American Dream Café: As Dow Plunges, Mortgage Brokers Say Dream Still Possible

As the stock market continues its amusement park ride -- mostly downhill, one might begin to wonder whether there is hope for living the American Dream, which has become synonymous with home ownership.

According to three local mortgage brokers, despite the fear and anxiety that prevails, the combination of historically low interest rates and housing prices, makes this a thrilling home purchasing opportunity for those who qualify.

“The mood of consumers is certainly cautious because almost everyone is concerned about the employment picture,” said Russell Tucker, Senior Vice President of Investor’s Savings Bank in Millburn, with 80 branches through New Jersey, including Berkeley Heights and New Providence.

Tucker, who has worked in banking for 29 years, said only one other time in history have fixed rate mortgages been as low as they are today.

“If it weren’t for the concern about the fragility of the economy and fear that we may fall back into a recession, we would have a runaway economy because housing prices are at a historic low,” said Tucker.

However the uncertainty about the future is prompting the majority of consumers to retire debt, not add to it, said Tucker.

The good news is that for those who do feel confident about the future, this is a phenomenal time to shop for a home.

“I think the mood of buyers is good, because of the low interest rates and housing prices,” said Senior Mortgage Consultant Scott Blyth, with Union Center National Bank in Berkeley Heights.

Diane Muldoon, Vice President and Certified Mortgage Planner at Hilltop Community Bank in Berkeley Heights, agrees.

“I think that potential home buyers realize that they have a unique buying opportunity right now, with values that are the lowest they have been in close to ten years and interest rates remaining historically low,” said Muldoon who has been with the bank for over 10 years.

Think Globally, Bank Locally?

Choosing a local bank has enormous value, according to Tucker, Blyth and Muldoon.

I have heard so many horror stories from people who have dealt with the larger banks, mortgage brokers and on-line lenders,” said Blyth.

He said it makes sense to deal with a local bank for many reasons.

“We are a direct lender, and all loans from start to finish, are handled under one roof at our Union Headquarters on Morris Ave. Our turn-around time is 45 days which is exceptional and my clients deal with only me throughout the process which is so hard to find these days,” said Blyth.

While the credit score is still very important, dealing with a local bank may offer flexibility that is not available at national banks.

“As a local bank, we look at the whole transaction, not just an individual credit score which may have been impacted by loss of job, etc.  We also consider the amount of equity in the home, current ability to pay and other assets,” said Muldoon.

She said, “Hilltop Community Bank is a local bank headquartered in Summit, NJ with branches in Summit, Berkeley Heights and Madison, the benefits of securing a mortgage through Hilltop are local decision making and the ability to provide a quick response.”

Greater Skin in the Game Required

Generally speaking, all three mortgage experts said that at this time, a 20 percent down payment is expected, but 3 percent down is not out of the realm of possibility.

“Mortgage lending has reverted back to lending of years ago, whereby the best interest rates offered are supported by a full 20% down payment,” said Muldoon.

Blyth and Tucker agree that while 20 percent down is the norm, for those with a good credit rating, 3 percent down is still an option.

Looking into the Crystal Ball

All three lenders agree that they don’t see the interest rates changing much in the next year.

“Interest rates are at record lows and very volatile,” said Blyth.

“They change daily, but we are able to lock in and register a client’s application over the phone once qualified. The 30 year mortgage is currently at an annual percentage rate (APR) of 4.25% and the 15 year mortgage is at 3.375% (APR),” said Blyth.

 “The current interest rate for a 30 year fixed rate with no points would be 4.375%.  I anticipate rates staying between 4% and 5% in the upcoming year,” said Muldoon.

Bottom Line Advice

Muldoon said, “Be prepared to provide everything to your mortgage lender.  "No doc" loans are a thing of the past, as they should be. So be prepared to provide everything to your mortgage lender; Two years of tax returns, two months' bank statements, two pay stubs, etc. Also, be prepared to have writer's cramp from the amount of times you will need to sign your name.”

Blyth said, qualification these days depends heavily on an applicant’s credit rating and can affect the interest rate, therefore it’s important to make sure that your credit is in good shape before you apply.

Despite the fear that getting a mortgage may be very difficult these days, Tucker said the truth is that a lot of banks want to lend money now.

He said, “I think a lot of the larger banks have in some way communicated that getting a mortgage is very difficult right now, and that’s simply not the case, especially with a local bank.”

He said, “The truth is, many banks like ours are aggressively seeking new customers.”