FHA Appraisal Changes - FHA Responds To Declining Markets
03/28/2009

DU Refi Plus aka Home Affordable Refinance Plan
03/18/2009

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.

FHA Cash Out Maximum Going to 85% LTV on April 1, 2009
03/17/2009

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.

Fannie Mae Homepath Mortgage
03/13/2009

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

The $8000 First Time Homebuyer Credit
02/20/2009

First time home buyers can claim a credit of up to $8,000 on their 2009 taxes for a primary residence purchased between January 1st, 2009 and December 1st , 2009.  This program replaces the old $7,500 tax credit and unlike the old credit, this is a true credit that does not have to be repaid as long as the buyer remains in the home for 3 years.

Here are the highlights:

•   Credit amount:  10% of the sales price of the home up to $8000.  Any home purchased for $80,000 or more qualifies for the full $8,000 credit.
•   Qualified homebuyers:  Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
•   Eligible purchases:   Any primary residence purchased between 1/1/2009 and 12/1/2009.
•   When:  The credit will be available when you file your 2009 taxes (still some debate over whether it can be applied when you file your 2008 taxes).  This credit will first offset any taxes you have due, and any remaining credit will be issued to you as a tax refund.
•   Income limits:  Anyone under $75,000 AGI (individual) and $150,000 AGI (joint) gets the full credit.  The credit phases out between $75k and $95k individual and $150k and $175k joint.
•   Recapture: If home is sold within three years of purchase, entire amount of credit is recaptured on sale.

The Basics of Condominium Financing Using an FHA Mortgage
02/19/2009

FHA is back in vogue today with the extreme tightening of underwriting guidelines for conventional financing.  FHA is much more liberal on credit score restrictions and generally provides a much lower monthly payment for those borrowers who are below a 700 middle credit score.  Additionally, FHA provides a number of features which are simply not available on conventional loans such as allowing borrowers with a fairly recent bankruptcy to obtain financing as well as to allow a non-occupant co-borrower to be added to the loan.

Today, the area where FHA probably shines the most though is in condo financing.  With a conventional loan, both Fannie Mae and Freddie Mac have made condo financing extremely difficult to obtain.  Additionally, just this month they began charging 0.75 points for any 20 or 30 year condominium loan where the borrower does not put down at least 25%.

Please note that not every condominium will qualify for FHA financing.  In the best case, the condo project that you are purchasing in will already be on the FHA approved projects list.  How can you determine this?  Simply follow the link below and slowly narrow down the search to determine if the condo you are looking at is on the list.

https://entp.hud.gov/idapp/html/condlook.cfm

If you find that your condo project is on that list, then you can stop there as you are in great shape.  If, however, the condo project you are looking at is not on the list, you do still have the possibility that the unit you are purchasing can receive a “spot approval”.  In order to make that happen, the FHA lender must certify that the condo project meets the eligibility criteria set forth by HUD.  Using this checklist: https://www.franklinamerican.com/wiki/_media/public_extranet/wholesale_forms_general/condo_fha_spot_approval_checklist.pdf?id=public_extranet%3Awholesale_forms_-_ma&cache=cache  the lender will perform an investigation on the unit in question.  If the lender determines that the condo does meet the criteria, the unit will then be eligible for FHA financing.

Here are a few of the major restrictions to obtaining a “spot approval”.

•  At least 90% of the units must have been sold
•  At least 51% are owner occupied
•  No single entity may own more than 10% of the units
•  If there are more than 30 total units, then no more than 10% of the units may have FHA financing
•  If there are 30 or fewer total units, then no more than 30% of the units may have FHA financing

In addition to the above, the unit in question must also meet the FHA requirements that are placed on any property - whether it be a single family, 2-4 family, or a condo.  The appraiser will make this determination when he inspects the property.

Feel free to call us if you have any questions at all about FHA financing, or any other financing needs.

Credit Scoring Model
01/07/2009

We often get asked, what are the 2 most important things I can do to improve my credit score?  First, pay your bills on-time.  That’s the easiest and most concrete portion of your score.  If all of your bills are paid on time, then you get full credit for 35% of your total credit score.

Once you have ensured that you are making payments on time, then the next biggest thing you can do is to watch your outstanding balances versus your credit limits.  To get the best score possible, you have to keep those balances at 30% of the limit or less.  If you cannot get them down to 30% of the limit, however, don’t worry, you get nearly just as much benefit from simply keeping below the 50% mark.

Here’s a chart showing how your score is broken down:

The Mortgage Process for Homebuyers
01/02/2009

1. Pre-approval - First, we recommend that you find a mortgage professional that you trust and have them complete the pre-approval process before you begin shopping for a home.  This way you will know exactly what price range you should be shopping for, and it will also greatly improve your negotiating position with the seller.

2. Loan Search - Work with your mortgage professional to determine which loan program will best fit your needs based on your credit profile, your age and income growth potential, and a number of other factors.  He or she will provide you with a Good Faith Estimate (GFE) which details the closing costs required for the mortgage, and which estimates your “cash needed for closing.”

3. Loan Application - Once you have determined the loan amount and product, it’s time to get all of your asset, income, and debt information to your mortgage professional so that they have a completed application package ready for when your offer is accepted.

4. The Hunt - Now you can begin the house shopping process.  When you find your dream home, you and your Realtor will work on negotiating the terms of the sale.  

5. Lock the Rate - Now that you have a binding contract on your new home, you will talk to your mortgage professional about locking in the rate.  He or she will review the loan options with you again, and finalize the rate and terms for your mortgage.  Rates are generally locked for 30 days, however can be locked for longer time periods if needed. 

6. Documentation - At this time, you will need to gather supporting documentation (paychecks, bank statements, etc) to back up the numbers on the loan application, and provide them to your mortgage professional.  In addition, you’ll sign and return the loan application and other disclosures that describe your new mortgage. 

7. Appraisal - An appraiser will compare the sales price that you negotiated with the lender to recent “comparable” properties in the immediate area of your prospective home.  This protects you from overpaying for the home and it protects the lender from having insufficient collateral to guarantee the loan.

8. Title Search - Your attorney or title company will then check for liens against the property by searching through title records.  All liens have to be cleared prior to closing the sale of the property in order to protect you and the lender from other parties laying claim to the property in the future.  As an added measure of protection, you will also buy a title insurance policy which will protect you in the event that the person doing the title search missed something.

9. Processor’s Review - All pertinent information will be packaged by your mortgage professional and sent to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit.

10. Underwriter’s Review - The underwriter makes the final approval decision on your loan.  This decision is based on the overall picture that is painted by your application.  Specifically, the underwriter will review the 4 C’s:  Credit (credit score and history), Collateral (the appraisal), Capital (your assets including down payment and funds in reserve), and Capacity (your income and job stability).  

11. Mortgage Insurance - If you put down less than 20% of the purchase price, then you will often be required to add mortgage insurance to the loan.  This is handled by the lender and you will pay a separate amount each month to cover the insurance which will cover the lender in the event you default on the loan.

12. Approval, Denial or Counter Offer - Normally, your loan will be approved or denied outright.  Occasionally the lender may require changes to the terms of the loan in order to get an approval — a counter offer.  They could require a larger down payment in order to reduce your debt to to income, for example.  Note that if you are working with an experienced mortgage professional, a loan denial or counter offer should be unlikely, as the work has already been done during the pre-approval stage (step 1) to make sure you were qualified for the loan.   

13. Insurance - The lender will require that you get hazard (homeowners) insurance to cover the replacement value of the structure of the home.  If your property is in a flood plain, flood insurance may be required as well.  

14. Closing - In general, you will be required to attend the closing of the transaction to sign the documents and provide the down payment funds.  Generally, the closing is at an attorney’s office.  The lender will wire funds (your mortgage) to the attorney in order to pay the seller and close the transaction.  You will bring a certified check for the amount due from you (or have your bank wire the funds in advance), as well as photo ID and personal check book (just in case.)  Expert the closing to take approximately 1 1/2 hours.  After the closing, the attorney will file documents with the county to record the transfer of the title from the former owner to you.

15. Congratulations, you are now a homeowner!

In Spite of the Headlines, Mortgages Still Available to Most
10/15/2008

Given all of the media attention on the credit crisis, buyers and sellers are concerned. I’ve received many calls from individuals who wonder whether or not there is any money available for home financing. These are certainly unprecedented times - with banking giants such as Bear Stearns, Lehman Brothers, Indymac, and Wachovia disappearing. With the government bail outs of AIG, Fannie Mae and Freddie Mac. The markets are extremely volatile, and the analysts are finally admitting we are indeed in a recession. The fears of buyers and sellers are warranted. With everything that has happened, is there still money available to buy a home? The answer is absolutely.

With the government takeover of Fannie Mae and Freddie Mac, the federal government made sure that there is liquidity in the mortgage market by providing financial support to allow Fannie and Freddie to continue to buy and sell mortgages. In addition to increasing liquidity, it also caused a drop in interest rates by easing the minds of investors in the mortgage backed security market. With the government guaranteeing mortgage-backed securities through Fannie and Freddie, it also guaranteed the continued availability of funds for mortgages.

In the recent past, almost anyone could get a loan. In the industry, we said if you could fog a mirror, you could buy a home. Now, it takes a little more than that. Stated income and other low documentation loans have virtually vanished. Today, you have to prove your income and that you have some money in the bank to buy a home. Underwriting guidelines have tightened significantly in the past year. Does this mean if you have so-so credit and a limited downpayment that you can’t get a loan? Absolutely not. There are certainly higher standards than before, but there are still plenty of loans available. FHA loans, insured by the government, have become extremely popular. FHA allows borrowers with not so perfect credit to get into a home with just a 3.5% downpayment. The program allows for gifts from family members as well. And, it allows non-occupant co-borrowers to help with qualification. It is actually very flexible - but does require full documentation of employment, income and assets.

So in conclusion, in spite what you are hearing in the news, there is plenty of money available for home financing. Recent actions by the Federal government assured that funding would continue. However, the rules have changed - and probably for the better. With tighter lending guidelines, foreclosure rates should decrease in the future. And look around - there are many great deals for buyers, lots of inventory from which to choose, money is available and interest rates are low. The opportunity has never been better.

Give me a call if you’d like to discuss your home purchase plans. Getting pre-approved from a reputable mortgage professional is the first step!

10/03/2008

Buying Before Selling?:  Know the New Rules

Often, a buyer wants to purchase a new home prior to selling their prior residence.  They may plan to rent the prior home, and assume that they can use the rental income to offset the mortgage payment.  Recent changes have been enacted by *both* Fannie Mae and FHA regarding the use of rental income from prior residence in qualifying for a new home.  Freddie Mac is widely expected to follow these rules shortly, and most lenders have already implemented the new rules regardless of Freddie’s delay.

A new trend has been seen in homebuying - called “Buy and Bail” - where homeowners upside down in their own homes decide to purchase a new home, often right down the street or perhaps closer to work, at a significantly lower price than their current residence - with a plan to let their original home be foreclosed after they have moved out of it.  Obviously, this is not good for the overall industry, and that’s why these new rules were enacted.

Fannie Mae’s New Guidelines:

Fannie Mae has issued the following requirements for a borrower to use rental income on the property they are vacating to offset the mortgage payment:

• The borrower must provide a fully executed lease agreement covering a 12 month period AND receipt of security deposit from the tenant along with proof of deposit into borrower’s account.
• Must document 30% equity in the property being vacated. Acceptable documents are AVM, Appraisal or BPO.

If both of these requirements can be met, use 75% of gross rental income to arrive at rental income.

 

If sufficient equity in the vacated property cannot be documented, the rental income cannot be used to offset the mortgage payment. The borrower will have to qualify with both the current and proposed mortgage payments (PITI).

FHA’s New Guidelines:

For FHA:  HUD has issued a Mortgagee Letter 2008-25 to revise their underwriting requirements for borrowers who are converting their primary residence into a rental property. Beginning with case numbers assigned on or after September 19th, the underwriting analysis may consider rental income from the property being vacated if the following requirements are met:

• Relocations - Homebuyer is being relocated by existing or new employer to a location that is not a reasonable commuting distance.                     
  

                                                OR

• Must document 25% equity in the property being vacated. Acceptable documentation includes current appraisal, or comparison of the principle balance to the original sales price.                         

                                                AND

• The borrower must provide a fully executed lease agreement covering a 12 month period AND receipt of security deposit from the tenant along with proof of deposit into borrower’s account.

What does it mean to you?

Again again, more than ever, it’s imperative that you have your borrowers talk to a mortgage professional early in the home shopping process.  Many borrowers with excellent credit just assume that they can rent out their prior home and buy a new one - without understanding that things have changed in the lending world.  Atlanta Home Loans are becoming more challenging to come by each day.  Ensure that you are working with an Atlanta Mortgage Lender who is staying on top of the quickly changing financing landscape.