Why Nows the Time to Look at Your Mortgage

With 2009 still it its early months, let’s take a look at what we might see in the coming year.


If you’re unsure as to what you can afford – or you think that your credit profile might limit you – now is a good time to explore your options. This applies to both first-time buyers and long-time homeowners.

The Federal Housing Authority (FHA), which caters to borrowers with either less money to put down or who are credit-challenged (or both), has tightened its guidelines just a bit for 2009. However, it is still a very good place to start.

The FHA requires a 3.5% down payment, but all or part of this can come in the form of a gift from a relative.
Many of the closing costs can be financed by the seller by what is known as a seller concession.

There will be an upfront mortgage insurance premium of 1.75% of the loan amount, but this can be financed as well.  There also will be a monthly insurance premium assessed.


A challenge facing homeowners looking to refinance is their equity position – in other words, the value of their home.

Tentative borrowers might want to give their real estate agent a call and have him or her run what is called a Comparative Market Analysis, or CMA.  This is a list of comparable homes, excluding foreclosures and non-comparable properties that have sold in the area recently.

Mortgage lenders tend to give more credence to CMAs than to market analyses that include non-comparables and foreclosures.

Once borrowers have an idea of what their home is worth, they can, with the help of a lender, determine their options.

With rates being relatively low, it might be time to get out of that ARM or other higher fixed-rate loan you might be in right now.

Valuing Your Home: How Appraisals Work

An appraisal is a process that supports a realistic value of a property against which a borrower would like to borrow money.  With the changes in the real estate market, appraisals, which are required by lenders, are drawing more attention from lenders as part of the approval process.

To establish the value of a property, appraisers, who in most states need to be licensed, start with an interior and exterior inspection of the property. They then look at recent sales of similar homes, called comparables, or comps.  These comparables (a minimum of three) are ideally located within a one-mile radius of what is called the Subject Property and have sold within the previous few months.

Depending on the availability of such comparables, it may be necessary for an appraiser to go outside this radius, especially on custom homes. Examples of this might be homes on oversized lots, or those with finished basements.

Since every home is different from every other, the appraiser will give what are called adjustments to each comparable. These adjustments will account for differences such as the number of bedrooms and square footage in otherwise very similar properties.

Appraisals of investment properties are similar to those of owner-occupied homes, the difference being the preparation of additional documents, including those showing what the rental market for that type of property will bear in that area. The lender needs to know both the market value of the property, and the potential rental income to calculate a cash flow.