Under Your Roof

FHA 90 Day Flip Waiver has been EXTENTED through December 31, 2011

2010-12-15T15:16:00.000-08:00

UPDATE: January 28, 2011
Nothing Like waiting until the last minute (3 days before expiration) to let the mortgage industry know that a highly effective policy will be continued. Typical ... but we'll take it. Buyers can continue to use FHA financing to purchase homes from sellers who have been on title for less than 90 days. This includes homes being flipped by private parties.

Reminder ... most lenders impose additional underwriting guidelines for flip homes so buyers need to ask their loan officer what is required before an offer is made to prevent surprises after escrow is opened.

OriginalPost: December 15, 2010

90 Day Flip Waiver set to EXPIRE January 31, 2011
FHA’s 90 Day Flip Rule waiver implemented on February 1, 2010 is set to expire January 31, 2011. The waiver was for one year and designed to help buyers using FHA financing to access a broader selection of homes for sale … and it worked. In addition to foreclosure, short sale and equity seller listings, FHA buyers were able to add to their shopping cart the growing segmented of homes sold by investors who were rehabbing and flipping.

With the expiration fast approaching and no word from FHA of an extension, lenders notified us this week they have stopped accepting new FHA loan applications involving a flipped property. At this point, my advice:

BUYERS - before you make an offer on a home, make sure your Realtor checks to see if the owner has been on title at least 90 days and preferable 180.

INVESTORS - who are flipping in less than 90 days, don’t accept offers from FHA buyers at this time.

To learn more about the 90 Day Flip Rule for VA, Conventional and FHA loans, check out these additional popular blogs:

The 90 Day Flip Rule … Some Lender Have One While Other Don’t
FHA Takes a New Position on the 90 Day Flip Rule … its OK Now!
FHA 90 Day Flipping Waiver … Tips for Buyers and Sellers

Stay tuned for the next update.

Underwater Homeowners Refinancing Their Conventional Mortgage? Yep ... There's a Program for That!

2010-07-26T14:00:00.000-07:00

In 1980, Kool and the Gang were signing
C-e-l-e-b-r-a-t-e Good Times … Come On and celebrate is what many homeowners are doing now as they trade in what was once considered an awesome interest rate for and even lower one today. On July 15, 2010 Freddie Mac’s chief economist, Frank Nothaft said:

“fixed rate mortgages continued to hover at 50-year lows, thereby supporting homebuyer affordability and refinance activity. Over the past month, about four out of five conventional loan applications and more than half of FHA and VA loan applications were for refinance. Compared to the recent peak in 30-year fixed interest rates 13 months ago (week of June 11, 2009), current rates are a full percentage point lower. With today’s rates, homeowners, would save about $1500 in payment each year on a $200,000 loan compared to rates last June”.

People were buying homes in the 80’s with interest rates averaging 13.74 (1.8 Points). Imagine that! Check out Freddie Mac history of 30-Year Fixed mortgage rates dating back to 1971 at http://www.freddiemac.com/pmms/pmms30.htm.

Back to the present … if you think refinancing a conventional mortgage is only an option for homeowners with 20 percent or more equity, you’re in for a pleasant surprise. HARP - The Home Affordable Refinance Program is designed to provide refinance opportunities to borrowers with mortgages owned or guaranteed by Fannie Mae or Freddie Mac, who have a current payment history but due to declining property values have been unable to refinance to a lower interest or from an ARM to a fixed rate loan.

CASE STUDY #1
In 2008 a Bay Area homeowner purchased a home for $737,500 and financed $590,000 at 5.875%. On the refinance loan application, we estimated current market value at $718,000, a new loan amount of $572,850 and interest rate of 4.75% with APR of 4.80%. The loan application and credit report was submitted to Fannie Mae’s DU Refi Plus automated underwriting system for a decision. Fannie’s findings came back as “approved” AND no appraisal required! The homeowner’s mortgage payment dropped $501/mo.

CASE STUDY #2
The 2008 purchase price was $360,000 and loan amount $288,000. The Fannie Mae refinance (DU Refi Plus) included an estimated value of $320,000 and new loan amount of $283,000. That made the LTV 88%. Fannie Mae waived a full appraisal which reduced the borrower's closing costs and saved time processing the loan. The borrower's new interest rate is saving them $227/mo.

QUESTIONS & ANSWERS

How do I find out who owns my mortgage?
For Fannie Mae look up CLICK HERE and for Freddie Mac CLICK HERE. If you don’t get a positive answer, call the customer service dept for your loan servicer and ask them who owns your mortgage.

Do I have to refinance with the same lender that is servicing my loan?
You can but are NOT required to. Fannie and Freddie have established basic loan guidelines but all lenders add additional qualifying requirements. Your loan scenario may not work with one lender but is OK with others. You can shop around yourself or use the services of a mortgage broker who will do it for you.

How much underwater can I be?
Fannie and Freddie have established a max LTV of 125 percent. Example: you owe $300,000 and your home is worth $240,000. Not all lenders allow LTV’s up to 125 percent. However, 105 percent is more widely accepted.

Will I be required to pay mortgage insurance?
If the original LTV of the existing loan was 80 percent or less, no mortgage insurance is required on the new refinance loan.

No doubt you have more questions as each homeowner's circumstance are unique and need to be considered to qualify. Program guidelines are extensive and changing all the time. We are helping California homeowners find solutions to their real estate financing needs and would like to help you. We are a Direct Lender and Mortgage Broker. Call Barbara at 916.932.2352 for more information.

7 Mistakes to Avoid ... Don't Blow Your Loan Approval

2010-06-22T20:00:00.000-07:00

CONGRATULATIONS! Your loan has been approved so you can relax right? Nope ... not yet. Lender's have added new quality controls during the loan process that you need to be aware of because one wrong move and your loan approval could crash and burn. Before you learn seven mistakes to avoid, let's make sure you understand when the loan process actually begins.

From the moment you apply for a home loan and get "pre-approved" the spotlight is on your finances. Since it can take weeks or even months to get a purchase offer accepted, borrowers need to consider the entire time a "quite period" and not make any credit decisions that could blow the approval.

Once escrow is eventually opened, the loan officer updates your loan application, requests current income/asset docs and runs another credit report (if the one in your file is older than 3 months). After you get through underwriting and receive loan approval, the lender continually monitors your credit activity and may pull a new credit report prior to funding the loan. If the credit report shows your financial obligations have changed since the loan application was submitted, it will cause delays because the lender wants an explaination. If your debit-to-income ratio is already boarderline, new debt could increase your ratio beyond qualifying guidelines causing your loan to be denied. OUCH!

Seven Mistakes to Avoid

Don't increase balances on credit cards - the debt listed on the initial loan application needs to agree with the debt appearing on the credit report pulled before the loan is funded.
Don't apply for any new debt - credit cards, auto loan, interest free purchases etc.
Don't allow bank accounts to become overdrawn - from the moment you get pre-approved through the close of escrow, bank stmts need to be free of NSF charges.
Don't change employment - employment is verified twice during the loan process. The lender will call all employers for a last minute verification before funding the loan.
Don't let your driver's license expire - of the two forms of ID required by the lender, a drivers license is most common. The lender will not accept an expired license.
Inquiries on credit report - any time you authorize a company to run your credit it creates an "inquiry" on your credit report. The lender wants an explaination for each entry

There are many other do's and don'ts to be aware of and its your loan officers job to make sure you are. As much as you may be tempted, don't rush out and by the furniture or appliances until AFTER escrow closes.

A Short Sale Scam? … Homeowners Beware

2010-03-19T09:34:00.000-07:00

My phone rang recently and the caller explained he was searching for a loan officer who could arrange financing for two short sales he was negotiating in Southern California. He went on to explain his company helps at-risk homeowners in several states negotiate short sales with their mortgage servicers by bringing pre-approved buyers to the table. Homeowners apparently agree to quick claim title to their home and give limited power of attorney in exchange for this company negotiating a successful short sale. Using a dual escrow, the company buys the home and immediately sells it to the waiting buyer - at a profit. Timing is everything after all because he has no “skin in the game” only profits at the
end. THE ULTIMATE FLIP?

Hum … is this legit was one of the many questions going through my mind. So what do you need me for, I asked? Well … he’s shopping for a loan officer who can line up lenders willing to fund these loans. And of course, there are plenty of deals available so it would be quite lucrative.

Sound fishy yet?

Just for giggles, I asked one of my lenders if they would approve a loan like this. The answer was a flat NO! The buyer/investor would not be allowed to make a profit without having some risk. In other words, they would have put money into deal before flipping it.

So is this the next scam? Tell me what you think.

FHA 90 Day Flipping Waiver ... Tips for Buyers and Sellers

2010-02-26T21:42:00.000-08:00

It didn’t take long for FHA buyers to “bite” the previously forbidden fruit … flipped homes! The recent 90 day flip rule “waiver” is so fresh (effective date was February 1st) sellers are hesitating to accept offers from FHA buyers because they are worried lenders won’t fund them. It has been a time for calming nerves, double checking underwriting guidelines and reassuring all parties to the transaction that we can do it.

Hopefully this information will help you with your purchase. Make sure there is no relationship between the parties in the transaction. That includes a real estate agent/investor who is flipping and think they can be the listing agent too. It won’t fly.

Buyers and their agents need to be asking questions to learn how much profit the seller is expected to make on the deal. If it’s going to be more than 20 percent, the buyer needs to be prepared to pay for two appraisals. They don’t have to be ordered at the same time. Get the first one done to make sure value comes in at or above the contract price. Then move forward with the second one. Until we get clarification from HUD what to do with different value, expect the lender to use the lower of the two.

Another out-of-pocket expense the buyer needs to be prepared for is the cost of a home inspection. Home inspections are customary in this market of as-is deals but in the case of a flip that involves 20 percent or more profit for the seller … it’s required by FHA.

If you do your homework up front during purchase negotiations you will learn if two appraisals will be needed. Make it a 45 day escrow in that case. Once in contract, this should allow you enough time for the first appraisal to come in before requesting the second. Now that lenders are controlling FHA appraisals, the turn times take longer.

The definition of how profits are determined is a grey area so we are asking HUD for clarity. Here’s an example:

QUESTION: Let’s say a property was purchased at a Trustee Sale and in addition to paying the bid amount, they had to pay delinquent property taxes, past due HOA dues, etc. Are all of these costs weighed in when factoring the 20 percent? What about the cost of selling the property such as Realtor’s commissions, title and escrow, etc? Or is it only the cost of renovations and actual improvements to the property?

ANSWER: The cost of acquisition generally includes all items charged to acquire the home, not to sell the home. Generally acquisition would include seller paid costs (delinquent taxes, HOA, etc). I’m working with a lender who is asking these questions and more to get clarify on what they are defining as “acquisition”. Of course, as long as the cost of repairs or improvements can be documented, this would be allowed to be added to the acquisition.

I’ll update the post when new information becomes available.

Need Money to Pay Your Closing Costs? Try This ...

2010-02-20T13:39:00.000-08:00

Ahh, the good old days … homes for sale were plentiful and buyers had no problem getting sellers to pony up 3 percent to cover their closing costs.

Wake up … its time to let go of the past!

Inventory is tight and multiple offers allow sellers to pick and choose the best deals. Cash is always king but when offers in this market involve financing, the cleaner the better.

That means buyers who aren’t asking for seller credits now have an advantage over those who are.

FHA buyers who have money saved for the 3.5 percent down but short cash to close may qualify for California’s CHDAP program. It offers up to 3 percent that can be used for closing costs. Here are some key features:

it’s a silent second so no monthly payment is required
the rate is 3.25 percent amortized over 30 years
must be a first time home buyer
only available for homes in California
buyer must have at least 3 percent of their own funds into the transaction (no gifts allowed)
need a 680 minimum FICO
max DTI is 45 percent
income and sales price limits apply
online homebuyer education required
the loan is payable when the home is sold or refinanced

Sounds pretty good doesn’t it. CLICK HERE to see the “sales limits” for California and CLICK HERE for the “income limits“.

Need more information … contact me.

The Best Kept Secret ... Fannie Mae's HomePath Financing Program

2010-02-15T19:23:00.000-08:00

No appraisal ... no mortgage insurance ... easier qualifying guidelines ... and down payment as low as 3 percent!

Can this be true? Yes, but only with Fannie Mae HomePath homes that qualify for Fannie Mae’s HomePath financing. Fannie Mae is the largest purchaser of mortgages in the U.S. and in February of 2009 announced special financing to make it more affordable to buy their foreclosures.

More features that make HomePath homes a unique buying opportunity include:

Can be purchased as a primary residence, second home or investment. If you plan to occupy the home, HomePath offers seller credits up to 6 percent to help offset closing costs. That’s double Fannie’s 3 percent limit for seller credits on conventional loans.

Another cool feature … Fannie allows the buyer to choose the title company. In a typical “bank owned” purchase transaction (except in California) the seller chooses the title company which many be located in a completely different part of the state. This can cause delays, high escrow charges and often complicates closing escrow.

Fannie has made it easier to qualify for financing by lowering the adjustments for FICO scores below 720. And … if you put 5 percent down instead of the minimum 3 percent, the LTV / interest rate adjustment is significantly less.

To avoid mortgage insurance on a traditonal conventional loan, you need 20 percent down payment. Not true for HomePath. The minimum down payment is 3 percent.

Now that FHA appraisals are managed by the lender, they take longer. Since NO appraisal is required, you not only save money… you save time closing escrow.

This is great information but there’s more. You have to check out another blog I wrote that compares HomePath financing to FHA. Click on the title below to get to that post.

Fannie Mae Foreclosures … Is HomePath Financing Better Than FHA?

Lenders Approving FHA Loans on 90 Day Flips

2010-02-05T18:48:00.000-08:00

With HUD’s 90 day flip rule waived for one year starting February 1, 2010, FHA buyers are asking which lenders are approving loans on these previously forbidden homes. We are the largest mortgage brokerage in the county with over 100 lenders and so far have heard from 4 who said they will. Among them was Mountain West Financial who reversed their position today after their investors said they would not buy the loans. So now the list is down to 3 and hopefully more will follow:

1. Guild Mortgage
2. MetLife
3. NetMore America

If your lender is not on this list, find a mortgage broker who is doing business with one of these.

FHA Changes Loan Guidelines … it’s not that bad

2010-01-30T18:00:00.000-08:00

When it comes to financing a home in today’s market, buyers have two basic choices … a conventional loan or a government insured FHA loan. Borrowers who can’t meet the higher down payment and credit score requirements for conventional financing are finding success qualifying for an FHA loan.

With the appointment of David Stevens as Commissioner to FHA last year, the agency has begun to implement policies designed to reduce risk from loan default, increase capital reserves and weed out fraud. I like it! Home buyers will see changes to popular FHA loan features in the coming months that include:

INCREASE UP FRONT MORTGAGE INSURANCE PREMIUM (UFMIP)
This policy change has been approved for purchase transactions effective on or after April 5, 2010. The fee will increase from 1.75 percent to 2.25 percent of the base loan amount. Rather than pay this fee out of pocket, most homeowners choose the option of adding it to the loan amount and finance over the loan term. Let’s run some numbers to see what impact the fee increase will have. Assume a $200,000 base loan plus UPMIP financed, 5.0 percent rate, 30 year amortization:

1.75 percent UPMIP is $3500 and = monthly principal & interest payment of $1092

2.25 percent UPMIP is $4500 and = monthly principal & interest payment of $1098

So the mortgage payment goes up a whooping $6 bucks a month. Not a deal breaker. Two additional program changes were announced but DO NOT have effective dates yet. FHA said we should expect implementation some time this summer. They are:

REDUCE SELLER CREDITS FROM 6 PERCENT TO 3 PERCENT
During the buyers market in California, it was common to negotiate seller credits of 3 to 4 percent and use them to offset buyers closing costs. Now that the market has shifted in favor of sellers, buyers would celebrate a 3 percent credit. I don’t see this change keeping buyers out of the market.

MINIMUM FICO SCORE INCREASE TO 580
To qualify for FHA’s minimum down payment of 3.5 percent, a borrower will need a qualifying FICO score of 580. Here’s the thing … even though FHA has a 580 FICO score requirement, most lenders who fund FHA loans have increased their minimum FICO score to 640. In my opinion … if you have a FICO score below 600, you have no business buying a home.

The New Good Faith Estimate, part 2

2010-01-23T14:42:00.001-08:00

Three weeks into the New Year and the real estate industry continues to digest RESPA’s new Good Faith Estimate form and rules. In Part 1 of my blog on this topic, I mentioned there were features in GFE 2010 that I like.

If you ask a borrower who didn’t have a good financing experience, you will likely hear a common reason was their “cash to close” ended up significantly higher than what they were told or expected. These surprises happened whether a loan came from a traditional bank or mortgage broker. The new GFE will prevent this because once fees are disclosed in a section called “Your Adjusted Origination Charges” they can NOT change. NO MATTER WHAT! And this section contains the bulk of costs associated with obtaining a loan.

The new GFE breaks down costs into 3 sections.

FIRST SECTION, amounts cannot change from beginning to end of loan
SECOND SECTION, there can only be a 10% variance
THIRD SECTION, allows changes for things we have no control over like your hazard insurance premium and property taxes

I also like that my conversation with borrowers now focuses on interest rates and the corresponding “lender rebate” (a credit) that now belongs to the borrower and used to lower loan costs. When it comes to numbers, I have learned that borrowers are most interested in their total cost, interest rate, loan program and cash to close. GFE 2010 summarizes many fees into one category and itemizes certain others. With few exceptions, figures disclosed on a GFE at the beginning of the loan process will be the same as those at the end.

According to RESPA, a loan originator must issue a GFE no later than 3 business days after they receive the following information:

1) borrower’s name
2) monthly income
3) social security # to obtain a credit report
4) estimated value of property
5) loan amount
6) property address

Without all the above, don’t expect any loan originator will give you a GFE nor are they required to by law. This includes during the pre-approval process and prior to having a purchase agreement in place. In the case of a purchase, if you want to shop for “true loan costs” you will be doing it after a purchase offer has been accepted.

Two problems of the new GFE is ... it doesn't provide a cash-to-close area for the borrower. Nor does it detail the proposed housing payment associated with the loan. It's focus is merely to provide total loan costs. Borrowers and their mortgage advisors will have to use other means to get those questions answered.

The New Good Faith Estimate, part 1

2010-01-20T13:06:00.000-08:00

The mortgage industry is … in the words of Elvis … “All Shook Up” over the new Good Faith Estimate that become the gold standard on January 1, 2010. So what’s the hoopla you ask?

It’s not the fact that a one page form is now a three page document. I actually like many features of the new GFE and think consumers will too.

It’s not even the additional areas now required to be disclosed. I’ve gotten used to change.

The problem is … HUD & RESPA have dropped this regulatory ball in our laps without regard to the fact that it doesn’t play nicely with the other disclosures they require us to provide borrowers like Truth-in-lending, APR and California’s Mortgage Loan Disclosure Statement. There are parts of GFE 2010 that have everyone from bankers, brokers, lenders and their compliance departments in total disagreement on how to implement. Getting it wrong can blow up loans so everyone is being extremely careful. I’m glad to be associated with the largest mortgage brokerage in the country, First Priority Financial, who is taking a lead role in bring these short comings to the attention of HUD and RESPA. As a result, improvements are on the way.

In my next blog, I delve into what I like about the new GFE and what borrowers can expect when it comes to understanding the costs associated with getting a home loan.

Tips for Financing Real Estate in 2010

2010-01-08T18:25:00.000-08:00

In this climate of constant change, here is some key information relevant in today’s real estate market. Some things are new while others are worth reviewing again.

1) The $8000 FTHB tax credit requires the borrower to have a binding contract signed by April 30, 2010 and close by June 30, 2010.

2) The tax credit for repeat home buyers follows the same timeline above. It does not require the buyer to sell their existing home but does require the new purchase to be owner occupied. Learn more

3) For Conventional financing, you need a minimum qualifying FICO score of 720, a DTI of 45 percent and down payment of at least 20 percent to get the best interest rate. If you are looking for a lower down payment with private mortgage insurance, expect a 740 FICO and 41 percent DTI.

4) FHA has raised the minimum qualifying FICO score to 620 although most lenders will charge a higher rate for FICO’s below 640. The minimum FICO for FHA Jumbos is 660. FHA’s minimum down payment remains at 3.5 percent.

5) Fannie Mae's regular conforming limit remains at $417,000. The Temporary High Balance limit ranges from $417,001 to $729,750 depending on the county. For the Sacramento tri-county region, the high cost limit is $580,000.

5) VA continues to offer “zero” down payment financing.

6) Student loan balances that are considered “deferred” and therefore show no monthly payment on a borrower’s credit report, will require a 1.25 to 1.50 percent payment factor (varies by lender) to be added to the borrower’s DTI.

7) Before you consider co-signing for someone, understand the debt will appear on your credit report and needs to be included in your DTI when qualifying for a mortgage. It makes no difference that someone else makes the payment.

8) The wait period to qualify for a mortgage after discharge of Chapter 7 bankruptcy is 4 years for Conventional and 2 years for FHA.

9) A borrower paying off debts with a Chapter 13 bankruptcy may qualify for FHA financing after successfully completing 1 year of the payoff program and have the Court's approval.

10) Conventional financing requires a 2 year wait period after discharge of a Chapter 13 bankruptcy or 4 years after a dismissal.

11) In order to use FHA financing on a flipped property, the seller must be on title for at least 90 days. In cases where the property is an REO, the flip rule does not apply.

12) Fannie Mae does not have a 90 day flip rule however most lenders who fund Conventional loans do have this rule. To buy a flipped property within 90 days, find a mortgage broker who has lending sources with no flip rule. Learn more

13) The waiting period to qualify for a mortgage after a short sale is 2 years for Conventional financing and 3 years for FHA. In the case of a foreclosure, the wait is 5 years for Conventional and 3 years for FHA. Learn more

14) When it come to down payments, FHA allows the entire 3.5 percent to be "gifted" by a family member or others as long as they are not associated with the transaction. Conventional financing allows 20 percent to be gifted when the loan balance is conforming.

The information provided is basic and not intended to represent complete guideline for the topics discussed. As we have all experienced, things will likely change as the year passes. For more information, feel free to contact me.

Avoid Foreclosure with HAFA Program?

2009-12-12T09:29:00.000-08:00

Has the U.S. Treasury actually designed a program that will help at risk homeowners avoid foreclosure? On November 30, 2009 the Home Affordable Foreclosure Alternatives (HAFA) a supplemental program to HAMP, was announced. I have to admit that inside the 43 pages of guidelines and sample forms is information that homeowners, real estate agents and buyers should like. It sounds good on paper but like all the housing rescue programs that have come before, getting banks and loan servicers to voluntarily participate will be key to its success … even with the financial incentives being offered. The program takes effect on April 5, 2010 but banks and loan servicers have the option to implement sooner if they choose. Here are some highlights of what qualifies for HAFA:

homeowners who were unsuccessful on obtaining a HAMP loan modification could be considered for a short sale or deed-in-lieu of foreclosure program utilizing HAFA guidelines
the borrower’s monthly mortgage payment exceeds 31 percent of their gross income
loan servicer must offer borrowers the HAFA program within 30 days of being ineligibility for a HAMP loan modification
loan does not have to be owned by Fannie Mae or Freddie Mac
loan must have been originated on or before January 1, 2009
loan is for the homeowner’s principal residence
the mortgage is delinquent or default is likely
only for a first mortgage that does not exceed $729,750

Some features that make the HAFA program unique compared to what’s sellers, buyers and real estate agents are experiencing in today’s short sale market is:

HAFA uses the borrower’s financial and hardship information collected during eligibility for HAMP, eliminating the need for additional eligibility analysis
allows the borrower to receive pre-approved short sale terms prior to the property listing
prohibits the servicer from requiring , as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement
requires the borrower ro be fully released from future liability for the debt
standardizes the process, documents and timeframes
provides financial incentives to borrowers (seller), servicers and banks

There is more information including the deed-in-lieu program, so if you have questions about how HAFA could help you avoid foreclosure, I’ll be glad to answer them. Keep in mind, a short sale is a lot more forgiving on your credit than foreclosure and the waiting period to qualify for your next mortgage will be much shorter.

Read my post about the HAMP program

Read my post home ownership after short sale or foreclosure

Minimum FICO Scores Are Increasing As DTI is Decreasing

2009-12-03T18:28:00.000-08:00

Several lenders have announced the minimum FICO score for an FHA or VA loan is increasing to 640. They are also imposing an adjustment up to .375% to the rate if your qualifying FICO score is 660 or below. Does this mean you can't get a loan if your FICO is below 640? Not yet … there are lenders who accept lower credit scores but you can expect to pay a higher rate. Fannie’s minimum FICO is 620 but the price adjustments for scores between 620 and 719 will make your interest rate explode!

Along with minimum FICO scores increasing, the debt-to-income ratio (DTI) is decreasing. Fannie Mae announced that beginning December 12, 2009 their underwriting guidelines will be revised to max DTI at 45%. There can be exceptions for higher compensating factors. Your DTI ratio is calculated by taking the proposed housing costs (including property taxes, homeowners insurance and mortgage insurance if applicable) coupled with your minimum monthly payment on existing credit card and installment accounts compared to your gross monthly income. More reasons for you to get your credit scores and outstanding debts in order before applying for a mortgage.

Interested in a Home Loan Larger Than $417,000?

2009-11-20T10:46:00.000-08:00

They are called Conforming Jumbo, Conforming High Balance or even Agency Jumbo. All terms referring to a home loan between $417,001 and $729,750 in high costs areas for a single family residence. It can be confusing because there are permanent loan limits and temporary loan limits throughout the U.S.

Fannie Mae and Freddie Mac raised their conforming loan limits in 2008 during the credit crunch to ensure liquidity for loans greater than $417,000 in high cost real estate markets. These temporary high balance limits have been in place since 2008 but were scheduled to expire at the end of 2009. Good news … there will be no change for 2010. If allowed to expire, the temporary ceiling of $729,750 would have been reduced to the permanent ceiling of $625,500. For Sacramento, Placer and El Dorado counties, the temporary high balance limit remains at $580,000 through 2010. The permanent limit is $474,950. For most counties in the Bay Area it’s $729,750. The permanent limit is $625,500.

The reason for all the hoopla is because interest rates on loans that meet Fannie or Freddie limits, whether they be conforming or high balance, are priced significantly better than a Jumbo loan. Bottom line … it’s good for the housing market.

Footnote:
1) Temporary high balance loan limit of $729,750 established in the Economic Stimulus Act of 2008
2) Permanent high balance loan limit of $625,500 established in the Housing and Recovery Act of 2008

Tax Credit for First Time Home Buyers AND Repeat Buyers

2009-11-09T19:19:00.000-08:00

UPDATED: July 2, 2010

The $8000 first time home buyer and $6500 repeat buyers federal tax credits have officially been extended. H.R. 5623 the Homebuyer Assistance and Improvement Act of 2010 was signed by the President, extending the deadline to close escrow on a qualified purchase from June 30, 2010 to September 30, 2010. The April 30, 2010 deadline to get "in to contract" remains the same. Buyers who will find this extension helpful include those with fully executed contracts dated prior to May 1st on short sale properties who are still waiting for the seller's bank to approve the contract.

UPDATED: June 28, 2010

The blogisphere is buzzing with claims the FTHB tax credit has been extended through September 30, 2010. Sorry to burst the bubble but it's not true ... at least for now. The Senate voted AND passed an extension of the FTHB tax credit but this provision is part of that HUGE Dodd/Frank financial reform and jobs bill that is all over the news these days. Congress still needs to vote on the entire package and it's not looking good for a vote before June 30th. Then the President has to sign it. So as things stand today, there is no extension. June 30, 2010 remains the last day to fund and close escrow on a qualifing purchase.

ORIGINAL POST

It’s official. The home buyer tax credit has been extended. Breathe in … breathe out … you now have until April 30, 2010 to get a purchase contract executed and qualify for the $8000 first time home buyer tax credit. If you’re already a homeowner (with some equity) and planning to buy up or downsize, you may qualify for the new $6500 tax credit. In either case, your escrow must close no later than June 30, 2010. Since Congress didn’t stretch this out for all of 2010, I wouldn’t plan on another extension. One more thing … the qualifying income limits have been raised significantly.

No need for me to reinvent the wheel. For all the details about both programs you have to check out this website. It has an awesome Q & A section.

An Extension of the $8,000 Home Buyer Tax Credit is Closer

2009-10-30T17:08:00.000-07:00

As we approach the November 30th deadline, we have some encouraging news on the extension of the $8,000 home buyer tax credit. It’s not a done deal but the news is looking pretty good. Wednesday the Senate reached an agreement to extend the tax credit for first time home buyers. In a new twist, they are including a $6,500 tax credit for buyers who are not first timers. They also raised the qualifying income limits in a very meaningful way... singles were increased from $75,000 to $125,000 and joint taxpayers from $150,000 to $250,000. The Senate wants the qualifying period to be extended to purchase agreements executed by April 30, 2010 and allow buyers until June 30, 2010 to close their escrow.

The House and Senate now have to reconcile their versions of the tax credit and create a final bill to be voted on before the legislation will take affect. Both Houses have different ideas of what the home buyer tax credit should include so it will be interesting to see what they decide on.

Here's my take away from this news. Regardless of the provisions in the final bill, those of you who are actively making offers on homes now have some breathing room. If you’re motivated by the tax credit and have put off your home buying plans until next year, you’ll want to keep the April 30th deadline in mind. I’ll be back with another update once a final bill has been voted on and the details become available.

Interest Rate Headlines ... What They Don't Tell You

2009-10-23T09:40:00.000-07:00

Are you a rate shopper? Have you gotten sucked into the media ads touting 4.875% with an APR of 5.125% or something similar? How about the online offers that will quote you a rate if you just supply your name, address, phone number and email? Do you really want someone who buys your contact information to also manage your loan origination?

Here’s a brief list of variables that go into determining an interest rate whether it’s a purchase or refinance.

Loan Amount – conforming, high balance conforming or jumbo
Property description - single family residence or something else
Occupancy – primary residence, second home or investment
Loan to value – more than 80% or less
Loan period – 30 year fixed, 15 year fixed or something else
Loan program – conventional or government
FICO score – qualifying FICO 720+ or below
Rate lock period – 15, 21, 30, or 45+ days
Points or No Points

These are the biggies but there could be other things that determine your interest rate. We all want the lowest rate possible but which one are you really interested in … the teaser rate or the rate you actually qualify for? The next time you decide to shop for an interest rate, make sure you know all the variables that apply to your financial transaction and shop accordingly.

Home Buyers ... NEW Rules From FHA Are Headed Your Way

2009-10-16T10:22:00.000-07:00

Most first-time home buyers choose FHA financing because of the lower down payment requirement and less than perfect credit history that makes it easier for them to qualify these days. But make no mistake, as conventional underwriting guidelines continue to get tougher we have seen FHA raise the bar too. Most lenders have adopted a minimum qualifying FICO score of 620 and if your FICO is 660 or below, your interest rate will cost more. HUD recently announced FHA changes coming January 1, 2010, that home buyers need to know about.

FHA Appraisal Period - Currently an appraisal report is effective for a period of six months on existing homes and up to 12 months for those under construction. Come January 1, the time period is reduced to four months for all homes.

FHA Appraisal Transfer - New guidelines will allow a second appraisal to be ordered under certain circumstances when a borrower switches from one lender to another and restates the requirement that the first lender must transfer the appraisal to the second lender at the request of the borrower.

FHA Appraiser Certification - HUD is requiring appraisers to be State certified. In California, the two “certified” designations are AR which is the Certified Residential and the AG which is the Certified General designation. Appraisers already have to be licensed and certified in California so this becomes an additional certification.

FHA Appraiser Independence - A mortgage professional and their staff will be prohibited from ordering an appraisal. The lender will be responsible for making sure the appraisal process is independent. It sounds like HVCC appraisal rules governing conforming loans will be coming to FHA loans. Lenders have not announced how they plan to implement this new guideline so it will be interesting to see what form it takes.

Remember that lenders use HUD guidelines as a base and often add additional layers of qualifying that borrowers must meet. That’s why rules vary from one lender to another and a mortgage broker can pick and choose the best lender to meet your needs. If you have questions about FHA financing, contact me for answers.

Buyer Beware ... This Bank's Foreclosures Come With Additional Strings Attached

2009-10-08T18:07:00.000-07:00

If you come across a foreclosure owned by the one of the largest banks in the country and you decide to make an offer, be prepared to jump through some new hoops. This particular bank requires the buyer to be pre-approved by one of their mortgage bankers. This means you will have to fill out a new loan application, provide income documents and allow them to run your credit. It doesn’t matter that you have already done this with your own mortgage person and been pre-approved. This bank wants you to go through the approval process all over again with them and … wait a minute … its going to cost you $50 bucks too! All of this just to have the privilege of “making an offer” on one of their foreclosures. The chance of your offer getting accepted isn’t any better. My borrowers are saying NO THANK YOU!

Here’s what really bugs me. My personal business practice includes a borrower paying a small charge for their credit report during the pre-approval process. On July 31, 2009, along comes a new Truth in Lending Act by the federal government preventing mortgage brokers from charging a borrower anything other than a credit report fee during the pre-approval process. I have no problem with that. However, a bank like the one mentioned above doesn’t play by the same TILA rules. They can AND do charge hundreds of $$$ for loan application fees or loan approval fees. So who is being taken advantage of who?

Are Home Buyers Getting a Reprieve?

2009-09-25T18:23:00.000-07:00

Yes! Home loan rates would have shot higher at year's end if the Federal Reserve continued with plans to stop semi-monthly buying of Mortgage Backed Securities (MBS) in December. Not good for a struggling housing market.

After the September FOMC meeting, the Fed announced they would gradually wind down their purchase of MBS and stretch it out through March of 2010. This reprieve is good news for both home buyers and homeowners considering a refinance. The bottom line ... once the Fed reaches their target spending of $1.25 trillion, the buying will stop and home loan rates will go up. They're just hoping the housing market will be in better shape next year when it happens.

You only need to look back to last year before the Fed stepped in to be a major buyer of our mortgage bonds to see the positive impact this policy has had on home loan rates. I pulled out a rate sheet from September 25th of 2008 and found a 30 year fixed rate conventional mortgage cost 6.25% with NO Points. Today it's 5.00%. When the Fed began their purchase of mortgage bonds in January of 2009 home loan rates dropped below 5 percent initially. Since then they have been running between 5.0 and 5.5%. What a difference!

If you're planning to buy a home or refinance an existing loan, take advantage of these historic low rates while they are available.

"Making Home Affordable" the report card ... HAMP & HARP = Hope?

2009-09-18T12:18:00.000-07:00

Remember when our government was passing one housing rescue plan after another beginning in late 2007. Banks were "encouraged" to help struggling homeowners modify their loan. That didn't work as foreclosures continued to climb. After taking over Fannie Mae and Freddie Mac they imposed a six month foreclosure moratorium from November 2008 through April 2009. It just delayed the inevitable. That brings us to the $75 billion Making Home Affordable plan.

Making Home Affordable - MHA was announced in February 2009 to help stabilize the housing market. Under this umbrella two seperate programs with different objectives were born. So let's get you up to speed on HAMP (no ... I'm not blowing smoke) and HARP and see it there is any HOPE for you.

Home Affordable Modification Program - HAMP gives financial incentives to mortgage servicing companies for offering trial loan modifications to an estimated 2.7 million at-risk homeowners. To be considered for the program a homeowner must be at least 60 days behind on their mortgage or already in foreclosure.

According to a July 31st Treasury report card, $20 billion has been doled out to more than three dozen large and small servicing companies participating in HAMP with results showing 15% or 400,0000 homeowners out of the 2.7 million eligible have been offered trial modifications that involved reducing the interest rate on a loan for several years and/or extending the term of the loan.

Homeowners who have contacted their loan servicing company asking for a loan modification with little success may find better results by going back and asking for help under the HAMP program.

Home Affordable Refinanace Program - HARP is designed to help responsible homeowners who pay their mortgage on time refinance out of a risky loan into a stable loan and lower their mortgage payment. With declining home values preventing a traditional refinance, HARP allows homeowners to refinance up to 125% of their home's value. To give you an idea of what that would mean, assume a home value of $300,000 with a mortgage of $365,000. Applying 125% to $300,000 = $375,000. That's below the loan-to-value LTV ceiling. Other loan qualifying factors will apply. A key feature of this program ... the homeowner will not be required to get private mortgage insurance PMI if their original LTV ratio was 80% or less.

Fannie and Freddie had been allowing a HARP refinance up to 105%. To help more homeowners, they will increase their LTV ceiling to 125% effective September 19th, 2009. It may take time for mortgage companies to begin offering the 125% refinance option so be prepared. Follow these links to find out if your mortgage is owned by Fannie Mae or Freddie Mac. You can also double check with your existing mortgage servicer to find out who owns your mortgage. Qualified homeowners have the option to apply for a HARP refinance with their existing servicer or shop for a competitive loan with a new lender.

What Makes VA FINANCING a Great Choice in Today's Market?

2009-08-31T09:56:00.000-07:00

With an ample supply of creative financing programs available to anyone with a pulse during the real estate "bubble", VA home loans weren't unique so they lost their appeal. Well ... financing has changed big time and that's no longer the case. So what makes VA home loans popular these days? Could it be the 100% financing, low interest rates and reduced closing costs? Absolutely!

With that said ... VA financing is different. It would be a mistake to think that every real estate agent and mortgage professional has experience with them and prepared to give you the best advice. So before you put a team together to help you buy your next home, join us for this FREE VA Financing Workshop where you will learn:

What is the difference between VA and Cal Vet home loans

How do I determine my eligibility for a VA loan

Can I get a VA loan if I've had one before

What is the maximum VA loan limit for our region

How does the VA Funding Fee work

What are the closing costs and who pays for them

Is mortgage insurance required

How do VA interest rates compare to Conventional or FHA
How do sellers view buyers with VA financing

The buying process from START to FINISH

You will walk away from this workshop empowered by the knowledge and ready to make your home buying plans a success. Please register below for the next class. Seating is limited so all parties attending need to register separately. Only veterans are eligible for VA financing.

Date: Contact us for the next workshop
Time: 6:30 t0 8:00 pm (registration starts at 6:15 pm)
Location:3550 Watt Ave, Rm 140, Sacramento CA 95821

Holding Title to Your Home … It’s An Important Decision!

2009-08-27T20:55:00.000-07:00

There are many important decisions a consumer needs to make when buying and financing a home. Among them is how to take title to your home. With few exceptions, most home buyers (and even existing homeowners) don’t give this topic much attention. Those who do tend to have “Family Trusts” in place and are well informed.

Let’s cover six common ways to hold title to real estate in California which is a community property state:

1. Sole Ownership
2. Tenants in Common
3. Joints Tenants
4. Community Property
5. Community Property With Right of Survivorship
6. Family Trust

At the Van Duyn Group, we have prepared a report for our clients that provide explanations for these options and then recommend you consult with your CPA or tax professional for advice to determine which is best suited for you. You will want to get this right because the tax savings for survivors can be substantial! We also make sure the Title Company prepares and records your Deed of Trust according to your wishes.

If you are not sure how title is held to your existing property, check with the county recorder’s office where the property is located. Before you consider making any changes to existing real estate, make sure you get advice from your tax professional or CPA first. If changes to title are needed, a local title company will help you complete the paperwork and record with the appropriate county.

The 90 Day Flipping Rule ... Some Lenders Have One While Others Don't

2009-07-17T19:04:00.001-07:00

UPDATE: January 15, 2010

HUD TAKES A NEW POSITION ON THE 90 DAY FLIP RULE … It’s OK Now!

If you’re not familiar with the 90 flip rule, check out my July 17, 2009 post below for background. It will help you understand why HUD’s change of mind is great news for everyone! HUD now believes the real estate market will benefit by allowing buyers to use FHA financing to purchase a home even when the seller has been on title for less than 90 days. This is a temporary waiver of the 90 rule for one (1) year and takes affect on February 1, 2010. With tight underwriting guidelines, many home buyers are realizing that FHA financing is their only way to afford home ownership. Here are more reason why I like it:

FHA buyers will have more homes to choose from
Investors will be able to attract a larger pool of home buyers
Buyer and seller agents will increase their closing ratios
Mortgage brokers will have more lending options for their clients

HUD’s updated policy comes with restrictions designed to prevent fraud so investors … pay attention:

1) There can be no relationship or interest between the seller, buyer or other parties to the transaction

2) Seller’s profit is limited to 20 percent above their acquisition cost

3) HUD may allow a sales price in excess of the 20 percent limit if the lender can document legitimate rehabilitation to the property and/or a second appraisal supporting value. In addition, the lender must order a property inspection and provide the report to the buyer prior to closing.

KEY INFORMATION: Home buyers should expect some FHA lenders will not follow HUD’s waiver and continue to impose the 90 day restriction. When getting pre-approved for financing, I suggest home buyers ask their mortgage advisor if they have lenders who accept HUD’s waiver before you go shopping to avoid surprises later.

These are highlights of HUD’s temporary 90 flip rule waiver. Let me know if you would like more information or have questions.

ORIGINAL July 17, 2009 post

With the hottest segment of today's market focused on homes priced below $300,00o, first time home buyers and investors are finding great deals. There's nothing wrong with an investor buying a home in need of some TLC, making improvements and selling for a profit. This is the essence of property flipping but when the buy and sell occurs within the first 90 days, alarms go off and everyone involved needs to understand there are rules to play by. The investor who purchases a property for cash has no restrictions when it comes time to flipping it. On the other hand, a buyer who is financing their purchase needs to understand there are lenders who will not approve financing for these properties during the first 90 days. So it's not only buyer beware but seller, realtor and mortgage professional too.

Let me clarify one important point. A bank who forecloses on one of their mortgages is not subject to flipping rules (at this time). Once they take title to a property they can immediately sell it to a buyer who is financing the purchase. The flipping rule is an place to prevent fraud by investors so it's directed at those attempting to sell a property for a big profit within the first 90 days of ownership.

Here's another important point. Not all lenders have a 90 flipping rule. Oh no ... that would make things too easy. Let's start with HUD because so many buyers in this market are using FHA or VA to finance their purchase. FHA says NO to flipping and to be on the safe side, don't even consider entering into a purchase agreement until day 91 (I'll explain why in a minute). The VA doesn't have a flipping rule. Fannie and Freddie DON'T either (conforming loans) but have tightened their fraud guidelines. Here's the catch ... MOST mortgage banks/lenders have a 90 day flip rule that prohibits financing and their rules triumph all others. Some will not allow the purchase contract to be dated within the flip period while others are OK with it. Another example includes preventing the seller from making unreasonable profit and scrutinizing appraisals even further. Rules vary from lender to lender. If you decide to buy one of these homes, have your mortgage advisor shop for the right lender to get the deal done.

The real estate markets are dominated by short sales and foreclosures. Buyers get pretty excited when they find a home for sale by what we call a "regular" seller. This is your first heads up. Buyers and their agents need to do their homework. Find out when the owner took title to the property, how much they paid for it and if they made any material improvements. If the property is being flipped, you have some decisions to make. Find a mortgage lender who will approve financing for the purchase within 90 days or negotiate with the seller for an escrow to close on day 91. Since conforming loans are subject to HVCC appraisal rules and require the buyer to pay for an appraisal "upfront" you'll want to make sure all aspects of the purchase meets your lender's guidelines before shelling out those bucks.

A Nasty Rumor Aimed at First Time Home Buyers

2009-07-09T16:27:00.000-07:00

The rumor is home buyers who qualify for the $8,000 tax credit can use it as a down payment on the purchase of a home. SOUNDS FANTASTIC! So who is stepping up and loaning this future tax credit to the borrower? NOBODY! At least not in California. Being a mortgage broker associated with over 100 banks around the country and part of a vast group of fellow mortgage professionals (over 1,000) none of us has found anyone who is willing to monetize the tax credit. Nor have we found a mortgage bank allowing the tax credit to be used as a down payment.

This all began in May when HUS announced the $8,000 tax credit could be used for the down payment. The problem is, HUD brought this option to the table but didn't work with the lending industry to see it through implementation. Another example of our federal government in-action.

So if you hear a mortgage person or realtor tell you it can be done, be very very suspicious. Find out who is offering the loan, how much it will cost you and get it in writing. Then get a second opinion.

Home Ownership After a Short Sale or Foreclosure

2009-06-14T10:44:00.000-07:00

UPDATE: June 12, 2010

Fannie Mae Changes Waiting Period After Preforeclosure or Deed-in-Lieu of Foreclosoure

Fannie Mae has changed the required waiting period for a borrower to be eligible for a mortgage loan after a Preforeclosure or DIL of Foreclosure sale. Both policies will be effective July 1, 2010. The terms "short sale" and preforeclosure sale" mean the same thing to Fannie Mae - the sale of a property in lieu of foreclosure that results in a payoff of less than the total amount owed, which was pre-approved by the servicer.

Preforeclosure Sale: Current wait period = 2 years. New policy is 2 years with 20% down payment, 4 years with 10% down payment.

Deed-in-Lieu of Foreclosure: Current wait period = 4 years with additional requirements after 4 years up to 7 years. New policy = 2 years with 20% down payment, 4 years with 10 percent down payment.

ORIGINAL POST: June 14, 2009

QUESTION:
How long is the wait after a short sale or foreclosure before home ownership is possible again?

ANSWER:
It depends... Conventional, FHA and VA loan programs have different rules. The "shortest" wait period is 2 years. So if you had a short sale in 2007, the clock is ticking in your favor!

Here is an example of how the process can go very well when a family has a plan of action. In November of 2008 I was introduced to a couple who had a short sale in April of 2007 and wanted to know when they could qualify for a home loan. All of their questions were answered, advice about their credit implemented and the best financing program determined. Their wait period was 2 years so we used the remaining 6 months to prepare. In April of 2009 we had them pre-approved for a VA loan and making offers. They moved into their new home in June. A great success story!

If you're wondering ... how long do I have to wait before I can buy again ... the answer depends on the kind of loan you’re applying for, the mortgage bank you’re applying with and your credit history after the event. The waiting period begins once change of ownership has been recorded. You will find this information in the real estate documents you were given when your home was sold. Look for a HUD-1 or Settlement Statement.

In the case of foreclosure, Fannie Mae requires 5 years to pass before becoming eligible for conventional financing. A minimum FICO of 680 and a down payment of at least 20 percent is also required. FHA says the wait is 3 years while VA applies the same rules as Chapter 7 bankruptcy ... wait 2 years after discharge. If the foreclosure was on a VA loan, full entitlement may not be restored.

Prior to June of 2008, conventional rules treated a short sale the same as a foreclosure. That's when Fannie changed their policy and created a new guideline called "Pre-Foreclosure". It established a wait period of only 2 years. FHA views a short sale the same as foreclosure ... wait 3 years. VA doesn't have a seperate rule either so short sales and foreclosures are treated the same way ... wait 2 years.

In addition to the above guidelines most mortgage banks add additional underwriting rules that vary from bank to bank. Here's something else to be aware of, bankruptcy or credit counseling after a short sale will affect your timeline and need to be taken into consideration.

The best way to figure out how long you will need to wait before home ownership is possible again is to meet with a mortgage professional and set up a plan of action. This will be a time to review your tri-merge credit report, evaluate FICO scores and learn how to raise them. You will also want to learn which loan program will be best suited for your future objectives and determine what actions need to taken during your wait period so when the time is right, you will have a successful home purchase.

Loan guidelines are constantly changing so keep in mind all of the above is based on credit requirements at this point in time.

Are you ready to learn what your home ownership plan of action needs to be? My consultation services are free and the expertice is invaluable.

This Could Blow Your Home Purchase

2009-06-04T19:37:00.000-07:00

I have been telling you how important it is to get pre-approved for a home loan before you go shopping because sellers require a pre-approval letter from your lender to accompany a purchase offer. Sounds pretty basic … right? A lender compares your income to your expenses and then tacks on a proposed housing payment to arrive at your Debt-to-Income Ratio or DTI. That’s the Readers Digest version. Here’s what you need to understand. The proposed housing payment includes principal, interest, hazard insurance, and property taxes. Let’s save for another time how we calculate those items to arrive at your housing cost and focus on what costs are NOT included in the DTI ratio.

1. Mellos Roos *
2. Home Owners Association Dues (HOA)
3. Flood Insurance

Assuming you have no specific property in mind and are still looking for the right one, make sure you know if any of these items are associated with the property you plan to make an offer on. Flood insurance can double your insurance costs. Mello Roos vary by area and can add hundreds of dollars to your monthly property tax expense. The same goes for HOA. Any one of these additional housing costs can cause your DTI ratio to exceed your loan approval. The best thing to do when you come across a home with any of these additional costs is for your real estate agent and mortgage professional to run the numbers and see if you still qualify. Just one more example of why you need a real estate agent and mortgage professional who know each other, have clear communication and are on the page … You benefit big time!

* Note: Mello Roos is a tax used to finance or underwrite the cost of public improvements or infrastructure (such as sidewalks, utilities, roads, recreational facilities, schools, libraries, fire stations) in a new development. The tax stays in place until the bond is paid in full. Mello Roos taxes are not deductible unless they are for maintenance and repair of local improvements.

LOCKING an Interest Rate, What Does That Mean?

2009-04-15T21:36:00.000-07:00

Whether you’re financing a purchase or refinancing an existing loan, at some point in the process you and your mortgage professional will discuss “locking” the interest rate. Let’s talk about what that means and why we do it.

First of all, interest rates change every day. Locking a rate insures you get the rate you have been promised by your lender. If rates get worse, you’re protected. If rates improve, you keep the locked rate.

Generally we lock rates for 30 days but locks can be longer. How long you chose will depend on your needs. There is another piece of this process most people aren’t aware of. The lender funding your loan is likely selling it to an investor. Once a lock is made an investor is expecting delivery of that loan at that rate. So a lock is not only protection for you, it’s a promise from the lender to deliver that investment with those terms after they have completed the loan.

Have Your EYES WIDE OPEN if the deal involves a Short Sale!

2009-04-02T23:31:00.000-07:00

Purchase offers involving short sales are known for taking 60 days or longer to get approved so we prepare our clients accordingly. Depending on your risk tolerance, there may be another reason to avoid them or at the very least, have your eyes wide open.

I recently learned that a well known national mortgage bank has been approving short sales involving their mortgages and inserting a clause allowing the bank to pursue BOTH the seller and buyer for payment of the deficient mortgage balance after the close of escrow! Wait just a minute … its one thing for the seller’s lender to pursue the seller for any shortage but to go after the buyer? Who in their right mind would agree to buy a home under these terms? Maybe they were caught off guard? This new practice was brought to my attention by a local title company who has witnessed these short sale agreements and adopted new procedures to make sure all parties to the escrow are fully informed.

As someone whose clients are buyers, my take away from all this is … make sure the mortgage company’s short sale approval is given to the buyer’s agent and reviewed with the buyer to ensure full disclosure thereby allowing them to walk away from the deal without liability. Now you know what to look out for!

Will The Latest Housing Rescue Plan Help You?

2009-03-22T15:30:00.000-07:00

Re-Print from WSJ - MARCH 5, 2009

Mortgage-Assistance Program Offers Desperate Treatment Depending on Goals and Circumstances, By NICK TIMIRAOS

New rules issued by the White House on Wednesday clarify who can take advantage of the latest round of federal efforts to head off foreclosure. President Barack Obama announced his housing stability plan two weeks ago, promising the most far-reaching effort yet by the government to help large numbers of at-risk borrowers. The program has two main components.

One provision will allow diligent borrowers who are current on their mortgage payments but have little or no equity in their homes to refinance their first mortgage to take advantage of current interest rates, which have fallen to near record lows. That is designed to allow responsible borrowers -- mainly those who have been hurt by falling home prices -- to benefit from the current climate. Lenders won't refinance borrowers who don't have equity in their homes.

The second component involves modifying mortgages loans to lower monthly payments to 31% of the borrowers' gross monthly income, mainly by reducing the interest rate on the loan. This effort would target borrowers who are falling behind on their mortgage payments or who are in danger of falling behind. The government will provide financial
incentives to lenders and mortgage servicing companies to encourage them to offer the reduced payment plans, which last for five years. But as with any broad effort, homeowners are treated unevenly in the programs. The refinance provision is open only to borrowers who have loans that are owned by Fannie Mae or Freddie Mac.

That excludes large numbers of borrowers with subprime and other exotic mortgages sold to investors; and borrowers with so-called "jumbo" loans that are too large for government backing. Those groups will be eligible for the modification part of the plan, but only for loans up to $729,750. Borrowers who owe more than 105% of the current value of their home also won't be eligible for refinancing. That means that fewer borrowers in the nation's most over-heated housing markets, including California and Florida, and in some of the most depressed market in the Midwest can take advantage of the program. "Most of the people we serve are too far underwater to take advantage of this," says Dan Elsea, a mortgage broker in Detroit. Nationally, 25% of mortgage holders have conforming loans that are within the 80% to 105% loan-to-value ratio needed to qualify for the program, according to real estate Web site Zillow.com. But that number falls in certain highcost housing markets that have seen big price declines. In Los Angeles, for example, just 9% of mortgage holders are eligible to refinance, while 8% of conforming borrowers are too far underwater, according to Zillow.com.

Part II ... False Illusions About Rates and What You Need to Know!

2009-03-22T14:10:00.000-07:00

If you have hit the snooze button waiting for interest rates to drop in the low 4's or even into the 3's before you buy a home or refinance a mortgage, you're going to be late to the party.

To understand why you need to understand how mortgages are created and sold so here's the simplified version. Let's say you are offered a mortgage at 5.0%. There are a lot of people involved in getting that money to you at that rate. There is a mortgage servicer, an investor, Fannie Mae (FNMA) and Wall Street. All getting a piece of the pie. That money may have begun as a Bond with a coupon rate around 4.0% before it gets to you. So, to get a mortgage rate below 4.0%, it would have to begin with a Bond in the 3's. There has never been such a Bond.

To create money available to fund home loans, the Fed has been buying Mortgage Bonds, but if you look at what they are purchasing, they are buying a lot of FNMA 30-yr 5.5% and 6.0% Bonds... which won't have much of an impact on present interest rates. Let's see why? First, check out the Fed's purchases for yourself by hitting this link: Direct Link to View Fed Mortgage Bond Buying.

So why is the Fed buying these Bonds? Well if you think about it, it's very smart of the Fed... and maybe even a little sneaky... because 5.5% Bonds actually represent outstanding mortgages with rates of 6 - 6.50%, which are precisely the loans being refinanced at today's great interest rates.

Stay with me here...
With rates at present low levels, many of the mortgages in these FNMA 5.5% pools being bought up by the Fed will be refinanced and paid, thus giving the Fed a quick recoup on some of their investment. And this is likely a big reason why the Fed said they could continue their purchasing program beyond June. Bottom line, the Fed buying these higher rate coupons will not necessarily help rates to move lower, as their actions do not impact the loans being originated at today's low rates.

Here's the most important part:
Sometimes I talk to clients who are in a situation where it makes sense to refinance right now, and save $250 per month for example. But when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save the $250 per month right now, in the hopes of gaining another $30 per month in additional savings with a lower rate than where we stand presently. Now clearly, rates could turn higher and this window of opportunity could pass them by entirely.

This is the bottom line:
Even if those clients ultimately are correct in timing the market and eventually grab that lower rate and save another $30 per month - think of what they have lost by waiting. While they delayed, they lost the savings they could have gained by taking action sooner - or in the example used, $250 - for every single month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting.

I don't want anyone to miss an opportunity by either waiting or not understanding what is at stake. So let's talk further on this - call or email me and let's discuss what this might mean for you.

The Federal Reserve Has a Plan to Keep Interest Rates Low ... PART 1

2009-03-22T12:57:00.000-07:00

So how low will they go? I know ... you’re numb when you hear another Billion, Trillion or Gazillion (just kidding) will be spent to turn our housing market around. The Federal Reserve announced on Wednesday they will be buying an additional $750 billion in Mortgage Backed Securities (MBS) in an effort to keep mortgage rates low and make home buying and refinancing affordable for more consumers.

Here’s a quick mortgage 101 lesson. After a home mortgage is created, it is packaged into a pool with other mortgages and sold to investors in the form of Mortgage Backed Securities (MBS). With so many mortgages defaulting over the past couple years, the appetite of investors to purchase mortgage securities has been weak causing less money available to fund new mortgages. This resulted in home loans rates going as high as 6.75% during 2008.

Coming to the rescue in January, the Fed began buying MBS every day creating a market and causing interest rates to drop initially to the high 4's before settling in a range between 5.00% and 5.50% for a 30 year conforming loan. The plan to purchase $500 Billion worth of securities would last through about June. With Wednesday’s announcement of another $750 Billion commitment, the Fed's buying is expected to last thoughout the rest of this year. We can expect mortgage rates to continue near current levels or slightly better during this time.

But wait ... there's more to the story. The media is reporting interest rates could get below 4.00%. That’s not likely to happen and there are good reasons why. The story continues in my next post - Part II; False Illusions and What You Need to Know.

Home Appraisal Process is Changing... Will it Affect Your Home's Value?

2009-03-22T12:47:00.000-07:00

New York State Attorney General Andrew Cuomo put on his boxing gloves and jumped into the ring with Fannie Mae and Freddie Mac last year and the decision was unamious ... more regulations for all of us. Under current rules, when a homeowner or home buyer needs an appraisal, their mortgage professional orders it from appraisers they know and trust. The present rules require the appraiser to submit plenty of supporting documentation to prove a property’s value leaving little room for controversy. Beginning May 1, 2009 all conforming loans sold to Fannie or Freddie nationwide requires the mortgage bank funding the loan to use their appraisers. The attorney general believes this move will bring integrety and fairness to the valuation process for both homeowners and investors. I think we will see higher appraisal costs passed on the consumer, delays in getting appraisals completed while slowing down loan approvals and a decrease in home values. The new rule doesn't apply to goverment loans like FHA or VA. Some lenders have announced they will begin this practice as soon as April 1st.

From: A First-time Homebuyer

2009-03-11T15:44:00.000-07:00

If you have ever dreamt of home ownership, but were afraid you were unable to afford it, then you need to talk to the wonderful team of Barbara Van Duyn, Mortgage Planning Advisor from First Priority Financial and Debbie Baldes, Real Estate Broker from Executive Properties. I met Barbara in late September, 2008 and I told her I really wanted to know if I could afford to buy a home and the price range I wanted for a mortgage payment. She took all the paperwork needed to begin qualifying me for a loan, ran my credit, gave me advice on how to clear up any questions regarding my credit, gave me three possible scenario’s of what my payments would look like if the house was purchased at the prices listed. Once Barbara got me pre-approved with a lender (October, 2008), she referred me to Debbie Baldes and told me to go shopping!!

What can I say about Debbie? Well, first of all, we share the same name with a slightly different spelling, but our nicknames are the same (Deb). I met her and she showed me two homes the first time we met. The following week she was on vacation, but when she came back, we hit the ground running. She showed me three or four homes with sheets on all the amenities each home offered. We put in three bids on homes one day, but a few of them were short sales so we knew we would have to wait on the bank before we could proceed. Then the day before Halloween we went out and looked at about five homes. We put bids on three of them and one of them was my home!! I went out of town that weekend with my girls and we prayed that one of those homes would be mine. Before I knew it, I was signing all kinds of paperwork to purchase my very first home!!! Then on November 25, 2008, I became a first-time homebuyer! My dream had come true and the best part of all was that the house was bigger than I originally thought and it was appraised at a higher price than I paid for it before I ever walked in the door!! Debbie was the best Broker anyone could ever hope for. She worked hard for me to get the home I wanted. Then when I got the keys and walked in the door of my new home, there was a large basket on my kitchen counter full of things for my new house like paper towels, nails, tacks, tape measure, etc. It was so special and it was from Debbie and Barbara. Once you meet Debbie, you’ll find out that she loves houses with “red” doors. Well my house has a white door, but I love it just the same! Maybe one day I’ll paint it red, but I’ll have to paint the whole house to compliment the red door!

I had my housewarming on January 24th and the dynamic duo both came and shared this wonderful day with me. They did everything to make sure the day was super special for me. I couldn’t ask for more! They put “excellence” in customer service. So if you’re in the market for a new home, take my advice, don’t think twice, just pick up the phone and call the best group in Sacramento County, first Barbara Van Duyn and then Debbie Baldes. It will be the best step you ever made towards purchasing the home of your dreams!!

Deborah R, Sacramento First-time Homebuyer

It's Ridiculous and Getting Worse

2009-03-01T19:38:00.000-08:00

In order to provide relevant and trustworthy advice to those who ask for it, I set aside time each day to study the latest bulletin from financial institutions outlining a new credit requirement, notice of another loan program ending or the slow drip of details coming from the government’s latest rescue plan. I’ve come to learn it doesn’t matter how long someone has been in my profession because the experience from years past no longer apply to today’s rules. Even with time devoted to staying current, the endless stream of changes involved in financing real estate has reach the point of ridiculous!

The biggest offender is the government whose hands are in everything we touch (because it’s for our own good). Here’s an example. Effective January 1, 2009 we began the implementation of lower conforming loan limits in high cost areas throughout the country. Then a month later with the signing of the American Recovery and Reinvestment Act, we heard those limits will revert back to 2008’s higher levels. Mortgage banks can’t move that quickly so we are still waiting for official word when these changes will show up on our rate sheets. We had another example of back and forth last summer when FHA announced risk based pricing rules for about six weeks and then did away with them when another stimulus plan became law.
The bottom line … no one knows it all but some of us are trying our best to keep you informed.

Another Plan To Rescue The Housing Market

2009-02-20T13:57:00.000-08:00

So who owns your mortgage? Fannie Mae, Freddie Mac, your local bank or some unknown investment portfolio? The company you send your mortgage payments to is likely a servicer and not the owner of the mortgage. The reason for the question is because our government announced yet another housing rescue plan. This time it’s $75 billion dollars and focuses on mortgages owned by Fannie, Freddie and banks who took TARP money. Lawmakers estimate the plan will help 9 million households avoid foreclosure. We watched Washington roll out several housing rescue plans in the past six months and were told they would help struggling homeowners. Remember Hope For Homeowners? It bombed. None have proven to stop this slippery slop of foreclosures. The problem with all of these plans is the government cannot force any investor to modify a homeowner’s mortgage. The language associated with these plans is “urge” and “encourage” investors to stop foreclosing and modify. And the latest housing recovery plan offers financial incentives to investors for doing so.

Think about this… if the stabilization and recovery of the housing market is KEY to our economic recovery, why have we spent billions saving Walls Street firms, billions to others and another $787 billion on mostly non-housing stimulus.

New home buyers entering the market are getting great deals but it’s not enough to turn the housing market around by itself. A lot is riding on the latest round of taxpayer money and all we're all paying for it whether it works or not.

CalPERS Discontinues Home Loan Program

2009-02-13T20:08:00.000-08:00

UPDATE: December 13, 2010

CalPERS announced they have suspended the Home Loan Program to their members. As a result, new loan applications are no longer being accepted by participating lenders. This change does not affect homeowners who already have a CalPERS home loan.

Original Post: 100% Financing for CalPERS Members

CalPERS members have an exclusive benefit when it comes to buying a home. Especially at a time when down payment assistance programs have disappeared.

Members may borrower 50 percent from their member account up to $18,421 and use the money as a down payment on the purchase of a primary residence. These funds are considered a personal loan and feature repayment terms up to 15 years depending on the amount borrowed. Combine the personal loan with a CalPERS FHA or Conventional mortgage and members get 100% financing up to $350,000. But wait ... it gets even better. CalPERS loan programs feature significantly reduced closing costs compared to other loan programs! One more thing, you don't have to be a first time home buyer to take advantage of this member benefit.

If you're ready to buy a home and you would like 100% financing ... the solution is here! I am an approved CalPERS mortgage professional and look forward to helping you make your dream of homeownership a reality. Contact us to learn more.

How To Be a Successful Buyer In This Market

2009-02-11T21:55:00.000-08:00

You have important questions. Is this the best time to buy? Will interest rates go lower? What about property values? And you deserve answers you can count on. A successful home purchase doesn't happen by chance, IT’S BY DESIGN. In this highly competitive buyers market, you will learn the “Secrets for Success” from real estate professionals who know what it takes. You will be empowered by the knowledge and have the confidence to turn your home buying goals into reality. Topics that will be discussed include:

· How to buy Short Sales or Foreclosures
· Loan programs: FHA, VA, Conventional, CaPERS & more

· What happens when Escrow is opened
· Who qualifies for ZERO down payment
· How much can I afford to buy
· Inspections: appraisal, home & pest
· Is my credit good enough
and so much more …

Date: To Be Announced
Time: 6:15pm Registration - Class starts promptly at 6:30pm
Location: 3550 Watt Ave, Rm 140, Sacramento

If more than one person will be attending the class, each one needs to be registered seperately.