Last week I had the opportunity to sit down and interview Jim O' Malley, a Senior Loan Officer at Leader Bank, a MA-based community bank. Jim has over 12 years experience in the mortgage business. The video is must-watch for anyone about to buy a home and go through the mortgage process. This is the first of a three-part interview we did with Jim.
Where Do You Start the Mortgage Process?
The #1 factor in getting a mortgage is your FICO score. Before applying for a mortgage you should get a copy of your most recent credit report. Last year, it was possible to get a decent mortgage rate with a 620 FICO score. Now, you need a 720 to get the best rate. Between 640-720 you'll have to pay a higher rate and potentially PMI.
The profile of someone who has a 720 or higher is:
- Responsibly using and managing debt. It's better to have some debt (car payment, studentl loan, etc.) and show that you can handle it.
- History of paying back money.
- No late fees
- A clean record for the past two years.
According to Jim, it's still relatively easy to get a mortgage if you have a down payment. You also need to have strong earnings that appear on a W-2. If you are self-employed then you need two years of salary history.
How Does Today's Mortgage Environment Compare to Pre-Recession 2007?
Self-employed borrowers are experiencing the biggest impact. No income verification loans are gone. This is the biggest difference with 2007. This change has knocked out about 30% of potential buyers who might have strong finances but don't have it well documented. This is especially true in areas like Boston with a large entrepreneurial and self-employed population.
What's the State of the Real Estate Market?
Demand for homes is high right now spurred on by the homebuyer tax credit plus low rates. To take advantage of the tax credit you must have a home under agreement by the end of April.
What Can People Do to Get Best Mortgage Rate?
Make sure you don't have any small collections on your credit report. An outsanding $20 Verizon bill can have as much impact as a late payment on a credit card.
Are Rates Going Up?
Rates will go up slowly. They won't shoot up but he believes they will go higher.
How Are Home Values Doing?
Jim serves the Boston market so that was his reference. Close to the city home prices have faired pretty well - dropping by 5% or less. The further out you go, the worse the market is. He says the old adage is true: location, location, location.
We'll shortly be posting the rest of my informative interview with Jim.
Thanks for the interview Jim. Jim can be reached at jomalley (at) leaderbank.com.