Phil Lukan of Pulte Mortgage offers some positive insights for today's buyers.

Despite all of the news about our nation’s financial systems, we bring you an interview with Phil Lukan, Pulte Mortgage’s local branch manager.

Buyers in today’s marketplace have a lot of concerns when it comes to purchasing a new home (selling their current residence, qualifying for a loan, etc.). As someone intimately familiar with home mortgages, the qualification process and credit markets in general, what’s your perception of the current credit situation and what would you anticipate seeing as improvements in the near- to short-term?

Phil: Certainly the news can be deceiving when looked at superficially. But there are indications that the credit markets may start to ease up, mainly as a result of the federal government’s recent moves to shore up the economy, financial institutions and other measures through the recent bailout packages. The Treasury just recently indicated the $125 billion that is going to 9 major U.S. banks will begin to be deposited early this week.  The hope is that the additional funds will allow banks to open their doors to lending again and that will continue to help unfreeze the credit markets.

We’ve heard that many buyers are finding it difficult to qualify now unless they have spectacular credit scores. Is there any truth to this and does Pulte have any plans in place to allow buyers to become prequalified or even special financing programs once they’ve met qualification guidelines?

Phil: Most Qualification guidelines have been significantly tightened and the credit score “bar” has certainly been raised for all buyers. We’ve seen an end to certain types of financing programs, such as reduced documentation programs (Stated Income, No-Doc) and many 100% financing programs. Debt-to-income ratio guidelines are more stringent and downpayment requirements have also tightened, especially in developing markets that still hold a high level of overall credit risk.  In Illinois, legislation was passed which now requires lenders to verify the borrower’s ability to make monthly mortgage payments, which means “reduced doc” loan programs are no longer a financing option.

For a buyer who is looking to make a move into a new home, what strategies, tactics and preparations can they do now that will make the approval and closing process easier in the near future?

Phil: Come prepared with realistic expectations, all of your documentation in hand and accurate knowledge of what your current credit situation is.   An example of some of the documentation needed to make a credit decision includes last year’s W-2s and tax returns, recent pay stubs, and two months of asset statements.

How is the availability (and ease of process) of finding mortgage funding through alternative programs like FHA, VA and even private lenders? Has anything changed significantly, and if so, what should buyers be prepared for?

Phil: The private lending market is very tight now, but the hope is the ease in bank credit will translate out to more availability from private banks and lenders. FHA financing has not changed very radically and is widely available, though there are new guidelines and restrictions, such as an increase in the down payment requirement from 3% to now 3.5%.  FHA has also eliminated the seller’s ability to offer Down Payment Assistance as a means to help buyers with the required down payment.
For borrowers with credit scores below 580 — if they qualify — are required to have a 5% down payment.

Finally, what words of advice do you have for consumers who are facing difficulty in meeting their mortgage commitments?

Phil: Work with your current lender to come to terms both you and the lender can live with. Many consumers are walking away from their home mortgages now, not realizing that action will have a negative effect that will follow them for many, many years.

According to Mr. Lukan, 93% of Pulte homebuyers use Pulte Mortgage as their lender. When you choose Pulte Mortgage, you get a team of people from both Pulte Mortgage & Pulte Homes working together to support and guide every aspect of your mortgage experience.

Pre-qualifications are available at all communities by qualified Sales Associates prior to making any purchasing decision (though they cannot pull a credit report on the spot). Just remember that the more documentation and information you come armed with, the more accurate this entire process will be.