By Christa Buchanan
C & G Staff Writer

With all the changes taking place in the mortgage industry, it’s important to not only know what options are available, but also how to secure the best mortgage, at the best rates possible — that’s why it’s important to get competent, professional help.

“They need to call a mortgage company, preferably one that doesn’t charge an application fee — it shouldn’t cost anything,” said Tracy Collins, loan officer and branch manager of Great Lakes Mortgage Funding in Romeo. “Each mortgage really is done on a case-by-case basis. That’s why they really need professional help.”

A good loan officer, said Collins, runs the credit report, advises clients on credit cleanup, utilizes knowledgeable appraisers and underwriters to get an accurate value, and keeps up with market trends to ensure each client gets the best mortgage loan possible.

“Talk to your lender at least three to six months before you’re ready to buy, so there are no surprises. That way you have time to resolve any issues,” said Matt Adler, a loan officer with North Star Home Lending in Bingham Farms.

One of the biggest differences in obtaining a mortgage in today’s market versus a few years ago is that mortgage underwriting guidelines — the criteria used as the basis for determining a mortgage’s terms — have become much stricter, especially if there are foreclosures in the neighborhood, and more documentation is now required to be approved.

“The time it takes to get a mortgage is faster than ever, but getting qualified is harder. … Appraisals need to be researched in depth, scrutinized, re-scrutinized and de-scrutinized,” said Erik Ambrozaitis, a Realtor with Century 21 Sakman and owner of EGA & Associates Mortgage Corp. in Rochester Hills.

Credit scores are also playing a bigger part in the mortgage game: Acceptable credit scores have risen from the mid-500s to 650-plus, and those who have higher credit scores can get better interest rates.

“Credit qualifications have clearly gotten stricter — credit must be great. … A person with a credit score of 620 could see a quarter-point difference (0.25 percent) versus someone with a score of 760,” Ambrozaitis said.

As running a credit report is the first thing that loan officers do, it’s a good idea to check your credit report before seeing a mortgage broker to make sure there are no derogatory items on it — late fees, collections or civil judgments, etc.

“Go to annualcreditreport.com. I like that site better than others … (because) they use the same score we do. We use FICO scores, and if you look at the credit score and not the FICO score, there can be a 100-point difference,” said Adler, adding that you should take care of any discrepancies as soon as possible.

“The biggest thing is the last 12 months. … There should be no late (payments),” said Collins, adding that in some cases, past collections or debts, such as medical bills, could be ignored as long as everything else is kept current.

Even if you don’t have the best credit — 580 and above can qualify for a loan — Collins said it’s still a good time to get a mortgage, as interest rates are still at a low. 

“Even if you get hit with a higher interest rate and pay 7 (percent) to 7.5 percent, it’s still not a bad deal, and if you keep up on your payments you can refinance in a year or so,” she said.

The amount of the down payment, the cost of the home, how quickly the closing happens, the quality of the school district and city services, among other criteria, can also affect not only the interest rate, but also the ability to be approved for a loan.

“Research the area: Check out the local government, the tax system and city services; look at the school system and see how the school is ranked. … If there’s a good school system and city services, there’s a better chance for stability (in housing prices), and that ups the chance to qualify for a mortgage,” said Ambrozaitis.

Another change since the sub-prime fiasco is that conventional loans, preferably 30-year fixed-rate mortgages, have become the norm — zero-down loans and Adjustable Rate Mortgages are virtually non-existent — and Federal Housing Administration loans are becoming more prevalent.

“FHA is the way to go. You only need 3 percent down; credit guidelines are less strict; the interest rates are good,” said Collins, adding that FHA is becoming the “new conventional” in that guidelines have loosened to allow more people access to FHA loans.

“There’s been a lot of changes in FHA loans in the last 12 months.  The biggest thing is that they’ve raised the loan maximum — $297,500 is now the maximum in this area. … Conventional loans require a minimum down payment of 5 percent, so if you’re looking at 5 percent or less for a down payment, an FHA loan is the better option. But, if you put 10 percent down or more, a conventional loan is better,” said Adler.

The bottom line, said Ambrozaitis, is if you pay your bills, save money, have a good job and are pre-approved, not pre-qualified, for a loan — pre-approval means all documentation has been verified and a loan amount is determined, while pre-qualification is just the preliminary step and is not official — you should have no problem obtaining a mortgage with a good interest rate.

You can reach Staff Writer Christa Buchanan at cbuchanan@candgnews.com or at (586) 498-1061.