a veritable plethor of options to a few basic ones - FHA, VA, conventional and some jumbo (very little jumbo). While there are still major changes occuring that aren't good (new LO compensation goes into effect on April 1) there are some good things happening as well. In addition to Vanilla, Chocolate and Strawberry, lenders have other great flavors to satisfy people who have a different taste - Pralines and Cream, Mint Chocolate Chip, Coffee, and Rum Raisin (or whatever your favorite flavor is) are back on the menu. To be clear, 100% financing is back and it is a good option for the right borrower. There is also a 2nd Chance program which is based on FHA guidelines with the exception that it allows people to purchase a home one year out of BK, foreclosure or short sale instead of three like FHA requires. The down payment requirement is higher than FHA's at 20%, but the rate is competitive and this program is a good one for the right client.
For people who want to be able to pay their home off much faster and more efficiently than the traditional fixed-rate mortgage allows but also wants the safety of having access to their money, the Home Ownership Accelerator is a fantastic alternative. The challenge with this loan is overcoming the stigma that it is not a fixed-rate mortgage and not a plain old vanilla-type loan. As always, proper education is the key. Again, this loan is great for the right borrower. Check out this 5-minute video to learn more about it (it's not just for refinances either - you can use it to purchase a home as well).
The old standards (FHA, VA, and Conventional) are great loans for most people, but being able to offer choices and solutions that will help people achieve their goals, whatever they may be, is a good thing. The problem that led to the credit crisis wasn't that we had lots of mortgage choices, it was that the loan officers often didn't understand the mortgage program they were selling or didn't explain it properly to the client. In either case, there was a lack of education. Other than idiotic loans like 100% financing for investment properties with a 580 credit score (who thought that was a good idea?), loan programs aren't inherently bad. Not giving the client all of the proper information in order for them to make an informed decision is what's bad.
I believe that there is a much higher percentage of lenders who are trying to be responsible in their lending practices today than a few years ago and having more products to offer is a good thing in the hands of the right loan officer just like the right tool is a good thing in the hands of a craftsman. Speaking of craftsman, let's not forget the FHA 203(k) Streamline which is another fantastic program that allows buyers to finance a home that 1) isn't financeable by FHA, 2) is in the right neighborhood but needs some work, and / or 3) isn't receiving as many offers because of the need for repair. Think of how excited a client will be when they move into their new home that is more like a "new" home that has been customized to their liking. When their friends and family visit and see how incredible it is do you think that would generate some referrals? I can tell you it does.
Choice is a good thing and I am glad that more loan options are being made available for us to offer our clients. Feel free to share your thoughts.
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