Last time we talked about the big banks trying to eliminate competition from mortgage brokers and the fraudulent nature of the new appraisal rules (HVCC). Visit our newsletter archive for this and other past newsletters on www.cwcfinancial.com.

In this newsletter , we are going to provide a quick update on the current state of the mortgage lending market.

We are often asked by clients, friends and family, "Are loans really still available? Is someone out there really lending?" And the short answer is, yes. The challenges, however, are many. One major challenge is that we consumers have short memories and can only remember the swashbuckling days of the bubble years with easy money and rapidly rising values. The reality is that we have just gone back to more sensible times.

In order to obtain mortgage financing in today's market, borrowers need to prove income, prove assets, and have relatively good credit. The better your credit rating and the more equity you have in your property (or the more money you provide for a downpayment), the better the rate/price you will receive.

There are still small downpayment programs available with about 3.5% down on FHA loans and 5% down on conforming $417,000 loans. In addition, you may still finance properties with as little as 10% equity or 10% downpayments but these loans typically require mortgage insurance on both conventional and FHA financing which make them more cost prohibitive.

One area where we have seen the biggest challenge is in the true jumbo mortgage market. Jumbo loans (loans over $729,750 in certain markets) have become very limited but, contrary to popular belief, they are still available.

Another of the bigger challenges in our Bay Area market presents itself to self-employed borrowers. We have many clients with 800 credit scores, hundreds of thousands of dollars in savings, 50% equity in their homes and most of them cannot get new financing. Why? Because most self-employed borrowers can afford more than they qualify for as most choose to invest profits back into their business rather than paying themselves (optimizing tax benefits and minimizing tax liabilities).

Ironically, loans to these borrower are typically not the ones that have gone bad. In addition, the salaried borrower is qualified on gross income whereas the self-employed borrower is qualified on net income making it that much more difficult for them to meet income requirements. We believe that the industry will get this right one of these days.

So, the bottom line is this: yes, it is more challenging to get financing now versus the easy money days of the early millennium but good options still exist, especially if you know where to go. As always, we welcome you to give us a call or drop us a note anytime so that we can analyze your individual situation and advise what strategy might serve your best interest based on the present market.

Sincerely,Your CWC Financial Loan Team

888-711-5454 Toll Free / 415-454-1130 info@cwcfinancial.com