First you find the house and then you try to get financing. Meanwhile someone else is going through the same process to buy your home. At best, the suspense is killing. At worst, the time periods do not coincide and the deal falls through.
Pacific West Mortgage Co. of Seattle thinks it has found the answer reverse the process. Three months ago in began a prescreening program to let clients know how much mortgage money they can borrow before, not after, choosing a house.
"It's a simple idea that's been kicking around a long time," said Pacific's president, Bob Porter. But apparently his company is the first in the country to put it into practice. Since he and colleague Kirk C. Schuster launched "Mortgage Master, the Homebuyer's Credit Card," Pacific has received many calls from interested realtors and financial institutions all over the country.
For $25, the company will run a credit check on an individual, and if he or she passes, the applicant will receive a coded plastic card with the amount of mortgage funds Pacific is willing to guarantee, subject, of course, to an independent appraisal of the property and title clearance. The commitment is good for one year, a credit update is done every 60 days. And the $25 fee can be added to closing costs.
While the primary object is to save time - one couple brought a house in two days with a Mortgage Master card - it also serves to avoid embarrassment: Care-holders will not find themselves in the position of having to admit after signing a contract they cannot get the financing.
Porter admits Pacific has a very conservative lending policy, but even so, 90 per cent of the applicants are able to meet the qualifications. Mortgage payments must not total more than 25 per cent of the monthly gross income of both spouses, and debts must not total no more than a third of income.
Pacific will make a maximum loan of $75,000 in an area where the average sale price is about $35,000. It follows Federal National Mortgage Associations rules on down payments: 5 per cent up to $42,000, 10 per cent up to $55,000 and 20 per cent for a house costing $55,000 or more.
Thus far, Pacific has had applications from more than 100 persons, half of whom have already bought houses. Although the Master Mortgage card might tend to make sales by owners easier, Porter says, in fact, not a single sales to date has been made without a realtor. Seattle realtors are reported to be very enthusiastic about it.