By Jeffrey Guarino
Gotham Capital Mortgage Corp.
1115 Broadway, Ste 1200. New York, NY 10010
866.3.Gotham (Toll Free)

Obtaining a mortgage can be like playing a chess match. Borrowers need to see what moves lenders are making and then react accordingly. I receive daily updates from all the major lenders either changing product guidelines or eliminating products altogether.

Borrowers should be prepared. The basic current elements in this market include: good fico scores, good income, reserves (money left over after closing), and in most cases, a down payment of 20%. Banks are looking for “A” borrowers, and the definition of an “A” borrower has gotten tighter over the last three months. Banks want to see credit scores of 720, if not higher, with certain products asking for a 740 score to qualify for the best pricing. Down payments are generally 20% down on non-conforming loans (i.e. jumbo loans).With conforming loans, there are still 10% down products, but there are far fewer. You need to have a pristine application or you will be asked for more money down.

It is especially important to truly understand your options before signing a contract. Many contracts are signed with no mortgage contingency in them. In this market, you need to make sure you are dealing with a reliable mortgage broker or lender and have everything in place before signing a contract.

In the last week, I have had clients come back to me with this situation: After being pre-approved a few months ago, they no longer have the same options they did when we first spoke. Many borrowers may not have realized that banks are now asking for larger down payments and more reserves after closing. It is best to check with your mortgage professional to find out what the latest guideline changes are and how they may affect your ability to get a loan.

If you are in the shopping stage, it is a good time to make sure everything is in order. Have you checked your credit recently? Have there been any inconsistencies in your income over the last two years? Do you have rental history for the last 12 months in order? Have there been any large deposits into your bank accounts that you will be asked to explain? These are items that will most likely be addressed at the time of application. In order to rule out any bumps in the road that may affect your application, it is best to work on them before making an offer.

In addition, interest rates currently remain very low. In most cases, the thirty-year fixed mortgage is better priced than the ARM (adjustable mortgage), giving you the security of knowing what your rate and payment will be no matter how long you intend to live in the property.

With all the changes that have been made by the lenders, there are still great opportunities for buyers. We have just received the new loan limits under the 2008 Economic Stimulus plan. These new loan amounts, which can go up to $729,000 for a single family residence depending on the property location, are designed to bridge the gap between conforming and jumbo loan limits and accurately represent the property value based on location.

These loans are being bought by Freddie and Fannie Mae, offering low pricing with new higher loan amounts. These new loan limits are not permanent. If you have been waiting to purchase a property, you may be able to take advantage of new loan limits while they are available and lock in a long-term rate with the benefit of a larger loan limit.

Similarly, the FHA loan limits have also been raised. These programs are government supported and allow small down payments (3-5%) to first time homebuyers to allow them to take advantage of low rates with higher loan limits. FHA loans have certain guidelines and criteria, and you can learn more about these programs at www.fha.gov.