One of the major fallouts from last years mortgage market meltdown is we are having to re-educate everyone on the kinds of loans we can do and the level of documentation required to write such mortgages. I think when I tell people I can not do this or that type of loan, they think I’m the only one who can’t and think surely another lender can. Oftentimes that is not the case. There are certain programs and features which NO ONE in the industry can do. These things simply vanished last year. Gone. No one does them anymore.
Take for example a question I received this morning:
What if we did an 80/20 loan? We shouldn’t have to put anything down correct?
Borrowers have long memories because I don’t even think of 80/20’s anymore when I do a pre-qualification. This is because 80/20 loans are no longer available. And it’s not just here at CTX Mortgage either but everywhere in the industry. In fact 80/20 loans have been gone for a while now and will likely never come back again (I’ve even already updated my spreadsheet analysis I give to borrowers – it no longer has any trace of 80/20 type financing). For a while FannieMae’s MyCommunity and Flex mortgages filled the gap left by 80/20 loans. But now that mortgage insurance providers will not insure greater than 95% in declining markets, these loans are no longer an option!
The only 100% loans available these days is FHA or VA. And in realty FHA is not a 100% program. They only lend up to 97% and expect you to come up with 3%. They are lenient on where you come up with this 3% and even allow you to obtain it from non-profits such as AmeriDream, Nehemiah and others. The catch of course is that the seller has to agree to participate in this arrangement and a sellers participation is not always guaranteed. Also, don’t forget that FHA has a loan limit of $346,250 in Maricopa and Pinal county.
Additionally, if you were planning on having the seller pay for closing costs that means you’ll be asking for more from them and costs can quickly add up. While in today’s buyers market you maybe able to find sellers willing to accommodate you, it is still something that needs to be understood as you make a purchase offer. This is especially true if you’re looking at bank owned homes.
So, unless you are willing to purchase under the FHA loan limit, only work with sellers willing to contribute towards your purchase or, you are a military veteran then you will be required to put money down. Remember if you are a first time home buyer or are willing to purchase within a certain restricted/targeted area than you can use the Home in Five bond program for the down payment.
Bottom line: things are different than a few months ago. So, do not assume anything and ask lots of questions. By the way, yes, if the lender gets irritated with all your questions then go on to the next one! Things truly are not the same and you have every right to ask as many questions as you like.