Kellie Pali is the Broker/President of Creative Financial.

Lately, when asked about interest rates

she has called the current situation “Interest Rate

Limbo,” with everyone wondering how low the rates

can go.

In another time those low interest rates—the lowest

since the early 1950s when most home loans were

15-25 years—might have been the spark that ignited

the wildfire of another housing boom, setting off

bidding wars and competition among several buyers

for a single high value property.

Today, with a nervous economy, lowered consumer

confidence, and a significant tightening of mortgage

loan standards, there are many elements that collectively

could inhibit the emergence of a healthy housing

market, a factor that has traditionally been one of

the most important aspects in any sustained economic

recovery.

When it comes to today’s tougher lending standards

—and to today’s historically low interest rates—it

seems that much of what was old is, in fact, new

again. 

Tricia Morris, Owner/President of Hawaii’s Premiere

Mortgage Company, says that “We are back to

doing business the way it was done in the ’80s and

’90s. Stated income loans are no longer available and

we are back to analyzing tax returns. Credit and cash

reserves requirements are higher. The funds needed

for a down payment are also greater. We are seeing

more family help for the first time homebuyer down

payments.”

Ivy Costa, a loan officer with Maui Mortgage

Group, sees that the major changes in lending are

guideline based. The guidelines have changed to ensure

that a more financially qualified borrower is borrowing

money, thus lowering the risk of high numbers

of defaults and foreclosures in the housing sector.

“In order to qualify for a loan you must now document

your income and assets and also show credit

worthiness, which are now set to a higher standard,”

Costa said.

“New requirements for credit, types of loans no

longer as available, etc. Credit is now a big deciding

factor to writing loans, negative items such as bankruptcies,

late mortgage payments and overall debt exposure

is being carefully evaluated,” she said.

It’s not all bad news. There are still good loans

available and opportunities that may not have existed

1-2 years ago. 

Be prepared

The advice from mortgage professionals today is

to be prepared and be able to document the ability

to take on a loan.

“The best thing a homebuyer can do now is prepare

their credit,” said Costa. “Your credit will ultimately

decide the programs and pricing you can

qualify for. Some key elements in keeping your

credit in good rating is making payments on time,

keeping credit card balances low, avoid acquiring

or applying for more credit lines, save for a good

size down payment and don’t make any major

changes in your employment/income situation,” she

said.

That advice to be prepared also applies to refinancing

and to loans that may be having trouble.

When it comes to refinancing Morris tells her

clients that the first thing to do is to check the value

of their property. This can provide the information

as to whether the appraisal will be sufficient to

make the loan.

“We can do that at a minimal cost and avoid the

loan falling through at the last minute with a full

appraisal cost,” Morris said.

Morris recognizes that some loans may need to be

reworked to meet economic realities “Modifications

are happening and are a viable way to avoid a foreclosure.

They do take a fair amount of work on the borrower’s

part even if they are working with a modification

company.We have seen many go through and

they are viable for those who meet the requirements

and have no other choice. A refinance is the way to

go, for those that qualify for one.With a refinance,

your credit is preserved,”Morris said.