Relatively low interest rates are one reason local banking professionals say Cullman’s real estate market remains strong.

“The market has gotten stronger. It’s the safest investment out there,” said Pat Moody, president of The Mortgage Center.

“Rates are even lower right now than six months ago,” he said.

According to Moody, three years ago rates were as low as 5 percent. But low 6s are excellent, said Moody whose traditional 30-year fixed mortgage loan rate is around 6.25 percent.

“Rates are not the problem,” he said.

The problem is what Moody calls “exotic mortgages” — the adjustable-rate or interest-only mortgages that have been so popular over the last couple of years.

Nationally, 20 percent of mortgages in the United States have been subprime, loans with higher interest rates for people with poor credit histories.

“People were buying more house than they could afford,” he said. “In our market, we have just not seen that type of mortgage being very popular.”

Whether it is a bank or a mortgage lender, most loans are then sold to a secondary market; however, a couple of banks in the Cullman area do not sell loans like First Federal.

“If you go into a bank, they are going to do the exact same thing we are doing,” said Moody. “We get approval through a lending source we have.”

Moody said his company has seen some foreclosures, but they were due more to “extenuating circumstances” like a job loss, a medical problem or a divorce.

Cullman Savings Bank Executive Vice President Alan Wood said he has seen a steady volume of loan applicants coming in.

“We’ve not really seen the effects of subprime lending at our bank,” he said. “We try to stay in the primary market.”

Wood said his bank has not seen any increase in home foreclosures.

“Right now, we have none,” he said.

EvaBank Senior Vice President Phillip Crumbley said, “We have experienced a slight increase in foreclosures on subprime loans.”

EvaBank specializes in subprime loans. Crumbley said the term subprime really refers to a person’s credit rating.

“Many banks consider credit scores less than 600 to be subprime loans,” he said. “Other factors come into play as well as prior bankruptcies and recent past due accounts.”

According to Crumbley, EvaBank will work with customers who are one year outside of filing for bankruptcy without any significant credit problems.

Crumbley said the bank has not made any major changes to its underwriting guidelines that review a customer’s credit report and income.

“You will underwrite the credit making a decision as to making a loan,” said Wood.

For prospective home buyers, Wood said individuals should maintain a credit history, be prepared to show a “good pay history” and save some money for a down payment. He recommends saving 10 percent or more of the purchase price but can provide a loan with as little as 5 percent down. He also recommends getting pre-approved for a loan.

Home buyers can wait to get financing after they have signed a contract to buy a home, but sellers may require buyers to secure financing within five business days. If home buyers get pre-approved, they are sure they can secure financing.

Wachovia Mortgage Consultant Shasta Quick said she can pre-approve customers in 15 minutes and offers over 250 products.

When clients walk into Quick’s office with a great credit score, money to pay down and a low debt-to-income ratio, it makes her job easy; but for those who are not the ideal customer, she is still probably going to be able to help them obtain a loan.

It is rare for Quick to send a borrower to a broker or subprime lender.

Wells Fargo, a diversified financial services company, and Countrywide, the nation’s largest independent mortgage lender, have stopped offering subprime loans, according to company Web sites.

Quick said a lot of the big companies are treading water or going under.

“Wachovia is a very strong institution. We have tightened up a little on criteria, but we are still able to do those loans.”

While Quick does not like to offer adjustable-rate mortgages or interest-only loans, she will offer them if the borrower’s circumstances warrant it.

She currently has a client who has invested a large sum of money in his home and is trying to sell it. He does not want a short-term rate which is higher, so Quick offered him a five-year ARM which means the 6.375 percent interest rate is locked in for five years. It adjusts every year after that for the next five years.

All ARMS have a rate cap. It is the limit on the amount the interest rate can be increased at each adjustment period. The cap may also set the maximum interest rate than can be charged during the life of the loan.

Quick’s buyer is hoping his first home will sell so he can pay off the second home.

For borrowers seeking a home construction loan, experts agree the borrower will go through the same credit approval process.

Quick said, “When building, you have to qualify the builder too. It’s easier if buying outright, but neither is hard,” she said.

Moody said it was much easier to qualify for a home loan than a construction loan because the lender is at risk for different things.

Wood said the criteria is the same.

“Usually, if you’re building, you’re required to put more equity into the construction project,” he said.

Cullman Savings Bank will finance up to 85 percent of the project.

“We try to get them to show 15 percent equity going into the construction process,” he said.

Wood said the rental market has been increasing some in the area.

“The majority of people here still like to own their own home,” he said.

Musgrove Estates Apartments Property Manager Tasha Milligan said she maintains a high occupancy rate and on average has three to five renters a month tell her that they are going to build or buy a home.

Quail Run Apartments Manager Diane Wilhelm reported high occupancy, having a few buying houses each month and a high waiting list as well.