Mortgage loans are more complex, but are readily attainable

Yes, it’s true. It is more challenging and complex to obtain a mortgage loan today.

That being said, mortgage loan money is available and most banks are lending.

Nevertheless, whether you are buying a home, or refinancing your current property with one of the low-interest rate loans so widely advertised, the economic landscape has changed in the last few years, and that is no more evident than in the world of real estate mortgage finance.

If you think it is more difficult to obtain a mortgage loan today you are wrong — and you are right.

But just how difficult is it to borrow money to buy your dream home? Myths and mistaken beliefs are rampant.

There is the common misleading notion about the amount of cash needed to purchase a home.

Many people think that a 20 percent down payment is necessary to obtain a loan today. In fact, 0 percent down and 3.5 percent down payment mortgages are still available.

This is good news for homebuyers who may have only been able to save enough cash for a minimal down payment.

Additionally, a menu of mortgage loans is available through the State Governments and U.S. Government.

There are government loans which require little or no down payment, that are readily available. FHA (Federal Housing Administration) and VA (Veterans Administration) offer mortgages with low or no down payment requirements, as do government down payment-assistance programs such as those through a State of Ohio program (OFHA).

The Ohio Housing Finance Agency(OHFA) offers a variety of home loan options to homebuyers through state bond money. Buyers can access this program through participating banks, or visit Ohiohome.org.

Good news indeed, yet the fact remains that banks have tightened their underwriting criteria. This means that borrowers’ qualifications are more highly scrutinized, and the interest rate they can obtain is directly influenced by their credit score. How does this play out? To obtain the loan with the best rate possible, the borrower must be prepared to produce a substantial amount of paperwork.

Pay stubs, multiple bank statements, two years of W-2’s, asset documentation, tax returns and written verification of income and debts, combined with the review of the borrowers credit, and “letters of explanation” are needed.

People are surprised and often frustrated by the amount of work they have to do to assemble the documentation required by the underwriter. Mortgage underwriters evaluate and verify applications and are responsible for approving or denying mortgage loans.

More than ever, the ability to get a loan is based on the lender and underwriter’s scrutiny of one’s ability to repay.

Lending has become more strict, and more documentation is required up front than ever before.

Lenders are now extra-cautious. If you want to take advantage of the current buyer’s market, or desire to refinance your home with one of today’s low interest rate loans then you must be like a Boy Scout and  “Be prepared”. The pendulum has swung the other way.