With all the news about mortgage loans gone bad, homes in foreclosure and housing prices dropping, you may be wondering what you can expect if you're looking to buy a home or refinance your mortgage.
Generally, credit requirements have gotten more strict, and there's less money to lend. The Mortgage Bankers Association expects residential mortgage loan originations to drop by 18 percent this year compared with 2007.
But a spot check of several lenders who do business with the military community indicates money is definitely out there for mortgages, including refinancing.
Refinancing may be difficult if you don't have enough equity in your home. You may have lived there a short time or taken out second loans on the home as the housing market declined. You may owe more on the loan than your home is worth. It would help if you could pony up some cash to bring that balance down.
You may have trouble financing if the loan is for more than 90 percent of the home's value, although in this market, some lenders are looking at 100 percent financing, said Barbara Sheehan, assistant vice president of mortgage products for Navy Federal Credit Union. In some situations, borrowers can refinance the remaining balance.
"People have heard rates have improved, and we know they need alternatives," Sheehan said. Along with loans backed by the Department of Veterans Affairs and other mortgage loans, Navy Federal has an option called Veterans Choice, which is similar to a VA loan but with a reduced funding fee of 1.5 percent.
Make sure you know the annual percentage rate, Sheehan said. The "interest rate" will be similar, but the APR, by law, includes any fees and charges as well as the interest rate. The APR must be disclosed to borrowers before they agree to the loan. Also, find out whether the rate will adjust, and when.
If you need help interpreting the terms, see an attorney. Start with the legal assistance office at your installation.
Navy Federal has seen an increase in mortgage applications since October, Sheehan said. But the mix is shifting; traditionally, it has been about two-thirds new mortgage loans, but more than half of the loan requests for the week of Jan. 7 were for refinancing, she said.
Chase bank offers a program that gives $300 off loan closing costs to all service members. For National Guard and reserve members mobilized for 30 days or more, the bank offers relief over and above the Servicemembers' Civil Relief Act, allowing deferral of mortgage payments for up to 18 months while deployed with no additional interest.
Chase officials saw an increase in mortgage originations of 35 percent in the third quarter of 2007 compared with the same quarter in 2006, but military business was up 40 percent, said Tom Kelly, senior vice president for Chase.
Because Chase has about $1.5 trillion in assets, it is able to hold the mortgages it makes in-house and make more loans, he said, unlike other companies that sell their mortgages to the secondary market. When companies can't sell loans on the secondary market, they can't make more loans.
USAA also offers loans for refinancing or buying homes and uses internal sources of money for its mortgage loans, eliminating the need to borrow from outside sources.
As with other reputable banks and credit unions, there is never a guarantee that a loan will be made. "We have our own underwriting criteria," said Mike Frazer, USAA assistant vice president for mortgage and equity products.
If you're concerned about making your mortgage payments or have already missed one or more payments, talk to your lender immediately or call a local housing counselor approved by the Department of Housing and Urban Development. Find one at http://www.hud.gov">http://www.hud.gov.
Don't stick your head in the sand. The earlier you seek help, the better. Your lender may be able to reduce your interest rate or make other adjustments to help you keep up with payments.
Officials say some borrowers have been steered to loans with much less favorable terms and interest rates when they could have qualified for better rates.
Some lenders put people into homes with mortgage payments that ate up 50 percent to 60 percent of their income. Remember, you have to feed yourself and possibly others. So it's important to shop around.