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14 | M R EP O RT COVER FEATURE consideration. "Cash is king, which is a shame, because there are a lot of good programs out there," Blevins said. "I have had multiple con- versations with real estate agents when I'm pre-qualifying clients. If the agent finds out the client is coming in with an FHA or VA loan, the first question always is if they can qualify for a conven- tional loan, or they are going to the bottom of the pile." Adjustable-rate mortgages have lost any popularity they once had, added Steve Adamo, President of National Retail Production, Embrace Home Loans. "In the years leading up to the Great Recession of 2008, ARMs were being made with higher lifetime caps and many were made with no money down. When borrow- ers' interest rates adjusted upward, many had a difficult time making their loan payments as they could not afford the loan to begin with. In 2008, the Board of Governors of the Federal Reserve System adopted a rule under the Truth in Lending Act, prohibiting creditors from making higher-priced mortgage loans without assessing consumers' ability to repay the loans. Creditors have had to follow these requirements since October 2009. For example, when borrow- ers request an application for an adjustable-rate mortgage, they must be provided with information on how their loan payments could rise in the future under different interest rate scenarios. With interest rates on conven- tional, fixed-rate loans as low as they are, there is little, if any, ad- vantage for most borrowers to opt for an adjustable-rate loan, Adamo added. "Most are sticking with the 30-year, fixed-rate product. It's safe, it's sound, it's predictable. It's not that other borrowers don't use the plethora of products that are available, because some do. But most are sticking with that long term fixed-rate instrument." Adamo added: "The credit profile of the entire industry, certainly, has changed post-crisis, for the better- ment of the entire housing finance industry. The underpinnings are much stronger for housing finance today than they were pre-crisis." Due to the preference for cash or conventional mortgages, real estate agents advise sellers against accept- ing VA loans, Bopp noted. Another increasingly popular product in this market, Bopp said, is the Fannie Mae HomeStyle Renovation mortgage, which pro- vides funds for a wide range of renovation projects, ranging from repairs and energy updates to landscaping and luxury upgrades. According to Fannie Mae, the funds provide the borrow the option to renovate and rehab a new or existing home by includ- ing financing in their conventional purchase or refinanced home loan. LTV is calculated taking the proposed project into account, giving the borrower more pur- chasing power and more options to make their home their own. By using the Fannie Mae funds or a home equity loan, the pro- spective homebuyer who already has a property has the option of trying to convert that property to a move-up home without needing to move, Bopp said. Speed to Close Tops Rate Differential R egardless of the type of mort- gage, speed is of the essence, Clermont said. "Everything is condensed, everything is urgent. When a seller gets an offer, if it's not a strong offer, it won't be successful." Higher down payments, offer- ing to cover any appraisal short- falls, and similar contingencies will help get approval for an offer, Clermont said. "We're seeing anything from $10,000 to $50,000 or more being put down in nonrefundable due dil- igence deposits," Blevins said. "We have people signing appraisal adden- dums, agreeing to pay above and beyond fair market value; [others] are waiving any sort of repairs and looking for ways to qualify to buy a home without needing to sell their existing home first." Buyers and sellers also want quick closes, but that's not always the best idea, Clermont said. "When you have a quick close time, that's when things can kind of go awry or things get missed. It does help to be working with a local lender." Rising home prices mean that purchases will be challenging for first-time homebuyers, Clermont admitted. While Inlanta and several other lenders have programs de- signed for first-time buyers, most of those programs involved low down payments, and sellers are looking for cash offers or for larger down payments. "If you're a first-time homebuyer and you don't have a large down payment, it's tough to be heard," Koss said. Becoming the Lender of Choice B orrowers have many op- tions to choose from when it comes to a mortgage lender. There are few, if any, differences in rates, types of loans available, etc. "What [borrowers] care about is how quickly that mortgage company can close," Sivert said. "The emotion of being able to guarantee that you can get in this home, get it funded and closed, is worth more money than shopping around and saving 25 basis points on a mortgage. Companies that have the reputation that they can close a purchase in under 30 days is a game changer." Koss recommends building good partnerships with real estate agents, who will come to the table with relationships with prospec- tive buyers already in place. Koss stressed the need for strong, active communications with real estate agents in order to build good relationships with them. Once a loan is approved, Mortgage Network offers the borrower a cover letter from the CEO to be presented to the seller, offering $1,000 if, for any reason, Mortgage Network doesn't perform as promised, Koss said. "In the areas that we are known, we have a very good history, and we have good originators who do their homework up front." If a seller will accept a mort- gage rather than an all-cash offer, he or she wants assurances the deal will close, Adamo said. "I think Embrace Home Loans has something special. With our Guaranteed On Time Closing program, if we miss the clos- ing date and it's our fault, we'll pay the borrower $2,500 within 30 days of closing. For a buyer, that is as good as cash in this market. We also have a trade- marked product, Approved to Move TM , which has full approval and is completely underwritten, so that a buyer and seller know the amount the mortgage is ap- proved for when an offer is put on a property. So, we have a lot of [prospective buyers] who are ready to go in this market." Popular Amenities W ith the ongoing shortage of housing inventory, buyers aren't being too picky about the type of house they buy, experts agree. But homes offering open "The credit profile of the entire industry, certainly, has changed post-crisis, for the betterment of the entire housing finance industry." —Steve Adamo, President of National Retail Production, Embrace Home Loans.