As the Lake Travis area gears up for a busy real estate season, it’s a good time to be sure your mortgage fits your needs, whether you want to buy a home or refinance.
Lago Vista resident Daffana Gray has been a loan officer since 1999. She’s got plenty of advice.
“Mortgage literally means death pledge,” she says, “but getting one doesn’t have to be painful or even dramatic.” With the right attitude, some patience, and preparation, you can get a mortgage in around 30 days.
Gray takes pride in hunting out the loan program that best fits each individual borrower.
Home Mortgage Basics
You can get a mortgage that takes anywhere from 5 to 30 years to pay off, and there’s a loan to fit any situation.
“There are purchase money loans, refinance, remodel/rehab, cash out,” Gray says. “There’s a loan if you have an aging parent you want to move closer to you. There are programs for people with special-needs kids. There are reverse mortgages, loans geared to certain careers such as doctors and on and on. There’s just so much out there.”
This is definitely not a closed lending age.
Skin in the Game
Gray is grounded in fiscal conservatism. “If you’re going to buy a house, you need to have a little bit of skin in the game.” This can be in the form of a down payment or closing costs.
But she doesn’t insist that everybody put down 20%. “When interest rates were 15, 18, 20%, people would put 20% down. But don’t forget you were buying your biggest investment and it wasn’t even $80,000.”
If you bought a more modest house, say, $50,000 to $100,000, a 20% down payment would get you in. Not today. The average cost of a house has gone up so much — $311,000 is the average cost of a home in the Austin area — Gray says, that 20% is hard to come up with for most borrowers.
Qualifying for a Mortgage
“If people really want a house, there are two main things,” Gray notes. “Your credit and income.” A good ratio of total debt to income is also required. That varies by program.
You don’t have to earn an astronomical salary, though. “If you have verifiable income and you’re buying a house within your means,” Gray says, “the chance is good you will qualify for a mortgage.”
Gray can find loans for most, even those whose credit score is as low as 580. But most lenders prefer scores of 620 and up, especially for conventional loan programs. “The lower your credit score is, generally,” she says, “the larger down payment you need to qualify. And you may have a higher interest rate than someone with excellent credit.”
Loan officers like Gray look for trending credit these days. “Trending credit tells me how you pay your bills. If you have a credit card and you pay it off every month, that’s a trend I’ll be able to see.”
Revolving accounts — credit cards and home equity lines of credit — are your strongest credit builders, Gray points out. Repeated monthly use and payment will build those credit muscles.
Then there are installment accounts. Car notes and furniture payments, student loans, etc. “can just slaughter your credit” if you miss a payment. But paying them off ahead of schedule doesn’t help credit scores.
Your mortgage payment is the ultimate installment account. “You don’t ever want to miss a mortgage payment,” Gray says. That happens and you’re responsible for both the month missed and the month that is now due — all at once. If you pay only the missed month, the lender will return the payment as incomplete. But if an emergency threatens your ability to make a payment, she has some advice.
When the Unexpected Happens
“I do urge people, if they lose their job, talk to their mortgage servicer right away. Some people keep credit so close to the vest, like it’s some kind of personal shame, and it’s not. Anybody can go through a difficult time.”
Gray points out that “typically the payment is due on the first of the month. You don’t get a late fee until after the 15th, and the fee is about 5% of the monthly mortgage payment.” This late fee is not reported to the credit bureaus. But if you’re late on a regular basis, it can be a sign that financial troubles are brewing.
However, being late on a payment is different from being delinquent, she says. If you miss a full month’s billing cycle, your credit will suffer. “If you miss three months of payments, the mortgage company can and usually will begin the foreclosure process.”
How can a loan officer help?
You may be able to refinance, and that will let you effectively miss one or possibly even two payments. That might give your personal finances some relief. “If you’re having a hard time, you really want to get with a loan officer between day 1 and day 15, so we can have that baby closed by day 29 and it won’t go against you.”
But if you know you’re going to miss a payment, Gray reiterates that you should first call your mortgage servicer. Though Gray points out that servicing mortgage loans is not her bailiwick, she says that a really, really good customer service person may be able to move one payment to the end of your mortgage.
“If you’re buying your first house, there are down payment assistance programs through the state, such as SETH, and The Texas Department of Housing and Community Affairs has a fantastic down payment assistance program,” Gray says. Although SETH isn’t available in Travis County, it offers down payment assistance to income-eligible buyers even if they aren’t buying their first home. Nearby counties such as Williamson, Bell, Burnet, and Caldwell qualify.
Gray is also a fan of USDA loans for people willing to live in rural America. With this program, the borrower is only responsible for closing costs.
“You can even buy farms using USDA,” Gray says. “You can be in really neat little towns like Lago Vista or Marble Falls or Spicewood.”
Lake Living Can Be Affordable
“Sometimes it’s a matter of gently helping people rethink where they want to live, based on affordability,” she says. If you insist on living in the more expensive areas, you’ll need a bigger down payment or better debt-to-income ratio. There are affordable housing areas in Austin, but not enough to meet demand.
“As a loan officer,” Gray says, “I want you to get in a house. I’m your mouthpiece to the lender representing why you’d be a good risk for a mortgage loan.” And there is risk for her as well.
A Loan Officer’s Responsibility
Every loan that Gray writes follows her license number. “If a client goes into foreclosure, that follows me,” she says. “If I have three clients that go into foreclosure, I have a strong probability of getting my license suspended. The last thing I want is for someone to have a foreclosure — not just for the purpose of my license, but for their sake.”
Gray points out that, “most of us are grasshoppers — very few of us are ants.” When interest rates are low, we hold off and hope maybe they will get even lower. “But just like summer, low, low rates will one day go away.”
There is a possibility of lower rates from one day to the next, but in today’s economic climate, interest rates will likely rise. So, says Gray, “hop to it today!”