Recent Program Changes Require Careful Consideration

Aug 9th, 2007 @ 12:18 AM by MortgageMentor

In the continuing wake of the mortgage market shakeout lenders left standing continue to make significant changes to the loan products available for home owners and home buyers. It has become a full time job just to keep up with the daily changes made by banks as they try to find profitable loan products. What does this turmoil mean to you as a home owner and home buyer?

Home Owners

• If you are in a long-term fixed loan that you are happy with – congratulations, you are in an enviable position. You may want to consider opening a home equity line of credit to provide access to liquidity as an emergency reserve option.
• If you are in a short-term fixed loan that has a prepayment penalty you may want to talk to a mortgage professional about your options. While you may not be able to refinance now due to the prepayment penalty it is important to start planning for the inevitable need to refinance when your rate adjusts. Whether you are 6 or 16 months away from that adjustment date the prudent move is to develop a game plan now.
• If you are in a short-term fixed loan that does not have a prepayment penalty you should talk to a mortgage consultant about your refinance options. Refinancing may protect you from rate adjustments during this period of limited program availability and rising non-conforming loan program interest rates.

Home Buyers

• Re-evaluate your home purchase plans. If you were planning on purchasing a home with little or no money down you should talk to your mortgage professional immediately about remaining options. These products have been greatly curtailed for all but the best-credit borrowers; and remaining products may be cost prohibitive.
• Determine your purchase price. With jumbo loan and interest only rates rising, and exotic mortgage products being eliminated or curtailed, you may find that your best bet is a first mortgage within conforming loan amounts. While that may not be practical based on where you live, it is definitely something you should consider.
• Research market conditions. Before making an investment in a new home it is vital that you research properties and current market conditions. Look at short sale and bank-owned properties for opportunities to get in at below-market prices. It is a buyer’s market; you should take advantage of it.

Consider yourself ahead of the curve if you’ve taken the time to evaluate your mortgage against the backdrop of the changing lending environment. Too many home owners who have read the news without understanding the consequences on their personal finances will find themselves in difficult positions in the near future. Talk to a mortgage professional now to game plan a successful mortgage strategy to navigate these turbulent times.