Aligned Asks:
Greg Socha, Mortgage Expert
Gregory Socha, a Managing Director at Manhattan Mortgage, was ranked as one of the top 100 mortgage originators in the US for 2008. He has experience in real estate as an investor, a real estate agent, and for the past eight years, as a top mortgage professional. He may be reached at gsocha@manhattanmortgage.com
AA) What are banks currently requiring as a down payment for various purchase price ranges?

GS) Typically, there are two kinds of loans. There conforming loans and there are jumbo loans. Each of these types of loans typically have a different set of requirements. For conforming loans, depending on the size of the loans 85%-90% financing is available. On jumbo loans, loans larger than $729,000, 75% financing is the standard maximum.

AA) In your opinion, what is a rule of thumb for how much you should spend on an apartment as a function of your income?

GS) There are many schools of thought about this, but most banks will allow you to spend up to 40% of your total, pretax income on all debts inclusive of housing debt. There are also some banks that will allow you to spend up to 45% of your income.

AA) How much liquidity are banks requiring purchasers to have after closing on a property?

GS) Again, there are two general sets of guidelines; for conforming loans, and for jumbo loans. In general, conforming loans require 3-6 months of monthly mortgage and maintenance in the bank after
the closing. For jumbo loans, however, the requirements are, at minimum, 3 month’s of total housing debt, and the banks with the best rates ask for the greatest amount of liquidity, with the maximum being approximately 35% of the loan amount.

AA) What are rates like this month and what movement do you predict for the first half of 2010?

GS) For the most part, rates in the conforming arena for a 30 year fixed are in the high 4’s/low 5% range, for a jumbo loan, you can get a 5/1 ARM as low as 4% up to 1.5m and a 30 year fixed rate mortgage at approximately 5.875% . As far as the first half of 2010 goes, I wish I had that crystal ball, but since I don’t, my best guess is that rates are going to start inching upward. The Fed is going to stop buying Mortgage Backed Securities at the end of March and inflation is already starting to rear its ugly head as we can already see in the Commodities Markets…Cotton/Sugar/Gold/Oil prices are all up and for whatever reason, are predicted to stay that course. That all being said, I still think that rates will be well below 6% for a conforming loan through the end of Q2 and certainly into Q3 2010. Q4, however, is a different story all together and if it were I that was thinking about buying or refinancing an apartment, I would do it now!

AA) Are you seeing more competitive rates with the larger institutional banks or the smaller boutique banks? Why do you think this is?

GS) There is no question that the smaller, regional, private boutique banks are offering the best rates today. These banks do not sell their loans to Wall Street, are not subject to Wall Street’s demands and are therefore able to pass on the current low cost of funds to the borrowers.

AA) What difficulties are you facing as clients try to re-finance and how do you help combat this?

GS) Today, the most difficult challenges we face are not with the borrowers themselves, but the buildings in which they are buying or refinancing. With factors such as sponsors owning more than 10% of the total units, high concentrations of unsold units, and high concentrations of investor-owned units, borrowers can find themselves in a scenario where they own or find the perfect apartment which they know they are qualified to purchase or refinance, but cannot do so due to matters out of their control. To address these issues, I get all of the building documentation up front, before any contracts are signed or any deals are done so everyone can make an informed decision.

AA) How has the mortgage broker business changed for you since the credit crunch?

GS) As a mortgage professional, I have to work smarter and work harder. Deals are getting done, and done at great rates. We continue to find new sources lending to make sure that our borrowers get the best possible deal.