Fovernight. Fear is paralyzing, and the news reports create fear and worry. Actually, it is an excellent time to buy a home, with prices not seen since 2004, and despite what some would have you believe, mortgage money is readily available. That said, things have changed drastically since this time last year when it comes to loan products, and what it takes to qualify.
What everyone needs to know about mortgage money is that the sound lending practices, that should have always been in place, are back. In fact, the pendulum has swung to far the other way, but that will correct itself, given time. Unfortunately, a lot of bad loans were made, resulting in large losses to lenders and investors. Remember, every loan is an investment for a mortgage company, bank, an investment fund, or a foreign investor. When too many of these loans turned out to be bad investments, investors stopped buying them. That put all the lending power back in the hands of Fannie Mae, Freddie Mac, the FHA (Federal Housing Administration) and the VA (Veterans Administration). Thank god we have these government sponsored agencies. These agencies have the power to keep sufficient liquidity in the housing market, to avoid a full scale crash, but only if the loans we make today are good investments that provide the returns the investors expect.
These government agencies are now providing over 8-% of all residential mortgage money. That means they get to make the rules. Superior Mortgage has been originating loans for 21 years, and we have the knowledge to continue to make plenty of loans under the current rules. To help us accomplish this, we need our Realtor partners and our customers to understand the work that needs to be done on every loan.
Income needs to be documented in almost all cases. Appraisals need to be done right, with recent comparables that are really comparable. Credit needs to be better than allowed before the August 2007 melt down. When credit is not acceptable, Superior has developed a special program to assist borrowers to raise their credit scores, so we can turn them into buyers for you in the future.
Assets for down payments need to be properly verified, so the lender can be assured the buyer will have a financial stake in the property. Clear evidence exists to prove that borrowers with no skin in the game are much more likely to walk away from a property verified, so the leader can be assured the buyer will have a financial stake in the property. Clear evidence exists to prove that borrowers with no skin in the game are much more likely to walk away from a property when things get tough, than a borrower who used their own savings as a down payment. In addition, underwriters need to take the time to review every detail closely, and make sure all the documentation is sound, and supports the approval decision.
Although Superior has always been totally committed to giving fast service, and being on time to meet every commitment and closing date, this extra attention to detail can make the process one or two days longer. The process also requires everyone's cooperation. We think this is a small price to pay to help restore the confidence in the mortgage industry that we all need, in order to achieve long term price stability and success in our chosen industry.
We look forward to helping you and your customers be successful in the current challenging market, and the great market that is sure to follow.