Thoughts About Mortgages, and Home Ownership
By Tom Wilbur
Contributing Editor/The Salina Post
Over the past few years, the media has given exposure to what’s been termed a “mortgage crisis” across the United States. You’ve read about mortgage companies going out of business by the hundreds, and there will be more. You’ve heard numerous stories about people who will be losing their homes to foreclosure, and there will be more of those, too. There have been 146 banks closed in the United States in 2010, and bank closures will continue until we get through the wave of issues that have hit the financial industry so hard. Home values are generally lower than they were a few years ago, which is good for potential home buyers—not so good for a home seller. My purpose today is to communicate a few ideas that may be of help to you, regarding home ownership and mortgage loans:
1) If you are just entering home ownership, you’re probably making a very good move. Interest rates are at record low levels, and home prices are favorable—so there are a couple of pluses just getting started. It’s critical, however, to take the time to understand the costs involved in owning, maintaining, and operating a home. Homeownership is terrific, but it’s not always the right move for everybody. I can give you many reasons, plus or minus, for being a homeowner. That being said, Salina has many professional Realtors who can walk you through the steps towards finding, buying and owning a home—responsibly.
2) In today’s lending environment, down payment is a bigger issue for conventional loans than it has been in the past, but there are programs out there to support first time home buyers with grants, and down payment funds. FHA and VA loans, and rural development loans, have become much more popular as a means to finance a home, and allow for less down payment funds. But you do need a good credit history today to get a home loan, regardless of the type of financing you apply for. If you have a lower credit score, a professional loan consultant can probably lay out a plan for you to get involved in owning a home in the future, but it may take some time and effort on your part, and discipline in your approach— to get to a point where you may qualify for a loan.
3) Don’t be offended when you apply for a mortgage loan if the loan officer asks you bunches of questions—or asks for copies of tax returns, pay stubs, driver’s licenses, bank statements, rent histories, etc. It’s all part of the process and the process takes more time, more documentation, and more effort than it did a few years ago.
4) If you have equity in your home, and lots of other consumer debt, the ability to consolidate your debt with one loan is possible, but only to those who have been making payments on time. Getting all your debts into one manageable payment can certainly have its advantages. Equity is determined by a fee independent appraisal from a local qualified appraiser looking at your house. Appraisal values generally differ from what the county gives you as their valuation for assessing taxes. Appraisal values sometimes surprise folks, but values are lower today.
Most area banks do home loans or home equity loans for consolidation of bills. However, using the equity of your home for things you “want” instead of things you “need” is bad practice—it’s better to save before you spend, if you’re able to do so.
5) If you are having trouble making your present loan payments, there are some keys to getting through the process. Hopefully, you originated your home loan at one of Salina’s area home lenders—we have good ones here. Your best option–go see your lender. Be honest with them. Tell them your situation as soon as you begin to have difficulty. Instead of hiding from the phone, a proactive approach in working with your lender will give you more options to get through it. If you get substantially behind on any payments and your credit score begins to plummet—bankers’ hands get tied, and the options to help you can disappear quickly.
Salina is a great community in which to live and work. Property values are relatively stable and we have a sound economic base. Much of what we read about the huge devaluation of property in areas like Arizona, California and Florida won’t happen here . . . because we’ve never had the meteoric rises in values areas like these other places— nor do we have an over-abundance of homes.
The key to understanding home loans, as in everything, is to spend time researching the options, work directly with people you trust and know, and use your superior noodle.
You alone are in position to take charge of your finances, and by using your common sense and our community and area resources— you can take action to get involved in home ownership, or you may use your home to get your financial obligations back on track.
Tom Wilbur is President/CEO of BANK VI in Salina. He is a lifelong resident of Salina, and has been a regular editorial contributor to newspapers and magazines, and a public speaker. He can be contacted at firstname.lastname@example.org.