By: Mike Kennedy October 15th, 2008 Category: Interest Rates and Loans, Obtaining a Mortgage

Jerry Merrick, Vice President of Mortgage Lending at BB&T Bank, stopped by our office again yesterday to give us an update on the mortgage industry after what was certainly a turbulent week on Wall Street and other financial sectors. For buyers out there who may be considering purchasing a second home or vacation home for sale at Deep Creek Lake - here are some points to consider if you will be obtaining a loan;

Credit Scores

Lenders still very much want to lend money - however, only those borrowers with 800+ credit scores are going to get the lowest rates without paying any upfront points. Borrowers with credit scores less than 800 can still get loans - but the banks are now charging upfront points to these people to get the same rates. If you are thinking of purchasing a piece of real estate at Deep Creek Lake or in Garrett County Maryland and are going to borrow, it may be a good idea to check your credit score first to see where you stand.

Interest Rates

With all the turbulence in the markets last week - interest rates went up nearly 1 whole percentage point between Wednesday of last week and Monday of this week. In fact, at one point last Friday, Jerry reported he was receiving new rate sheets every 15 minutes! That is how uncertain the mortgage industry was reacting to last week’s events on Friday. Should you lock in your interest rate now? That’s a question only you can answer - but if you are someone who doesn’t mind taking chances then you might want to consider waiting a while to see if rates come back down. If you are someone who doesn’t like to take chances and you are comfortable with your payment terms at the current rate levels then you may want to consider locking in now to avoid the chance that rates may go up again. It all boils down to your comfort level - no one can predict for certain which way interest rates will head in the future.

Appraisals

Lastly, starting at the end of this month a new regulation goes into effect that changes the way appraisals are ordered. Banks and mortgage brokers will now have to order all appraisals thru an independent 3^rd party - this 3^rd party will then order that appraisal from a licensed appraiser who agrees to do it for the lowest price. This is both good and bad. Good in two ways - (1) that it will probably lower the appraisal price for the borrower and (2) it will now eliminate any upfront communication or chatter between the lender and the appraiser - which some would say created most of the current problems in the mortgage industry we have now.

However, it’s bad in the sense that this new system is now searching for the lowest priced appraiser and not the most qualified appraiser. In our real estate market, it may result in the lower priced appraisers from Frostburg and Cumberland coming up and doing appraisals at Deep Creek Lake. Our local appraisers, who do charge a little more, have proven they do quality work in a very specialized market - they understand this resort market - appraisers who work in other markets, who may bid the lowest price just to get the work, more than likely do not have this same same specialized knowledge and experience. This new system may very well create another set of problems for the mortgage industry down the road - underwriters making loan decisions based on appraisals from what some would consider “less” qualified appraisers.

Tags: Second Home Financing

This entry was posted on Wednesday, October 15th, 2008 at 9:16 am and is filed under Interest Rates and Loans, Obtaining a Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.