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Mortgage Guy Answers Your Credit Crunch Questions

Credit CrunchNo, “Credit Crunch” is not a cereal.  It’s a serious financial situation impacting us all in ways we could not have imagined just months or a few weeks ago.

I know you are concerned how this credit crunch might impact your ability to buy or sell Crofton real estate right now.  I do, too, and that’s why I turned to a “mortgage guy” for answers.  

Actually, these answers come to you from our Crofton neighbor Chris Washburn, who just happens to be a V.P. and Branch Manager for FNMC/National City Mortgage: 

1.  Is there any mortgage money available for buying a home in Crofton now?

The short answer is “yes, there is mortgage money available to buy a home now,” although the options are fewer today than a year ago.   

2.  What mortgage options do you suggest?

FHA and VA are the best programs for buying a home priced up to $560,000 – and most Crofton homes do fit within that maximum.  With FHA, the down payment is 3% (until 1/1/2009, when it goes to 3.5%), and there is no down payment for VA.  Above $560,000, a VA borrower must make a down payment equal to 25% of the amount over $560,000.  (Example:  If you want to purchase a $600,000 home, you will need a $10,000 down payment because that is 25% of the $40,000 over $560,000.)

Maryland Mortgage Programs are still available, as well, but qualifying can be more difficult than it is for FHA and VA.

You can get a Conventional Mortgage with 10% down.   It will require full documentation, just like the “old days” – i.e.,  your credit worthiness and verification of income, cash assets, and financial obligations.

3.  Can first-time buyers get any “special” terms?

All first-time buyers in Maryland get a break in closing costs equal to 1/4% of the sale price.  A first-time buyer is defined as someone who has not owned a home in Maryland for the most recent three years.  If you’re relocating from another state, chances are you will qualify for this discount.

4. If I rent my current home for enough to cover my current mortgage payment, how will that affect my qualifying to buy another home?

VA still allows rental income to offset your mortgage payment on your current home.  However, FHA and Conventional loans require a low LTV (Loan to Value), a lease and security deposit in hand, and substantial cash reserves.

5.  How will bank-owned and short-sale properties impact the appraisal on any home I buy or sell?

These sales did not affect appraisals in the past, but that’s not true in this market.  In fact, these sales may define the market (and appraisals) if they are the majority of nearby sold properties.  Fortunately, the property’s condition, location, and square footage are still important, and most foreclosures are “condition-challenged.” 

Chris Washburn and Jeff MorelliWe won’t know for sure when home prices and interest rates bottom out until they start going up, so there’s no point in waiting.  The bottom will be gone before we even realize what happened. 

If you have any questions not addressed here, please let me know or email Chris directly at [email protected] or his associate, Jeff Morelli at [email protected].


PHOTO:  A Spoonful of Credit Crunch originally uploaded by The Silver Penguin on Flickr

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