Specialty Mortgage Companies Fill the Gaps

YOUNGSTOWN, Ohio — For those seeking a mortgage or participate in government-backed home-buying programs unavailable through conventional lenders, independent mortgage companies can help.

“A lot of people are surprised that conventional banks don’t offer products such as Veterans Administration loans or USDA [U.S. Department of Agriculture] loans,” says William Dawes, manager of the Salem branch of Fairway Independent Mortgage. “These are examples of a niche products and why we exist.”

Dawes says his office has enjoyed “exceptional success” in providing USDA development loans to qualified buyers in rural communities. Under the program, a qualified buyer could provide a down payment as low as zero toward the purchase of a new house. These affect mostly buyers with a middle credit score of 620. “If you have a family of four and earn less than $75,000 and are living in a rural area, you can qualify,” he says.

All of Columbiana County is classified as rural, he says, which helps drive business into Fairway’s Salem office. His business with USDA loans is so pronounced that Dawes is 15th in the country in closing USDA loans, and that’s across all financial institutions, not just Fairway.

The program was adopted in 1996 to provide incentives to buy houses in rural communities, Dawes says. “Before, it used to be 20% down,” he says. Plus, the company can help buyers with grant programs from the Ohio Housing Finance Agency to help them avoid a down payment.

And, Dawes notes, most conventional banks don’t offer loans administered through the U.S. Department of Veterans Affairs. His office specializes in military and USDA mortgages and, as a small operation, can devote more time to a customer.

Dawes says the regional market started to improve in 2012 and that 2016 was an especially good year. Yet challenges remain, most notably the low housing inventory. “There are more people who want to buy than [houses] available,” he says. “We’re not seeing a growth in the housing supply. There’s not been a lot of new construction.”

Other products that independent mortgage offices offer include Federal Housing Administration renovation loans, says Brandon Davis, Poland branch manager at AmeriFirst Home Mortgage Co.

Obtaining this type of loan from a conventional lender could be difficult because few traditional banks offer FHA renovation loans, Davis says. Often, someone looking to buy a house in serious need of repair discovers that the property is ineligible to be appraised and therefore is disqualified for a traditional mortgage.

Although an FHA renovation loan comes with a higher interest rate, there is the potential to refinance once the work is finished, Davis says. “With an FHA renovation loan, you’re in a position to purchase the property. And when you buy it and fix it up, you can place it in a traditional loan with better terms,” he says.

This is noteworthy because 94% of houses in the Mahoning Valley were built before 2000, Davis says, and 91% of the houses were built before 1993. “Renovation lending allows you to look at the property value as completed. There’s really a need for this in the marketplace.”

Recently, a local kitchen and bath remodeler contacted his office on behalf of a customer having a difficult time obtaining a traditional renovation loan. A recent appraisal said the customer lacked sufficient equity to finance a new kitchen. “We were called, did an FHA renovation loan, and they were able to keep that customer,” he says. “The value of the house now recognizes the new kitchen.”

Davis says his company also acts as a third party to augment mortgage deals with traditional lenders. In some cases, the bank contracts with AmeriFirst to help close a mortgage loan. However, the bank keeps the client.

“That’s a big piece of the puzzle we bring to the table,” he says. “In the end, this helps put local contractors – HVAC contractor or kitchen and bath remodelers – it puts community dollars to work.”

Copyright 2024 The Business Journal, Youngstown, Ohio.