Q & A: Getting a Mortgage Still Tough for Some, But It Can Be Done

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Is it easy to obtain a mortgage these days? My sister in law bought a home a few years ago and lending was very tight. I have decent credit, but if it is going to be impossible I will just continue to rent.
 
Lending requirements are certainly tight, but by no means impossible.  Today, more than ever, it generally comes down to being prepared.  It's very important to work with a true mortgage professional upfront to make sure you have everything in line to try to make the process go as smooth as possible BEFORE you sign a contract.  By having all of your paperwork reviewed, and potentially underwritten, you have an opportunity to know what a lender would require of you prior to actually finding the home you want.  If you take this route, you can do just about all of the work upfront, then simply need an appraisal and title report to close on your house.  It's generally about finding a professional and being prepared.  Even though this business is based on getting the best interest rate possible, these days it also can come down to the right mortgage person, even if it costs a bit more every month.
 
What is the difference between a 5 year ARM and a 7 year ARM? What are the pros and cons to taking one of these instead of a conventional 30 year fixed loan?
 
The difference between a 5 year arm and 7 year arm is simply based on the initial fixed period.  A 5 year ARM is fixed for 5 years before adjusting, and a 7 year ARM is fixed for 7 years prior to an interest rate adjustment.  Both of these products will initially give you a lower interest rate than you would get if you took a 30 year fixed.   They are good products for increasing cash flow.  However, after that 5 or 7 year initial period, the rates begin to adjust.  People who got these loans 5 or 7 years ago are in a great position right now as their rates are actually going DOWN upon their first adjustments, but that is not something you can guaranty.  In fact, people taking ARM's of any length need to be prepared that the rate could jump to the maximum amount upon the initial adjustment.
 
What is the maximum percentage of my home's value that I can borrow? I am trying to buy a home that is listed at 650,000?
 
That depends on where the house is.  The government has set different maximum loan amount thresholds for different areas around the country.  The general answer is 20%.  However, in higher priced areas, you might be able to put down as little as $24,500 and take a maximum FHA mortgage as the most FHA will lend on a 1-family home is currently $625,500.  If you are higher priced and looking at a non-FHA (conventional mortgage) you can sometimes put down as little as 10%.  Obviously, this all comes down to what you have available to put down and what that entails as a payment, as different loan types carry different rates and other payments (such as mortgage insurance).
 
My wife and I are trying to buy a small home. I am retired and my income is from a retirement program. Do I need to provide different documentation to secure a loan?
 
In general, you need to show proof that you are receiving the retirement income and provide proof that the income will continue for at least 3 years.  A retired person can get a loan the same way as anyone else, as long as the income qualifies.
 
We recently got an accepted offer on the home we wish to purchase, and inspection was fine and now we are scheduling the closing. My wife and I had a vacation planned to visit our daughter abroad and we won't be able to be at the closing. Is that a problem? Can that negatively impact us in some way? What should we do?
 
If a Power of Attorney document is allowed, you can close (if away) without an issue.  You might, however, need to be available for a phone call to verify you executed the Power of Attorney.  The downside is that you cannot look through the paperwork at the closing yourself to identify any potential mistakes.  Unfortunately, mistakes do happen in loan paperwork.  Not being there leaves you with little recourse if, for any reason, there is something incorrect.