Obtaining a mortgage loan for a new property always seems to be on the back of our minds. We often try to find a home first before we think about mortgages. However, understanding how much you can afford and what mortgage loans you qualify for are vital to the home buying process in Sarasota, FL. We all remember the real estate meltdown, where properties went into foreclosure and the credit markets froze. As a result of certain pitfalls in the lending system, new rules were established for obtaining a mortgage loan. Here is a little background history and what you can expect today:
Qualifying for a Mortgage Loan Prior to 2009
Prior to 2009, home buyers only had to state their income and cash savings to obtain a mortgage loan. These low-document loans were dubbed “Liar Loans.” Lenders weren’t verifying the home buyer’s actual income and didn’t ensure they could actually afford the loan they were purchasing. In addition, these loans were pieced together with Mortgage Backed Securities (which tied banks and mortgage providers like Freddie Mac and Fannie Mae together). Once the dominoes started falling, the whole real estate industry started collapsing. Homes went into foreclosure. Banks repossessed properties, which have remained vacant for a long time. As a result, the economy slowed.
Can I Qualify for a Mortgage Loan Today?
The simple answer is yes. Qualifying for a mortgage loan today is nearly the same, except there are more restrictions and documentation needed. No longer can home buyers simply state their income. If you’re looking to purchase a loan, you’ll need to provide proof of your income. These documents may include tax returns, W-2’s, and pay stubs. Also, any cash you use will need to be “sourced and seasoned.”
With the Patriot Act, law mandates that any funds deposited into bank accounts can be tracked to its original source. Examples include money deposits from pay stubs, a bonus from work, or a bill of sale for a car. The reasoning behind locating the source is to make sure that money from terrorists or illegal sources are not run through the banking system and laundered into real estate.
Lastly, obtaining a mortgage loan has loosened a bit since the “tightening up” after the 2009 real estate crash. The economy has been steadily recovering. New rules and the new system are working — which has been restoring confidence in mortgage lenders. To see what type of mortgage loan you may qualify for, contact us or get started with the application process:
Mortgage Loans for Short Sellers
Like many areas around the country, Sarasota had its share of homeowners who had to short sell their property in order to avoid foreclosure. Normally, you would have to wait 3 years before buying another home. However, with the right circumstances, it’s possible for you to buy a new home within a few months of a short sale.
Subprime loans (also referred to as “second chance” loans) are now available to buyers with bruised and battered credit. They allow you to purchase a home one day after a short sale, bankruptcy, or even a foreclosure. Under the right conditions, these loans, though expensive, may make great sense to buyers. They tend to be a step from renting to owning and then to qualifying for conventional financing.
In our next issue, we’ll be covering financing for your condo in the Sarasota region. To learn more about mortgage loans or see what loan you might qualify for, visit our website at Innovative Mortgage Services.