The American Dream is Still Attainable

With all the talk about recessions, foreclosures, scarcity of loans, one might think a mortgage is virtually impossible to obtain. Not so, according to Michael Stewart, president of the Mortgage Bankers Association of Arkansas. Stewart has been a mortgage banker for 15 years.

“There’s a lot of bad information and misinterpreted information out there,” Stewart said. “There is no lack of money for long-term mortgages, nor is there a lack of lenders.” He said Arkansas has fared well as far as foreclosure rates are concerned. “We’re averaging about half the number of foreclosures nationally. This can be contributed to the fact that we didn’t have a rapid appreciation in home values, thus we’ve not experienced a rapid decline. We didn’t have a lot of investors who placed their monies heavily in real estate; and Arkansas hasn’t been impacted as heavily by job loss and corporate closings as some other states.”

Stewart said mortgage rates continue to be at a historical low — averaging 4.5 to 5.25 percent for a 30-year fixed loan; however, many companies have set slightly more stringent credit standards, such as a credit score of 620.

“Don’t assume that you cannot get a mortgage — buyers can still get an FHA loan for 2.5 percent down, and 100 percent financing is available for veterans — consult a lender and allow the experts to assess your standing.” Stewart provided this quick, at-a-glance guide to mortgages.

FHA Loan

• 3.5 percent down payment, may be a gift from a relative, friend or employer;
• allows government and community-based grants and “soft seconds” for use of downpayment and closing costs
• more relaxed credit guidelines than conventional loan
• 30- and 15-year fixed rate

FHA 203(b)Streamline

• no cash out refinance of a current FHA loan for purposes of lowering the interest rate or reducing the loan term
• new appraisal and credit report may not be required
• income verification is needed, but not considered for qualifying purposes
• If current loan is less than three years old, a portion of the original upfront (mortgage insurance premium) MIP may be applied to the new loan’s upfront MIP

Conventional loan

• 5 percent down payment; must be from borrower’s own funds
• more stringent credit guidelines than FHA; credit score can affect rate
• 30- and 15-year fixed rate
• mortgage insurance is not required if downpayment is 20 percent or greater

HARP (Home Affordability Refinance Program)

• special refinance loan program enacted by and for Fannie Mae and Freddie Mac loans, for borrowers not in default
• must have a new note date on or before June 30, 2011
• if original loan did not have mortgage Insurance, the new loan will not — even with a lower market value of the home
• permits loan to values up to 125 percent of current market value
• Log onto freddiemac.com or fanniemae.com to find out if either company holds your loan.

VA Loan

• Available for veterans, active duty military and reservists
• 100 percent financing available
• no monthly mortgage insurance required
• more relaxed credit guidelines than conventional loans
• VA-eligible borrower with a service-related disability are exempt from paying the VA funding fee
• 30- and 15-year fixed rate

Adjustable Rate Mortgage (ARM Loans)

• based primarily on credit standards of conventional loan guidelines
• Rate is fixed only for a period of three, five, seven or 10 years and amortized over 30
• Can have an interest-only feature for typically the first 10 years, amortize the remaining 20