Six Key Mortgage Questions Answered

It’s been an eventful couple of weeks for the mortgage industry, and it is easy to see why more than a few consumers could be confused, wondering what the developments mean for their own finances.

As a result, they are asking their brokers and lenders questions they have never asked before, said Matt Vernon, retail sales executive for Bank of America (BAC).

Thanks to a number of mortgage lenders going bankrupt in recent weeks, a common query these days is simply: “Are you still out there financing loans?”

As uncertainty brews in the secondary market, consumers also are becoming students on how the process of financing a home loan works.

Below are some of the common mortgage questions on consumers’ minds these days, based on interviews with industry professionals, and brought to you by CNN Money and Dow Jones.

1. Will I still be able to get a mortgage?

One of the widest held misconceptions Alex Stenback has been hearing is the assumption that the current problems will have a negative impact across the entire mortgage spectrum. Stenback is a mortgage broker in Minneapolis and St. Paul, Minn., and author of the blog “Behind the Mortgage.”

So far, borrowers with decent credit histories and the ability to document their income - “the majority of the home-buying public” - aren’t being shut out from getting a loan, he said.

“Home loan applications are still being accepted, and home loans are still being approved. The difference is that there are fewer choices,” Green said.

What is getting harder to come by is Alt-A mortgages, which often don’t require income documentation. The same goes for jumbo mortgage loans.

Those are mortgages exceed $417,000 conforming mortgage limits and thus can’t be purchased by Freddie Mac and Fannie Mae - and getting more expensive.

2. Can I still get a no-down payment loan?

People tend to incorrectly group no-down payment mortgages together with bad credit home loans. But there are still programs that can get prime borrowers into mortgages with little or no money down to begin with.

However, no-down payment loans are now requiring strong credit, verifiable W-2 income and healthy assets in reserve. Homeowners whose returns include large write-offs - including small business owners and 1099 employees - will have a much harder time qualifying for 100 percent financing.

3. My mortgage lender declared bankruptcy. What do I do?

Don’t fret - and plan to keep making payments, said David Podgursky, a Florida mortgage broker and author of the “The Mortgage Go To Guy” blog.

“In fact, get ready to make your September payment as scheduled. Just keep your eyes open for your letter regarding who will be servicing your loan from now on,” he writes.

For borrowers who had home mortgage loans in process at a company that is facing bankruptcy, it is important to get a new loan application started right away with another firm, Green said.

4. Should I be concerned if I currently have a [bad credit mortgage]?

The above question was posed by a Denver-based real-estate agent on a Trulia.com discussion board. The consensus from the several real-estate professionals answering the question was a qualified “no.”

Podgursky chimed in with this comment: “Subprime loans are not the end of the world… unless you are at the end of the term and the new adjusted payment will hurt you financially.”

The holders of bad credit adjustable-rate mortgages need to be aware of when the initial, lower rate on the mortgage loan will expire.

By looking ahead - preferably a year ahead of the reset date - borrowers can improve their credit and consider their options so that they aren’t saddled with monthly payments they can’t afford.

5. My certificate of deposit is from a lender that has made subprime loans. Is my money safe?

It’s as safe as any other financial investment insured by the government.

Certificates of deposit are covered by FDIC insurance, as Daniel Weidman, first vice president of corporate communications for Countrywide Mortgage, pointed out.

“But from time to time, our customers inquire about this and other elements of their savings program, whether it’s a CD, money market or online savings account,” he said in an email.

6. Is now a good time to buy a home?

Every local real estate market is unique, so the answer to this will vary.

However, many areas throughout the country are buyer’s markets, where those on the buyer’s side of the table have the upper hand in negotiations.

The key theme is that while it may be a different mortgage landscape, it still can be a good market in which to buy - as long as people are buying for the right reasons and are paired with loans that ensure they will be able to keep the home in the future.

SOURCE: Dow Jones Newswires / CNN Money