- The Washington Times - Friday, April 23, 2010

I returned last week from a family vacation in Colorado. Being in the mortgage business, I would have been remiss if I hadn’t brought my laptop and checked e-mail daily. Expecting a pretty quiet week, I was pleasantly surprised to find three e-mails inquiring about mortgage financing for three different purchases.

I can’t speak for all loan officers, but the purchase market has been pretty slow over the last year or so. Three inquiries is a lot. After working with these folks for a few days, it appears that all will be able to accomplish their goal of buying a house, despite minor obstacles in each situation. Could this mean the housing market is improving and the credit crunch is waning?

The first fellow is a retired military officer referred to me by his real estate agent. He had found a house and was prepared to make an offer. We concluded he should take a low-interest-rate 5/1 adjustable-rate mortgage because he expects to pay off the loan within five years.

The problem was his current residence, which he owns free and clear, is listed for sale and he needed to tap into some of that equity to make a down payment on the new home. Because his current home is listed for sale, his credit union refused to grant him an equity line.

I called an officer of a local bank who agreed to make a 12-month bridge loan at 6.25 percent for a 0.50 percent fee. Two years ago, it wouldn’t have surprised me if my client had been unable to get any kind of bridge loan.

The second call I received was from the daughter of a client. She and her husband are first-time homebuyers. As with most young, first-time homebuyers, these folks are short on cash. We decided a loan insured by the Federal Housing Administration (FHA) would best suit them. The rates are good and a down payment of only 3.5 percent is required.

The third call I received was from the sister of a client - another first-time homebuyer and FHA candidate. These folks have rented for five years and have agreed to purchase a neighbor’s home without the assistance of a real estate agent. The problem is that while these folks have good income, they have very little liquid savings because they put all their extra earnings in her husband’s tax-deferred IRA.

I suggested he check with his employer’s human resources department and ask about taking a loan out secured by his IRA to use for a down payment. While borrowed funds typically are not allowed as a down-payment source, borrowed funds that are collateralized by assets, such as real estate or an IRA are allowed.

My client discovered that her husband is indeed able to borrow the amount needed for the down payment from his IRA at a modest interest rate and payment. The problem is they will still be short of funds to cover the closing costs, which I estimated to be about $11,000.

I suggested they approach their seller and offer to buy the house for $11,000 more than the original agreed upon price. The seller then would contribute $11,000 toward the borrower’s closing costs. This is allowed on an FHA loan.

I’m expecting all of these clients to be new homeowners in the next 30 to 45 days. With a little creativity and outside-of-the-box thinking, we can make deals happen.

Henry Savage is president of PMC Mortgage in Alexandria, Va. Reach him at [email protected]

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