Best Florida Real Estate Realtors

Can You Still Get a Home Mortgage or
Re-Finance Your Existing Mortgage?

Posted March 8, 2009

    The simple answer, accoeding to Janet Dugan, a well-respected Sarasota golf course homes realtor, is, "yes but the mortgage you can get today is way different from the one you might have gotten away with as recently as last year.  There are at least four mortgage sources you might want to consider if you are hoping to buy a home in the Sarasota area while prices are still low."

    Before the big "mortgage meltdown," people were able to qualify for a mortgage without even having to prove their actual income, among other things.  Today, you'll not only have to be able to document your famly income, but you'll also have to provide information on other assets and liabilities that you have.  Mortgage lenders now also want to accurately measure your "debt-to-income ratio", that is, what percentage of your total and take-home pay will be consumed by this mortgage if it is approved.  And, there are now few, if any, no-down payment or ridiculously-low down payment loans.

    If you meet these qualifications, there is mortgage money available.  Mortgage approvals are now based on the more reasonable bases on which mortgages were granted before all the foolishness began a few years ago and the mortgage business eventually crashed and burned when the housing bubble burst.  Mortgages being provided today "have to make-sense" in terms of the borrower's ability to repay the loan over time.  No longer can you and/or the mortgage provider bet on housing prices going up and up forever so regardless of how silly the situation was at mortgage origination, there would be endless increases in the value of the home to "bail both the buyer and the mortgage company out the ridiculous mortgage granted."  Nonetheless, there are mortgages available today to those who truly qualify for them.

FHA-insured mortgages
    Federal Housing Administration (FHA) -insured mortgages have been available for decades, focused predominantly on low-to moderate-income families who may not meet requirements for a conventional loan where up to a 20% down payment is required.  FHA-insured mortgages can require as little as 3% down payment with no pre-payment penalty.  Credit scores and your debt-to-income ratios have been relaxed somewhat to allow more families to buy one of the many homes on the market right now in Sarasota and Manatee County.

    Of course, there is always, "good news" and "not so good news" in situations like this.  First the "not so good news." With the lower down-payment on an FHA mortgage comes an upfront "mortgage insurance fee" that must be paid at closing plus a monthly mortgage insurance premium (MIP) that essentially adds a half-percentage point to your interest rate.  But the "good news" is that a competent Sarasota real estate professional, or Siesta Key real estate specialist, for example, working with the seller and mortgage provider, can structure your loan so that the home seller pays nealt all of your closing costs, other than the down payment, for you.  In the current market environment, many home sellers are willing to participate in this type of arrangement to get their home sold.

    FHA-insured mortgages with the lowest interest rates will go only to buyers with a debt-to-income ratio of less 33% or less where your "debt" is the total monthly cost of the home, including principal, interest, property taxes and insurance (PITI) plus any other monthly debt you owe like auto payments, credit card debt, student loans, etc.

    Under the stimulus package signed by President Barack Obama this month, more American families will now be eligible to purchase or refinance their homes using affordable FHA-insured mortgages.  This act allows FHA to increase through year-end, 2009, its maximum loan limits for FHA, Freddie Mac, and Fannie Mae loans.  These limits are equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA, and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750.

Credit Union Loans
    While they tend to issue mortgages only to their own members, the credit union you may participate in at work or in your community may also be a source of an attractive mortgage.   Most credit unions avoided the mortgage melt-down because they stuck to solidly-based mortgage underwriting principles. As not-for-profit firms, credit unions had no incentive to get involved in the "make a quick buck on closing fees and sell it off the same day" sub-prime mortgage schemes and scams.  Credit union fixed and adjustable rate mortgages (ARMs) are often written at lower interest rates than are available at conventional banks.

"Hope for Homeowners" Mortgages
    The "Housing and Economic Recovery Act of 2008" created "Hope For Homeowners" (H4H) program which allows troubled mortgage holders to avoid facing foreclosure by refinancing their existing mortgage into a more affordable, FHA Secure mortgage, provided the federal government participates in any increase in the value of the home over time and the holder of the existing mortgage agrees to go along with the re-financing.  This program increases the allowable loan to value ratio (LTV) to 96.5% for some H4H loans and allows lenders to extend mortgage terms from 30 to 40 years further reducing the monthly payment.

The American Recovery and Reinvestment Act of 2009 (ARRA)
    The ARRA offers assistance to first-time home buyers by providing an $8,000 tax credit for the purchase of a principal residence between January 1, 2009 and December 1, 2009.  The tax credit is claimed on your tax return reducing the purchaser's income tax.  Two bonus features of this program are:

• The tax credit does not have to be paid back
• If any credit amount is unused, that amount will be refunded as a check to the purchaser.

Local and State Programs in Your Own Area
    If you are a first-time homebuyer or a low-to-moderate income family, you should also investigate whether there are local or state housing assistance programs that can be helpful.  Some programs offer very low-interest loans or even grants to families these agencies want to attract into their communities.  These programs are also sometimes aimed at municipal employees, police officers, firefighters and other first-responders the local area has difficulty recruiting.