The past few weeks have been full of dramatic shifts in the stock market and dire predictions about our economy. The financial industry in particular has been in the news, and in watching the national news one can come away with the impression that loans, home mortgages especially, are not available for most people at this time. In fact, a quick survey of local area bankers indicates that funds are still available."I watch television, and I would think it's hard to get a loan too," agrees Christy Bencivenga-Burns of First Citizens Bank. "At First Citizens we were never involved in the sub prime mortgages so we have not been affected by that. We are still doing mortgages. It's just that you have to be qualified...that's the important word...qualified."
So how does that affect the consumer? First of all, it means that potential homebuyers should be able to put something down on their homes prior to purchase, rather than obtaining 100% funding.
Bencivenga-Burns points out that in the past, Fannie Mae would underwrite a loan with no proof of income and no verifiable assets. In addition, they were willing to finance 100% of the home value. Most of the banks I spoke with in the area, however, have not taken part in that practice, so they have not suffered the consequences that the larger national financial institutions are experiencing.
"We are evaluating and underwriting new loans every day and have not changed our lending standards," says Lee Ann Lewis of BB&T. "It is simply against our philosophy and values to put our clients at financial risk."
"Our bank has plenty of funds," agrees David Begley, of Black Mountain Savings Bank. "We are doing what we have always done, offering 80% of value to folks that have good credit."
"Black Mountain Savings has seen a large increase in deposits due to consumers fleeing to safety and local banks," Begley says. "Black Mountain Savings is one of the few banks nationally that doesn't borrow from other institutions to fund their loans so we haven't been impacted by the national credit crisis."
As a consumer seeking a mortgage, what should someone seeking a loan do to smooth out the process? According to Bencivenga-Burns, the first step is to check your own credit score.
"Pull the report yourself first," she advises. "Clean up any issues that need to be resolved prior to making the loan application. A high credit score will get you the best rates and improve your chances of being approved."
Another area of concern is the applicant's debt to income ratio. While in the past consumers with rates as high as 65% were approved, area bankers agree that these days, that debt income ratio needs to be much lower.
In short, in speaking with our local bankers, it appears that the mortgage business has changed but primarily for those larger banks who were taking extraordinary risks nationally. For our local financial institutions, loan officers have funds available for their customers who have provable income, solid credit scores, and a down payment for their new home.