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    Tuesday, March 2, 2010

    Patience, Education Helps Win Mortgage http://bit.ly/9pQiyp


    March 1, 2010

    Patience, education helps win mortgage

    Lenders willing to help first-time homebuyers

    MIKE PERRAULT
    The Desert Sun

    La Quinta High School teacher Lauren Young didn't allow her friends' horror stories about the home mortgage process to deter her from finding and purchasing an affordable fixer-upper in La Quinta.

    Young's friends warned of frustrations having to work months with eight or nine different underwriters.

    Young's home-buying experience turned out to be entirely different, even though it involved a “short sale.” Short sales occur when sale proceeds fall short of the balance owed on the property's loan. It often can take months to get the necessary approvals.

    Young attributes a relatively smooth loan process to working with a knowledgeable lender who understood what she wanted and “had my best interest” at heart.

    “Sean (La Rue) deterred me from jumping in too deep,” Young said. “And he was able to find me a loan where the seller paid half my closing costs and half the down payment.”

    With mortgage interest rates hovering at 5 percent, and $6,500 to $8,000 available in federal tax credits, more prospective homebuyers are tiptoeing back into the Coachella Valley's housing market to take advantage of bargain home prices.

    But buyers also are finding that lending standards are more stringent. Home loans require considerably more detailed information than in past years.

    Banks are scrutinizing assets, income, collateral, appraisals, tax returns, whether the home will be occupied and other information to ensure those getting loans can afford the house, said La Rue, senior vice president at Franklin Loan Center in Palm Desert.

    “Everything is being picked through with a fine-tooth-comb,” La Rue said. “But for most people, they still qualify.”

    Most borrowers understand the rationale behind new restrictions and paperwork, and are adjusting said Andy Montgomery, chief executive officer of El Paseo Bank, which has branches in Palm Desert and Rancho Mirage.

    “We're seeing people come in actually more qualified than they used to be,” he said.

    Homebuyer Ted Hane admits he was hesitant and wanted to find out what kind of payment he could handle when he began his hunt last fall for a home in La Quinta Cove. Previously, he couldn't afford a home in that neighborhood.

    “I wanted to be really, really careful not to overextend myself,” said Hane, manager of the Mary Pickford movie theater in Cathedral City. “Of course at this point, (lenders) aren't really letting you.”

    Documents in hand

    Lenders are so careful, many people have the misconception that banks and other lenders aren't interested in doling out home loans.

    “Some people may tell you that it is impossible to get (home) loans, but only because they're comparing it to a time when you didn't need the documentation,” said Chris Platamone, senior mortgage loan officer at Bank of America Home Loans in Palm Springs.

    “You can get loans as long as you can document that you qualify.”

    That includes jumbo mortgages — loan amounts above conventional conforming loan limits — and loans to buyers who aren't U.S. citizens, said Brent Platt, president of Millennium Mortgage Co. in Palm Desert.

    Platt, a lender in the Coachella Valley for two decades, said “there's money out there” to lend.

    “I hear people saying all the time, ‘Is there any jumbo money out there?' or ‘I can't seem to get a jumbo loan,'” Platt said. “You have to know where to go to get it.”

    First-time homebuyer Hane began his quest to finance a La Quinta Cove home with his credit union. But early in the process, he felt the credit union was unresponsive.

    Hane switched to Franklin Loan Center, where he found La Rue was willing to stay on top of the details and answer his many questions about all the documentation.

    The bottom line for borrowers is that they need to be more patient, La Rue said.

    “There are some restrictions that are kicking out some good buyers,” he said. “But, in general, the people who should be able to get a mortgage are getting a mortgage.”

    Lenders are looking at stable income and a minimum credit score, or FICO score, of about 620 to 640. Factors such as other debt you're carrying and how much you want to borrow also enter the equation.

    “Your debt-to-income ratio has got to be fairly reasonable,” said John Sloan, longtime real estate agent with John Sloan Realty Group, Keller Williams Realty in Rancho Mirage.

    Tax credits abound

    In recent weeks, average interest rates for 30-year fixed mortgages have fallen to just below 5 percent, with 15-year rates at about 4.34, according to a Mortgage Bankers Association weekly report.

    The favorable interest rates, federal and state tax credits, and generally low home prices in the valley have swayed buyers.

    The state is no longer accepting applications for the $10,000 new homebuyer tax credit, but the $8,000 or $6,500 federal tax credits are available until April 30, lenders said.

    Buyers previously locked out of the federal $8,000 first-time homebuyer credit because they earned too much may now qualify under new income limits.

    “There are a lot of first-time homebuyers out there who have time to close and get that credit,” Sloan said. “So there is a little bit of a frenzy out there right now.”

    Bankers and mortgage lenders are seeing more valley residents beginning to look into home loan applications.

    “Since the beginning of the year, we've definitely seen an increase in activity,” Platamone said.

    Prospective buyer Jerry Brown of the San Francisco area believes the valley offers some “really good” buys right now.“Homes in the $400,000 range used to be $700,000 to $800,000 homes,” Brown said. “I think it's a good time to make an investment.”Most buyers prefer the 30-year fixed mortgage, but the FHA option has become popular for many first-time homebuyers because it requires down payments as low as 3.5 percent, Platamone said.

    Sloan said as more buyers and investors enter the market, it pays to work with a lender to get pre-approved. Buyers can be in a better negotiating position when they do find the house they want.

    “I would absolutely get prequalified and get a sense of what banks are looking for,” Montgomery said. “Go shop. How much home can they buy with existing loan products?”

    The “sweet spot” in the valley housing market right now is homes under $250,000, he said. Some are bank-owned, and they're often getting multiple offers.

    Investors spot those opportunities and compete against first-time homebuyers. The investors sometimes have a leg up if they can walk in with cash in hand.

    “That's why it's important that the buyer know exactly where they're at in terms of affordability,” Sloan said. “You just lose out on something you really want.”

    Sloan said that, in one recent instance, four buyers made an offer on a $250,000 bank-owned property. Three buyers came in with FHA loans with 3.5 percent down. The other buyer had a conventional loan and was offering a 20 percent down payment.

    “The bank felt that that particular buyer was more worthy to sell the home to,” he said. “Because chances of them defaulting are much less because they've got more skin in the game.”

    Appraisals also are playing into the financing picture, Sloan said.

    Several buyers recently made an offer on a $239,000 home. The bank asked all buyers for their highest and best offer. The winning buyers offered more than the appraised value and were required to make up the difference out of their own pocket.

    Staying in the game

    Homebuyer Hane qualified for an $8,000 federal tax credit and closed on his home Dec. 30.

    He advises buyers to remain involved in the process so they're not caught at the last minute in “panic mode.”

    Despite working 12-hour days, Hane remained involved daily because he didn't want to be the one to drop the ball.

    “I faxed or e-mailed everything to make sure it was received and correct and legible,” Hane said. “When the appraiser was there, I was there. When the inspector was there, I was there.”

    Hane stressed that it's important to ask questions.

    “If I wasn't sure, I wanted to know,” Hane said. “This was a pretty hefty decision. It's not like you're buying a $300 Blu-ray or something.”

    Hane's experience was a far cry from several years ago, when he felt he was being pushed into a home he couldn't afford.

    “The lender said, ‘Sure you can.' I said, ‘No I can't. I'm not about to become a surgeon or something.'”

    Some area banks hit by losses on commercial real estate have reined in home loans, but other banks see that as an opportunity.“We've ramped up our efforts even more in the last year,” Montgomery said. “We see that there is a good market opportunity as fewer banks offer loans on homes — especially the jumbo. As demand increases, we think we have a pretty good opportunity to experience a lot of growth in that business.”

    Make It A Great Day,

    Sean K. La Rue
    Sr. Vice President
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