Think a Bit About Mortgage Rates In Context, and All Will Be Less Gloomy

If you have not been considering a real estate transaction recently, this may come as news to you, but the price for mortgages is on the rise. The question, however, most often posed by borrowers in these volatile times is whether the salad days of the sub-4.5% mortgage rates are well behind us.

The answer is one that, in general, disappoints. With the economy on the mend and treasuries losing their luster, conventional wisdom is that we have begun the rise to a more normal rate environment. All signs are pointing to 5% or higher for Fannie Mae and Freddie Mac loans becoming the new near-term reality. We could see even higher rates toward the end of the year. So what is a borrower to do?

To begin with, partake in any grieving that you need to do and move on. A real estate transaction occurs at a given point in time. Everything from the price or value of the property to the mortgage rate is a function of the time in which the transaction takes place. In short, it does not matter what rates were in October of last year and to lament is a waste of time. What matters is the rate available today and whether that rate meets your overall objectives.

Now that you have accepted that rates are what they are, take a minute to actually look at rates from a historical perspective. Rates in the 5% range are still amazingly low if you evaluate them in the context of the past decades. Understanding this and the fact that rates will likely return to a level more in line with the historical average should dispel some of the angst over not hitting the bottom. Just being at the low end of the trough should be enough to be thankful for.

Finally, remember the reason that rates are increasing is because equities have become a more favorable place for investors to out their money. This is an indicator of a stronger economy. If you have seen the double digit depreciation to your investments during the Great Recession, you should be jumping up and clicking your heels together with joy as these assets regain their value. Remember you cannot have it both ways and some money in your pocket due to the appreciation of equities that you hold could dwarf the benefit of a lower mortgage rate.

We would like to thank Sean Dreilinger for kindly sharing today’s photo via the creative commons license.

Oh The Humanity!

This week was bad for rates, really bad. If you are not in the industry, it is impossible to describe what happens when you see rate increases like we saw this week, so I will once again defer to history to illustrate what occurred.

“It’s fire and it’s crashing! It’s crashing terrible! Oh, my! Get out of the way, please! It’s burning, bursting into flames and is falling on the mooring mast, and all the folks agree that this is terrible. This is the worst of the worst catastrophes in the world! Oh, it’s crashing…oh, four or five hundred feet into the sky, and it’s a terrific crash, ladies and gentlemen. There’s smoke, and there’s flames, now, and the frame is crashing to the ground, not quite to the mooring mast…Oh, the humanity” (See the actual event.)

Yes, that was the Hindenburg and, as you might guess, rates jumped. Currently Fannie Mae and Freddie Mac conforming 30 Year Mortgages are averaging anywhere between 4.75% and 4.875% for optimal borrowers. While these are still amazing rates from a historical perspective, it is hard to reconcile this with the 4.25% available just a few months ago.

We were definitely expecting some degree of increase. Europe is beginning to stabilize with many countries, including the beleaguered Ireland, undertaking continued austerity measures. In the US, Congress has all but approved the extension of the Bush era tax cuts, as well as an extension of unemployment benefits for over 2 million Americans. Since this favors investment in equities, a negative impact on bonds would follow. The degree of the impact in the face of near 10% unemployment and continued weak economic indicators in the housing market, however, should have tempered movement.

A good number of economists have put forth that moves such as the recent Congressional plan add a monstrous amount to the deficit, which erodes confidence in Treasuries. Since Treasury pricing affects mortgage backed securities, mortgage pricing would follow suit. In short, we will have to pay the piper at some time and that time will not be pretty.

I will close by saying that this is a time for a very defensive strategy. In addition to significant increases, we are not seeing recovery from data that should provide respite. The abysmal jobs report from last week, for example, should have predicated a massive flight to safety bolstering bonds, but the bounce that we saw was almost non-existent.

I am recommending that my clients closing in 7 days or less LOCK. If closing in 7 to 30 days or less, there may be time to take advantage of a correction. LOCKING would be a very conservative way to go, but if your risk tolerance permits, you could FLOAT with a LOCK on ANY price improvements. For those closing in more than 30 days, I would suggest FLOATING with extreme caution.

Financing on Condos is More Challenging

Life just got a whole lot tougher in the wonderful world of condominiums. HUD recently announced that they are requiring all condominium projects undergo re-approval. This literally means that every condominium development that successfully underwent the previous process will no longer be approved and they must reapply for approval to be eligible for FHA loans. Needless to say if not managed closely by condominium boards, Realtors, lenders and sellers, this could result in a humungous mess.

There is Good News

The good news is that some developments will undergo an abbreviated process, which allow for only moderate inconvenience to those boards that are organized and that plan ahead. The date of original approval will define how stringent a process that the development will need to undergo.

The specifics of the requirements are as follows:

• If project initially approved prior to January 1, 2000, full project approval is required
• If project initially approved on or after January 1, 2000, then the project is eligible for the recertification process
• Projects may be recertified beginning six (6) months prior to the approval expiration date or within six (6) months after the approval expiration date
• Projects not recertified within six (6) months after the approval expiration date will require full project approval
• To determine date project was initially approved – can be checked in FHA Connection or on the public web site located at: https://entp.hud.gov/idapp/html/condlook.cfm

The important take away for this is that this can affect your listings and/or current deals if everyone is not fully aware of the changes and prepared to react.

We would like to thank Nancyarora2020 for kindly sharing today’s photo via the Creative Common’s License.

The Circuit Court of Cook County Reaches Out to Help Homeowners Facing Foreclosure

A Helping Hand is Available for Cook County Residents Facing Foreclosure

According to a recent Chicago Sun Times article, “Foreclosure filings catapulted 66.4 percent in Cook County in August from a year earlier, according to RealtyTrac’s latest report. . . and [f]ilings in the Chicago metropolitan area spiked 36.1 percent in August from a year earlier.”

With foreclosure rates “catapulting” and in an economy where the market values of homes are down, refinancing is difficult, people are losing jobs or afraid of losing jobs, the Circuit Court of Cook County is taking action. As a result of the new Circuit Court of Cook County Foreclosure Mediation Program, there is now help available for the increasing number of homeowners facing the possibility of losing their homes to foreclosure.

In April of 2010, the Circuit Court of Cook County, led by Chief Judge Timothy Evans, announced the launch of its Mortgage Foreclosure Mediation Program. The Court established the program and is working with state and local organizations and several legal aid groups and housing counselors to provide free assistance to Cook County residents who have received foreclosure summons from the Circuit Court of Cook County. The mediation program aims to ensure that homeowners know their options and to try to bring more banks and homeowners to the negotiating table.

The Program to Deliver Critical Services to Homeowners in Foreclosure Process

Ultimately, Chief Judge Evans says, “The program’s goal is to deliver critical services to homeowners as early as possible once the foreclosure process begins. In this way, homeowners in crisis are assured of receiving the support and information they need to explore fully their options either to stay in their homes or to negotiate a respectable exit.”

More specifically, the Circuit Court’s mediation program is structured to allow for a diverse range of outcomes—to assist the homeowner in navigating the foreclosure process whether it leads to a sustainable loan modification or to one of several “graceful exits.” According to the Regional Home Ownership Preservation Initiative these possible exits include:

…deed-in-lieu transactions, where the homeowner voluntarily transfers the deed to the bank instead of foreclosure; short sales, where a bank allows a home to be sold for less than what is owed on the loan; consent foreclosure agreements, where the homeowner will not contest the foreclosure, further preventing a deficiency judgment; or agreements for rental of the property, where the homeowner agrees to transfer their property to the lender in exchange for a rental lease.

The Austin Weekly News reports the mediation program, administered by the Chancery Division of the Circuit Court (where foreclosure cases are filed and heard—and credited with a critical role in making the mediation program a reality), is being funded via a $3.5 million grant from the Cook County Board and, as of the end of August 2010, had helped more than 2,000 homeowners.

Free Counselors Available to Homeowners in the Foreclosure Process

Once a homeowner receives a summons, he or she may schedule a meeting, free of charge, with a HUD-certified housing counselor. The counselors work for an agency that is approved by HUD to provide advice regarding buying or renting a home, defaults, foreclosure, and credit issues. To schedule a meeting  the homeowner must call the toll free help line provided on the website (877.895.2444 or 312.836.5222 TDD) or may use this online appointment request form. The housing counselors meet on-site with homeowners at 69 W. Washington and at the Richard J. Daley Center. No walk-in appointments are accepted so homeowners must schedule an appointment in advance.

After the homeowner has met with a housing counselor, he or she will then have the opportunity to meet with an attorney to talk about the counselor’s recommendations, whether they have any defenses to the foreclosure action, and for assistance in preparing for the first court date where a judge determines whether the homeowner’s foreclosure case can be mediated with the lender in question.

Don’t Ignore the Problem—Help is Available

According to a spokesperson for the Circuit Court of Cook County, the important thing for homeowners to know is that they need to show up to court and see what can be done to help the situation—coming to court does not mean that the homeowner will lose his or her house, but NOT showing up to court that first time makes it more difficult to get back on track. Chief Judge Evans explains that the mediation program is here to let homeowners know, “they will not have to face the [foreclosure] process alone.”

Facing a foreclosure is intimidating. An all-too-common but understandable response of homeowners who are finding it difficult to make their mortgage payments or who have received a summons is to ignore the problem. The mediation program has been set up to make it easier for homeowners to face a foreclosure by ensuring that they have access to legal assistance and are fully informed regarding their options.

The spokesperson also pointed out that the Court has just recently made contacting the mediation program to set up an appointment with a housing counselor easier by making it possible for nervous homeowners to click on a link and make contact with the mediation program representatives online. Further, they have also recently made the online appointment system available in Polish and Spanish.

In order to qualify for the program, homeowners must:

1. be residents of Cook County;
2. have received a foreclosure summons from the Circuit Court of Cook County; and
3. live in the building in foreclosure, which may be a single-family home, single-family condominium, or an apartment building with four or fewer units.

If a homeowner is concerned about going into foreclosure but is not yet in foreclosure and has not yet received a summons, a list of resources is available, but they are not eligible for this particular program.

For more information about the Circuit Court of Cook County Mediation program or to set up an appointment, visit http://
www.cookcountyforeclosurehelp.org.

We would like to thank Lara Mercer for kindly sharing today’s photo via the Creative Common’s License.

Something to grab onto if you're in rough water

There is a great misconception that there are no options for struggling homeowners. The reality is that major players in the mortgage lending market, specifically Fannie Mae, Freddie Mac and HUD (The Department of Housing and Urban Development), would like to avoid foreclosures whenever possible. As a result, they have created loan programs designed with this end in mind.

Fannie Mae Refi Plus

Current market conditions have created an environment where homeowners who previously put 20% or more down could face loan denial and/or mortgage insurance requirements. In addition, the uppermost limit in even flexible programs is capped between 95% and 96.5%. So many homeowners are stuck between a rock and a hard place. They are undoubtedly paying too much, but, due to a depressed housing market, they are outside of loan approval guidelines. Even if they are below generally accepted requirements and a refinance could lower the rate, a transaction would actually add cost to the homeowner.

The Fannie Mae Refi Plus Program, which is available from most Fannie Mae affiliated lenders, allows a homeowner to refinance an existing Fannie Mae loan at up to 125% of a property’s appraised value without the burden of private mortgage insurance and an added layer of underwriting. Although requiring adherence to all other guidelines, such as credit score, assets holdings and income, this option allows borrowers who are seemingly underwater on their mortgages to stabilize their housing expense.

Freddie Mac Open Access

Fannie Mae and Freddie Mac typically mirror one another in mortgage loan program offerings. Though not always exact matches, Freddie Mac’s programs do match the intent of their larger counterpart. In this line of thinking, Freddie Mac offers the Open Access Loan Program. Like Refi Plus from Fannie Mae, Open Access allows homeowners with existing Freddie Mac held loans to refinanced at higher loan-to-value without the burden of mortgage insurance. This program is available from any Freddie Mac affiliated lender.

FHA Streamlined Refinance

Since HUD backs many loans in the marketplace, they too have needed to develop mechanisms to assist struggling homeowners. They most notable of these is the FHA Streamlined Refinance. Although not as dynamic as the Fannie Mae and Freddie Mac programs, this program allows homeowners to refinance their loan under FHA guidelines without an appraisal, which alleviates a major obstacle preventing refinances from making it to the closing table. In addition, the program does not require the borrower documentation required for most deals. While they must provide proof of employment, homeowners need not provide bank statements, tax returns and other documentation generally associated with a loan transaction. In many cases, a prospective borrower can make it from application to close in half the time of other refinances.

The First Step

As with any loan transaction, the first step begins with the homeowner. The problem is that many have been cowed into inaction by reports in the media that nothing can be done and that the anemic housing market presents an insurmountable impediment to securing a better rate and more secure financial future. In this case, however, the worst course of action is inaction. Only by picking up the phone and reaching out to a lender or lenders can you know what options are available and all it costs you is your time.

We’d like to thank RobMan for kindly sharing today’s photo via the Creative Commons’ License.

Alexander Calder's Flamingo, in Front of the Ralph Metcalfe Federal Center, Home of the FHA in Chicago

FHA (Federal Housing Administration) insured loans are headed for a big change. For those unfamiliar with FHA mortgages, these loans are insured by the government, which allows for flexible approval guidelines. This insurance is paid for by the borrower as an upfront premium collected at close and as a smaller premium collected on a monthly basis. These premiums are then pooled with those from other FHA borrowers to form an insurance fund.

In times of normal demand, the aforementioned process works pretty well, but with the demise of sub-prime mortgage options and collapse of the housing market, FHA loans have steadily grown in popularity. The increased demand has put significant pressure on the capital reserves of the insurance fund. As a result, Congress approved a plan this week to shore up the agency’s insurance fund with a reconfiguration of the mortgage insurance paid by borrowers on loans originated after September 7th.

Under the new structure, FHA requires a borrower to pay an Upfront Mortgage Insurance Premium calculated at 1% of the loan amount. The good news is that this is down from the 2.25% currently required. The bad news, however, is that the monthly figure will increase from a factor of 0.55% annually to a factor of 0.90% annually.

What does this mean for the consumer?

Let’s look at an example: assume a $150,000 home purchase:

BEFORE September 7, 2010

• Upfront Premium (2.25%): $3,256.88
• Monthly payment including mortgage insurance: $793.93

ON OR AFTER September 7, 2010

• Upfront Premium (1.00%): $1,447.50
• Monthly payment including mortgage insurance: $826.93

NET CHANGES

• Upfront cost: Decreased by $1,809.38
• Monthly cost: Increased by $33.00

Overall, these changes should not affect many borrowers; it may place home ownership out of reach for buyers who currently just squeak by. On the practical side, I would recommend that anyone currently in the market for a home to talk to a lender as soon as possible to see how the new FHA loan requirements would affect them. This is especially important for pre-approved buyers as these changes could nullify their approval status or change the assumptions under which they should be shopping.

EDIT (13 Aug 2010): HUD has come out with an amendment to their earlier announcement. Based on the new information that they are distributing, the new date for the change will be October 4th, 2010.

We would like to thank Diorama Sky for kindly sharing today’s photo via the Creative Commons License.

Condominium Financing

The condominium is a great type of property. It provides the joy of ownership with minimum amount of maintenance, but it is also a type of property that strikes a bit trepidation into the heart of lenders. Think of it as the difference between running the 100-meter hurdles versus a simple 100-meter dash. You get to the end of both races, but one definitely has more complexities.

New Development Condo Buildings Differ from Existing Condos

When you are looking at condominiums, you need to understand that there are inherent difference between new condo developments and existing ones. New developments are, in the eyes of a lender, more risky than pre-existing ones. The guidelines for these are even more stringent and your lender may be hamstrung in the programs they can offer. There are very specific guidelines as to the required number of units sold, the number units completed and the degree of completion on the common areas. These items will also be reflected on the condo questionnaire, so you need not worry about assembling the data. You do need to understand, however, that choosing a new development may reduce some of your options or possibly even render the unit more expensive if you end up needing a niche program that allows for greater variance on guideline requirements.

The Neighbors

It is very important to know who lives in the building and who owns the other units. This goes well beyond affecting your quality of life after moving in. It actually has a great deal of impact during the financing of the property. Your lender will require that a condominium questionnaire be completed in conjunction with the transaction. This will allow them to assess whether or not the building is Fannie Mae or FHA approved, whether there is any litigation associated with the building, the number of units that are rented, how many are delinquent on association dues, how many units are in foreclosure and even how many units are owned by a single entity. All these statistics map onto the guidelines that the building must meet for a loan approval. While not your responsibility, the information is incredibly important to the lender. Your lender should request this be completed prior to going to contract as it allows them to know if they can lend on the property. Without this information, your lender could be setting you up for failure during the loan process.

A Poorly Maintained Building Can Cost You

I am going to go out on a limb and suggest that you would not likely buy a car that had a large amount of deferred maintenance on it. If in fact you were going to buy the car, you would consider the cost of the fixing any deferred maintenance issues into your purchase price. Condominiums have very real parallels to the aforementioned analogy. Because the building or common areas are jointly owned, the individual units pay into a treasury for repair and upkeep. There are times, such as a bad economy, where the maintenance is deferred until it is less of a hardship and these deferred maintenance items can build up. From a financing standpoint, you want to make sure that you are not setting yourself up for a slew of special assessments to be levied against your unit after you move in.

The Condo Declarations, Rules & Regulations Matter

When you buy a unit in a building, you and your lender are now a party to all of the joint ownership aspects of the building. Rules can be as benign as what you can hang on your outside door and as major as whether or not you can rent the unit. Additionally, issues like right of first refusal on the part of the condominium association can actually kill a deal if the lender’s guidelines do not allow this. By understanding and addressing these possible obstacles early, you and your lender can better understand whether or not the loan can actually be done.

Condo Loans Can Cost More

Lenders make their decision based on risk. In their eyes, condos represent more risk than single-family homes and therefore require more stringent approval criteria. As a result, everything from the loan size to the allowable qualifying ratios for buying a house may not be allowable for a condo. Even if allowable, the cost of the loan, i.e. rate and fees, for you will sometimes be higher as the lender needs to account for the added risk with a greater return on their money.

All in all, this article should not quell your desire to own a condominium. As I said at the beginning of this article, a condominium is a great option for home ownership. It offers a great many advantages to owning a single-family home, but with these advantages comes constraints. Like the athlete I alluded to in the opening, you just need to identify and overcome the hurdles to cross the finish line and reach your goal.

We would like to thank Rehab Real Estate for sharing his photo for this story through the Creative Commons license

Lenders Must Pass Exams

It should be no surprise that the collapse of the housing market drew the attention of regulators to professionalize the lending industry. Let me go on record as saying that this is not a bad thing for the consumer. Like Wyatt Earp cleaning up the streets of Tombstone, the government has created new requirements to ensure that the lender you choose is qualified and to force out lenders who were incompetent, dishonest or both.

New Requirements

The new requirements entail education, testing and criminal background checks that must be completed by the end of June and each loan officer will have an individual number that will follow them throughout their career. This will be monitored by the National Mortgage Licensing System and will allow for tracking of complaints, defaulted loans and other important statistics. Those loan originators that do not adhere to the law can have their licenses revoked.

Requirements for Larger Financial Institutions

Large financial institutions, such as banks, and their loan officers are exempt from the requirement. This exemption can be good and bad at the same time. The loan officers from these institutions do fall under the larger regulatory umbrella of the bank and the institution is responsible for ensuring that their originators receive the ethics, loan and compliance training, as well that their employees are of the moral fiber necessary to do their job. This should give some solace to you, as these entities need to meet banking compliance requirements of which mortgages are subset.  But without seeing the NMLS number, however, you have no guarantees as to the specific training or as to the background of the individual with whom you are dealing.

Look for the NMLS Number

I bring this to your attention now, because you should be vigilant to make sure that your lender is qualified to service you and your needs. As of the time I am writing this post, the overall pass rate for existing mortgage loan originators was roughly 67%, so you can see how important this is to make sure yours lender is qualified. If you decide to go with a bank, you have the good faith of the institution that all of their employees are compliant. If you go with a mortgage banker or broker, you need to look for their NMLS number. It is required on all advertising and official correspondence with you.  For example, I put mine in my signature block to make it easy for my clients to see. If you do not see it or your lender dodges your questions regarding their licensing, I recommend looking for a different lender.

Thank you to [j]t’s for the photo, which he graciously offered via the Creative Commons License.

The rate lock conundrum is the basis of angst for every borrower that I have ever had. After all, this is a choice that is going to have an effect on your finances for a considerable amount of time. On the one hand, there is desire to secure the best possible rate, which requires exposure to risk in an effort to time the market perfectly. On the other hand, there is the desire to eliminate uncertainty by simply choosing a rate that you can afford to ensure the viability of your transaction. This may initially seem impossible. When you understand how the market determines rates, however, you can strike the needed balance between these opposing requirements and secure a favorable rate.

The main indicator for mortgage rates is the bond market. As money moves into the bond market, mortgage-backed securities (bundles of loan sold on the secondary market) become more attractive. The yield required for buyers of these securities drops and the rates drop as well. This is an oversimplification, but it will do fine for you to grasp the concept. If conventional wisdom is pointing to a rough patch in the stock market, you would be best served by waiting. Conversely, if it looks as if the bond market is headed for a dip, you should lock.

It is important to remember that this analysis is not an exact science. You can read the tea leaves and come up with a good idea of where the market is headed, but nobody knows exactly what is going to happen. The securities and bond markets are fluid. There is a continual stream of good and bad data that contributes to the ups and downs in equities and bonds. While you can often track trends and anticipate outcomes, there is no way to know for sure whether a particular economic indicator or the earnings of specific Wall Street bellwethers will be positive or negative. You will not likely be able to predict the exact bottom of a cycle, so it is a fool’s folly to try.

So, there you have it, knowing when to lock is a process, not a point in time. Like researching routes and printing out maps in preparation for a car trip, a little preparation and knowledge goes a long way. And like a car trip, where you can get to the most efficient route by constantly reading the signs and conditions on the ground, you can empower yourself to make the right decisions by applying the same approach to the financial markets. If you do this, you will, no doubt, secure a very good rate content that you choice to lock was a sound and educated one.

Keep an eye out for my second part in this series, which will address the lock period and how it should influence your decision.

We would like to thank Bala for kindly sharing today’s photo via the Creative Common’s License.

Know Your Budget

The other day I was reading an interesting article regarding a high correlation between mathematical/financial education and default rates on mortgages. Basically, the data in the article showed that a greater portion of delinquencies and foreclosures carried today are associated with borrowers who lacked the sufficient knowledge to fully understand the basic terms of credit to which they were agreeing and how that affects their total financial picture. I found this especially interesting as we all sift through the ashes of the last housing bubble to see what went wrong. To fully clarify, I do not mean who is to blame as I feel that culpability is shared in some part amongst all of the players and stakeholders. Rather, I think that this is what is sometimes called a learning moment regarding consumer responsibility when seeking a mortgage loan or any credit for that matter.

Know you personal budget

I am always amazed when somebody comes into my office and asks me how much they can afford. This question, which incidentally spans all socioeconomic groups, communicates immediately that a client does not maintain a personal budget. They inherently do not know how much money it takes to maintain their current standard of living and how much flex they have in this calculation when factoring in a new purchase to continue to live this way. That is not to say that I cannot run their numbers to see whether or not they meet the guidelines of a particular program, but this is not analyzed in the context of their overall personal budget. While I personally make it a practice to show them how their disposable income will look once in the loan, it is the client’s responsibility to look at the numbers to make sure that they support current lifestyle and spending patterns and to act accordingly.

Understanding your payment

While there are a myriad of available programs available in the mortgage marketplace, they all boil down to the terms under which you are borrowing money from a creditor. In short, you are borrowing a specific amount of money over a predetermined period of time at an agreed interest rate. This equates to a monthly payment to you that needs to be serviced every month. Granted some very exotic programs crept into the market place toward the end of the bubble, but none of these re-wrote the book on how a mortgage payment is calculated. There are even tools to calculate the payments available on the Internet to eliminate the need to fully understand the math behind the concept. So, if you cannot calculate the payment yourself, you need to consider whether or not you have the current knowledge that you need to commit to the debt. If not, you need to send up the signal flag and get the help you need to understand this before you sign on the dotted line.

Understand the Terms

As I mentioned earlier, there are a lot of programs available for the purchase or refinance of a home. For the most part, they boil down to fixed or adjustable options. If it is a fixed rate, you have secured a rate for the entire term of the loan and it does not change. If it is adjustable rate, the rate and payment change at some point in the loan term based on market conditions. Yes, it is that simple. To make things even simpler, these terms are clearly articulated on all of the documents that you see during the loan process. It is your responsibility to yourself to both read and fully understand the specifics. If you cannot mentally check both of these boxes than you need to stop the process immediately and take the time to do both. After all, you own this loan once you sign on the dotted line.

Choosing the Right Lender

While this does not seem important, I would propose that it is the most important step of all. You will likely have gaps in the aforementioned steps. Almost everyone does, but the right lender looks at it as his or her personal responsibility to make sure that the gaps are filled. I actually think back to the height of the bubble when credit was easier to obtain and the panoply of programs was significantly broader that it is now. Even then I took the time to ensure that my clients fully understood their options. Most chose to listen to my advice and integrate it into their decision-making process. Others, succumbing to tunnel vision on obtaining the home, chose to ignore or disregard certain material aspects of their own situation and how they would be affected. For me, this sometimes meant losing business as my honesty was eclipsed by the lure of low rates regardless of the terms offered by a competitor. Are the lenders who miscommunicated or misrepresented a certain loan program to blame? The answer is unequivocally yes. Are the borrowers also worthy of significant constructive criticism for failing to fulfill the responsibility of choosing a reputable lender? I would say so.

In the end, you need to look at a home purchase, or any financial decision, in terms of how it impacts you. Like the ripples from a stone thrown into a pond, the effects of assuming a mortgage can influence your quality of life and financial future. Providers of credit and financial services will and do assist you in evaluating your choices, but only you hold the yeah/nay power to move forward. Because of this, it is your responsibility and duty to yourself and your family to ensure that there are no knowledge gaps before you sign on the dotted line.

We would like to thank Weddingssc1 for kindly sharing today’s photo via the Creative Commons’ License.