The Mortgage Process: Back From the Future

David Kozuh, Vice President—Residential Lending

Things have changed. But, not in the way many potential borrowers think.

David Kozuh, Vice President—Residential Lending   Things have changed. But, not in the way many potential borrowers think. Many still think it’s harder to get a mortgage than it used to be. Not necessarily. Despite the Financial Crisis of 2007–2008, banks have been helping homebuyers and owners take advantage of the low interest-rate environment all along. Even Millennials, despite their student debt loads, have been getting approved for mortgages. It’s also still possible to get a mortgage with a down payment of less than 20%. And, first-time homebuyer programs that provide money for down payments may even make it a little easier to afford a new home than in 2008. What Has Changed Since the crisis, the process of applying for a loan has improved. Many lenders, Old Second included, have made initiating a loan request even easier, leveraging online and mobile technology for applications, document gathering and communication. But, the biggest change involves the way an application is now processed. It takes longer…much longer. What could be done inside of 30 days in 2008, may now take longer. No home loan lender is immune—we are all subject to the same regulations. And, it’s about to get a little worse. It’s Not You, It’s the New Federal Regulations Whether you are a first-time homebuyer or an experienced homeowner, in the aftermath of the financial crisis there has been a return to the kind of lending standards—operational checks and balances—that most of us have used to apply to loans for decades. Those standards require time to analyze and verify that each mortgage applicant is qualified for and entering into the right type of loan for their financial circumstances. As of Oct. 3, a new rule from the Consumer Financial Protection Bureau, “Know Before You Owe,” will take effect. It is intended to offer additional protection by ensuring you understand the terms and consequences of your loan agreement at closing. This new rule will add a few more days to the closing process for all mortgage lenders no matter how automated their internal processes are. While a degree of patience has re-entered the mortgage process, we believe it ultimately ensures that you’ll gain full advantage of our expertise. Whether it’s a 30-year fixed mortgage, an adjustable rate, a line of credit for remodeling or a refinancing into a 15-year loan that will help you retire mortgage-free, our goal is—as it’s always been—to make sure you enter into the right financing structure.

Many still think it’s harder to get a mortgage than it used to be. Not necessarily. Despite the Financial Crisis of 2007–2008, banks have been helping homebuyers and owners take advantage of the low interest-rate environment all along. Even Millennials, despite their student debt loads, have been getting approved for mortgages.

It’s also still possible to get a mortgage with a down payment of less than 20%. And, first-time homebuyer programs that provide money for down payments may even make it a little easier to afford a new home than in 2008.

What Has Changed
Since the crisis, the process of applying for a loan has improved. Many lenders, Old Second included, have made initiating a loan request even easier, leveraging online and mobile technology for applications, document gathering and communication.

But, the biggest change involves the way an application is now processed. It takes longer…much longer. What could be done inside of 30 days in 2008, may now take longer. No home loan lender is immune—we are all subject to the same regulations. And, it’s about to get a little worse.

It’s Not You, It’s the New Federal Regulations
Whether you are a first-time homebuyer or an experienced homeowner, in the aftermath of the financial crisis there has been a return to the kind of lending standards—operational checks and balances—that most of us have used to apply to loans for decades.

Those standards require time to analyze and verify that each mortgage applicant is qualified for and entering into the right type of loan for their financial circumstances.

As of Oct. 3, a new rule from the Consumer Financial Protection Bureau, “Know Before You Owe,” will take effect. It is intended to offer additional protection by ensuring you understand the terms and consequences of your loan agreement at closing. This new rule will add a few more days to the closing process for all mortgage lenders no matter how automated their internal processes are.

While a degree of patience has re-entered the mortgage process, we believe it ultimately ensures that you’ll gain full advantage of our expertise.

Whether it’s a 30-year fixed mortgage, an adjustable rate, a line of credit for remodeling or a refinancing into a 15-year loan that will help you retire mortgage-free, our goal is—as it’s always been—to make sure you enter into the right financing structure.

Interest Rates Are Expected to Move. Should You?

William Schumann, First Vice President, Head of Mortgage Sales

William Schumann, First Vice President, Head of Mortgage Sales

Interest rates are at historical lows—you’ve probably heard this before. It’s still true, but sources indicate not for much longer. Even the U.S. Federal Reserve, which influences the direction of interest rates, has indicated rates will be going up.

If you are thinking about purchasing a home, buying before rates rise could lower your overall cost of ownership. Being able to lock in a low rate of interest lowers the amount of your monthly payment.

The current real estate environment has also created another factor those considering making the move to homeownership should be aware of—in some of the markets our bank serves, the selection of homes for purchase is much better than the selection of rental units.

Most homeowners are also able to deduct their mortgage interest on that home. There are no comparable deductions available to renters. Having access to this deductibility can significantly lower the after-tax costs of homeownership by lowering your income tax bill each year.

An additional advantage for home ownership is the opportunity it offers to build equity. You spend money on rent, but a mortgage payment represents both an expense (interest) and an investment in your asset (home equity). As equity builds, so does your personal wealth.

While the aspect of financial benefit figures significantly in the decision to buy instead of renting, homeownership also offers the ability to create a space of one’s own, to customize it to your liking and needs. And, it can provide stability, as well as a place you and your family can refer to as home for years to come.

If you do decide to take advantage of the current interest rate environment, it’s a good idea to “know” before you “go.” Visit your lender first to determine how much house you can afford so that you are only shown options in your price range. It helps make your decision and your home-buying experience go more smoothly.

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FHFA Extends HARP to 2015

Old Second Residential LendingOld Second Residential Lending division has positioned itself to accommodate the Home Affordable Refinance Program (HARP).  The Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to extend HARP by two years to December 31, 2015. The program was set to expire December 31, 2013.

In addition, FHFA will soon launch a nationwide campaign to inform homeowners aboutHARP. This campaign will educate consumers about HARP and its eligibility requirements and motivate them to explore their options and utilize HARP before the program ends.

The HARP program is designed specifically to help borrowers who may not qualify for traditional refinancing due to low home value or because they have low or no home equity. Borrowers may be able to lower their monthly payment, their rate or move from an adjustable rate loan product to a fixed rate loan product.

“The housing industry has a seen a number of changes in the past several years.” said Steve Weber, senior vice resident of residential lending at Old Second Bank. “Old Second has taken the necessary measures to act as facilitators.  We want to make it easy and economical for consumers to take advantage of these federal programs.”

To be eligible for a HARP refinance homeowners must meet the following criteria:

  • The loan must be owned or guaranteed, and acquired by Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The borrower must be “current” on their mortgage payments – no missed payments in the last 6 months, and no more than one payment missed in the last 12 months.)
  • The first mortgage can exceed the current market value of the home.

Borrowers can visit http://www.oldsecond.com/loans/home-loans/#special-financing to get more information about the HARP program and to determine if their loan is owned by Fannie Mae or Freddie Mac.