Long Island NY Mortgage Mistakes: Will Lenders Ever Learn?

Since the mortgage crisis when loans became almost impossible to obtain, Long Island NY mortgage lenders have begun to loosen standards again. This begs to ask the question, will lenders ever learn their lesson from loose lending practices?

Recently, the Federal Housing Administration (FHA) announced changes they hope will encourage banks to give more home loans to worthy but weaker borrowers.

Long Island NY mortgage requirements tightened during the mortgage crisis are now showing signs of being loosened again

The government has extracted billions of dollars in penalties from lenders that made mistakes on loans to borrowers who later defaulted. The errors ranged from small mistakes to ones that affected the riskiness of the Long Island NY mortgage they chose to underwrite in the first place.

Some banks, believing the penalties are too harsh relative to the errors made, have pulled back from originating a Long Island NY mortgage backed by the FHA and argue that the broad "certification" they must make when originating a Long Island NY mortgage should be limited to significant errors.

Will FHA Changes Help Those Trying to Get a Long Island NY Mortgage?

The FHA’s attempt to change the provision shows the tightrope policy makers and regulators are trying to walk. While they want to hold lenders accountable for crisis-era mistakes and retain recourse should the Long Island NY mortgage go bad, they also want the banks to extend loans to some consumers who have been largely shut out of the Long Island NY mortgage market since the crisis.

Lenders typically have pulled back on FHA lending by having more stringent requirements than what the FHA would allow. For example, even though the FHA will guarantee loans to borrowers with credit scores of as little as 580, on a scale of 300 to 850, a bank might not give a Long Island NY mortgage to borrowers with a score below 640.

Meanwhile, Long Island NY mortgage rates remain near a two-year low, even though rates inched up slightly in the past few days. Freddie Mac says the average rate on a 30-year fixed rate mortgage is now around 3.69 percent, that's up just a fraction from 3.59 percent a week ago. A year ago, 30-year rates averaged 4.28 percent.

We'll continue to monitor the FHA decisions and how they may affect (negatively or positively) getting a Long Island NY mortgage as we continue moving through the housing recovery in 2015.

In the meantime, you can get more information about news that may affect the Long Island NY mortgage market in our section on Long Island NY Mortgage Info to your right under Long Island NY Real Estate Categories.

Remember, we post tips daily to Twitter, and also on our Facebook Page. We'd love you to check us out there too.

Long Island NY Real Estate News – February 2015

Long Island NY Real Estate News - February 2015

In our Long Island NY Real Estate News for February 2015:

Protect Your Long Island NY Mortgage Until It's Funded

Getting a Long Island NY mortgage does not just entail applying for the loan and getting an approval letter. There are still things that can go wrong, and you need to be aware of these so you don't find yourself out all the cash to get the loan, and still not get the funds you thought you were approved for.

Why Your Long Island NY Mortgage May Not Get Funding

Your Long Island NY mortgage can still fall apart even after you think you are approved.

You've gotten the call that your Long Island NY mortgage was approved, and your lender coordinates a closing date with you. You get the movers all lined up, you notify the utility companies to switch the untilites over to your name effective on your closing date, and you send out the change of address notices. Everything's all set to move in, until you get another call from your lender that says, your loan has fallen through.

There are no formal statistics on deals that are approved but then don't actually close. These 11th hour disapprovals happen more often than many people realize. What they also don't know is that losing the loan at the last moment is almost always preventable and possibly fixable.

The most common mistake people make after their loan has been approved but before it closes is taking out additional credit after the lender has reviewed your credit report. Buying furniture on credit after you've been approved, or new appliances for the house, are both big no-no's! If your income to debt ratio was close during the initial documentation review, taking on more debt might push you into a debt ratio the bank deems unacceptable.

The bottom line is — just don't do it. Wait until your deal has completely closed before taking on any new debt. Your normal purchase of gas and a night at the movies isn't likely to cause any problems. It's a major purchase or opening new accounts that will get your loan denied.

Another mistake that may or may not be repairable is changing jobs during the loan funding process. Lenders almost always verify your employment shortly before the loan is set to close. If anyone that submitted financial documentation for your loan is planning to changed employers or stop working, it's best to wait until after the loan closes.

One you will never recover from is if you submit fraudulent income statements. When getting a Long Island NY mortgage, there are no undocumented income statements. The lender will validate your income statement with the IRS or other taxing authority. What you submit to the lender must be exactly what you submitted to the IRS. Often the original loan approval is based on a contingency that your income be validated by the IRS.

Between the time you are initially approved for your Long Island NY mortgage and when the deal closes, try to keep everything the same regarding your financial situation.

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Long Island NY Mortgage Rates Up

Long Island NY mortgage rates ticked up this week for the first time in 2015 following positive home sales reports.

Freddie Mac says a 30-year fixed-rate Long Island NY mortgage averaged 3.66 percent this week, up from 3.63 percent last week. A year ago, 30-year rates averaged 4.31 percent. The all-time low of 3.31 percent was set in November 2012.

A 15-year fix averaged 2.98 percent this week, up from 2.93 percent. A one-year adjustable-rate mortgage rose to 2.38 percent.

New-home sales in December rose 11.6 percent, a better monthly gain than had been expected. Existing-home sales rose 2.4 percent in December.

A separate report from the National Association of Realtors said pending sales of existing homes, a more forward-looking gauge of housing market activity, fell in December, though contract signings remained above year-ago levels.

We'll continue to keep you updated here on any news that might affect Long Island NY mortgage rates, either up or down.

Getting a Long Island NY Mortgage in 2014

If you’re planning to get a Long Island NY mortgage in 2014, you may find it harder. The reason? New rules have gone into effect this month. Mortgage lenders look at a host of factors when deciding whether or not to approve you for a mortgage. All lenders will be asking for even more information than ever before, as explained in this report…

Lending requirements for getting a Long Island NY mortgage will vary from lender to lender, but they’ve generally become more strict since the sub-prime mortgage lending crisis in 2008.

To stay on top of market changes and conditions that may affect getting a Long Island NY mortgage in 2014, check out our other articles by clicking on the Long Island NY Mortgage Info link to your right under Long Island NY Real Estate Categories.

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Getting a Long Island NY Mortgage With Bad Credit

Getting a Long Island NY mortgage when you have bad or poor creditDuring the days of the housing boom, “sub-prime mortgages” — aka ‘home loans for people with bad credit’ — were very popular. After the housing bust and the financial crisis of 2008, most banks stopped issuing sub-prime mortgage loans, and it became much more difficult for people with bad credit to qualify for a loan to buy a house.

Now the sub-prime mortgage market seems to be making a come-back. There are more options now than there have been since the days of the housing bubble for people with bad credit who want to get a home loan.

Getting a Long Island NY Mortgage When You Have Bad Credit

If you have bad credit, banks and lenders view you as a bigger risk to fail to repay the money they loan you. You can lower your risk by paying more money in advance — otherwise known as the down payment — on your house. Borrowers with bad credit usually have to make down payments of 25%-40% of the purchase price of a home, depending on their credit scores. For example, on a $300,000 house, a 25% down payment would be $75,000.

Prepare For Higher Rates

Getting a Long Island NY mortgage with a sub-prime loan will have much higher interest rates than conventional loans. Even at a time of historically low interest rates (3% or less on many mortgages), sub-prime borrowers paid interest rates of 7.95% or higher. Terms and conditions will vary by lender, of course, but it’s worth knowing that when sub-prime mortgage loans are available, they come at a higher cost.

Prove That You Can Pay

During the height of the housing bubble, people were getting a Long Island NY mortgage approved for sub-prime loans at irresponsible levels. People were getting a Long Island NY mortgage even if they didn’t have jobs or any money at all. There was even a joke about “NINJA” loans for people with “No Income, No Jobs/Assets.”

Today the situation is different. If you want to get a sub-prime loan, be prepared to show ample proof of income and have a solid work history. This is not an unreasonable expectation for getting a Long Island NY mortgage loan, but it goes to show how relatively insane the situation was during the housing bubble. But banks do their customers no favors when they give them loans that they cannot afford to repay.

The Good News

The housing market is improving. House prices are on the rise again. Millions of homeowners who were “under water” on their mortgages are now getting some relief, and many other people who were blocked out of being able to qualify for a home loan are once again getting a Long Island NY mortgage.

Even if you have bad credit, it is still possible to get a mortgage, but you need to be prepared to offer a sizable down payment, pay higher interest rates, and have your personal financial life in order so you can prove you are a good risk.

Long Island NY Mortgage Rates Spike

Long Island NY mortgage rates have topped 4 percent for the first time in over a year, while at the same time, mortgage applications fell more than 11 percent. Diana Olick reports on how rising Long Island NY mortgage rates may impact the housing recovery.

Economists are still cautiously bullish on real estate for two main reasons. First is the fact that near-record low Long Island NY mortgage rates have made home buying more affordable, even with the recent run-up in rates. The second is all the pent-up demand in the housing market after years of sluggish sales.

As was noted in the interview, even rates at 4 percent or so are still near historic lows, and seeing rates go up may be a temporary thing.

3 Percent Long Island NY Mortgage Rates Gone Forever?

We will ever see 3 percent mortgage rates again? It’s anyone’s guess, but most experts think not. So now may be the cheapest time to think about getting a Long Island NY mortgage as opposed to sitting on the fence and waiting for rates to go back down, which they may or may not ever do.

For more on Long Island NY mortgage information, check out the other articles we have under “Long Island NY Mortgage Info” under Long Island Real Estate Categories in the column to your right, and stay tuned to this website as we constantly keep you up to date on Long Island NY mortgage news and real estate information.

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