Can closing costs be rolled into the new loan? – Yes, as long as the new first mortgage loan will not exceed 105% of the appraised value.
What about my existing second mortgage? — If there is a second mortgage or Home Equity Line of Credit, it can be subordinated, and remain in place behind the new first mortgage. Big if here. IF the 2nd lender will allow the 2nd mortgage to be subordinated. At the current time, that is unlikely.
What if the combination of the first mortgage, existing second or HELOC, and closing costs [these three together are the Combined Loan-To-Value - “CLTV”] will exceed 105%? – That is OK, there is no cap on the CLTV. Again, it is currently difficult to get your 2nd lender to agree to the subordination.
What about Mortgage Insurance? – If the loan currently has private mortgage insurance (MI), that MI policy will simply carry through the refi, and will stay in place. If there is no MI on the current loan, then MI is not necessary for the new loan, regardless of the new LTV.
What properties are eligible? – Owner-occupied primary homes (detached and condos).
What payment history is required on the existing mortgage? – One 30-day late payment is allowed.
It was nice while it lasted. Up to this point, FHA insured mortgages were immune to the many problems we’re seeing with appraisals in declining markets (like Atlanta). Unfortunately, new rules are in place for appraisals done after April 1st.
Highlights of new requirements for FHA appraisals:
- Requires a Market Conditions Addendum
- At least 2 comparable sales within 90 days of appraisal date
- A minimum of 2 active listings or pending sales in addition to the 3 closed comparables
- Various new adjustments for active listings and pending sales
- Must include original list price and any revised list prices
- Various others
What does it mean? We’ll have to see. We could see more difficulty for the appraisers to justify the price on the sales contract. So watch your contingency periods, give your lender enough time to get an appraisal AND have it reviewed by an underwriter, and be ready to come back to the listing agent to renegotiate if the value is not supported.
This plan was announced by the Treasury Department in Feburary and additional details were released in March. The refinance program allows borrowers to refinance up to 105% of their home’s value using a streamlined refinance option through Fannie or Freddie.
The first step is to determine whether either Fannie or Freddie guarantees your mortgage. To do that, visit these sites:
Freddie:
https://ww3.freddiemac.com/corporate/
Fannie:
http://loanlookup.fanniemae.com/loanlookup/
Once you determine that your mortgage is held by one of those two, you must also ensure that you have not been more than 30 days late on your mortgage during the past 12 months. If you meet both of those criteria, then you are eligible to apply for the program. Please call us to proceed. Remember that just meeting these criteria do not guarantee that you will be able to participate in the program as there are a number of other restrictions in place.
Here is a quick overview:
This update from Mortgagee Letter 2009-08 establishes temporary cash-out refinance guidelines.
1. This is a temporary change, and effective as of April 1st, 2009
2. When adding a simultaneous 2nd lien, there will be a max CLTV of 85%
3. Existing 2nd liens can be re-subordinated with no max CLTV
4. When existing 2nd liens are modified to accommodate the new 1st, there is no max CLTV
5. Must have 12 months seasoning as primary residence to get max cash-out of 85%
6. Less than 12 months seasoning as primary residence, loan amount will be capped at 85% of the appraised value or sales price, whichever is lower
7. Existing loan must be current and not delinquent or in arrears
8. A second appraisal is required for all cash-out refinances above $417,000
9. Non-owner occupants cannot be added to qualify for cash-out refinances
If you are considering a cash out refinance, you have 2 weeks to get your loan application in so that we can assign a case number to your file prior to April 1st.
I’m pleased to announce that we are now able to offer the Fannie HomePath product. The Fannie Mae HomePath program is specifically for borrowers purchasing REOs directly from Fannie Mae. It Includes a number of features which make it the strongest mortgage product available today. Additionally, it is a fantastic marketing tool that you can use with those borrowers looking to purchase REO property (there are 420 Fannie owned properties currently in the city of Atlanta). By narrowing your property search to those properties on the HomePath site, your buyer will be able to enjoy the following features of the HomePath loan:
- 3% Down payment and NO MORTGAGE INSURANCE
- No upfront MIP as required by FHA loans
- Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
- NO APPRAISAL. No appraisal fees and no need to deal with the appraisal issues that we are all fighting today. This part is huge in the current market.
- 6% Seller contributions (we are limited to 3% above 80% LTV on a standard conventional product)
- 2nd Homes and Investors allowed. Still no MI but a 10% down payment is required.
- Remember: For investors, we are going back to a 10 property limit from the current 4. So when you combine that change with this product, there is a huge opportunity.
Search for properties here: http://www.homepath.com
