Real Estate Mortgage News

Loan Limits Changes Coming to a Town Near You!

There is both good and bad news about loan limits headed your way and much of it will depend on where you are in the country.  If you don’t like the news…then don’t worry, I’m projecting more changes will be on their way.  As with most changes in lending these days, as one opportunity opens another one closes, be sure to use the ones that are open while they last…

Last year the economic stimulus package brought about an opportunity for home-buyers/owners in high housing cost areas to buy or refinance with premium interest rates.  The jumbo loan market had all but dried up and there was an immediate need in the marketplace for these loans.  We did and continue to do many of these loans; it was an impact-full market adjustment that opened up money to the marketplace.  Well, as of the end of this year, those loans are gone.  Many lenders are cutting them off early because the loan must actually be delivered to Fannie/Freddie by the 12/31 cutoff.  I have seen some sources already stop accepting rate locks on these loans and I would expect to see most following very soon.

With that said both the GSE’s (Fannie Mae and Freddie Mac) and FHA loan limits will be changing starting in the beginning of 2009.  While the limit adjustments have not yet been determined it seems to be certain that if we are comparing these limits to the “pre-stimulus” adjustments than they will all be going up.  When compared with current loan limits most think that some will go down and others up.  The rumors (and I caution this is just rumor, there is no hard facts available yet) are that we will see a minimum increase in all areas to $417,000 (meaning that the lowest ceiling for FHA will be the current standard conforming loan limit) and that high cost areas will have loan amounts to $650,000.

Again, I would expect that there will be further changes coming during 2009 as the political power shifts.  I will keep everyone informed as this information turns from speculation to facts.  In the meantime, the good news is there are options for folks who need jumbo loans now.  Well qualified home buyers in high sale price areas are actually the focus of many portfolio lenders since they are being somewhat left out of the market. We have access to very competitive rates on loans as high as $2,000,000, as always good credit and a down payment are important parts of gaining access to these premium loan products.  Call me with any questions or scenarios.

--Keith

Please visit our website for additional information about our company, loan programs, and helpful tools like mortgage calculators and more: 

 http://www.WStarMortgage.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Appraisals Aren't Just for Banks!

When I was about 9 years old, my grandfather taught me a lesson about what something…anything, is worth.  I had a Ricky Henderson rookie baseball card and I rather proudly showed him the card and declared, “this is worth $45!”  He asked me how I knew that, to which I told him that the Beckett Baseball Card Guide said so.  He gave me a look and immediately changed our plans for the afternoon; we were going to find out what it was really worth.  …of course I said…”Pop-pop, I told you, it’s worth 45 dollars, it says so right here."

We went to the local baseball card store, where he told me to show the man behind the counter my card.  I did, and he told me to ask how much the man would buy it for.  Well, as some of you can imagine, I was not offered the $45 that Becket Baseball Card Guide said it was worth.  Rather, I was offered somewhere around $30, to be honest I don’t remember exactly how much he offered. What I do remember is telling my popup that the man was a crook!  …so he took to me to another card store...  At that card store I was offered even less!  When I said I’d had enough and didn’t want to sell the card anyway, my grandfather offered me a sentence that is probably not new to you all, but was wisdom that I still carry with me to this day; something is only worth what someone is willing to pay for it.

Cute story right? …well, like my grandfather, there was a purpose in taking you through that journey.  I talked to a realtor recently who had a seller that both wanted to sell soon, the property had already been on the market for 6 months, and they wanted to get as much as possible.  Sound familiar?  I’m sure it wont shock you to hear that “as much as possible” in the realtor’s head, was a lower number than what the seller had in their head.

We eventually started talking about the value of ordering an appraisal on the property.  In today’s market, an appraisal can be very important to order early in the game, here’s a few reasons why:

Tightening Credit Standards...not just something you hear about on TV

I’m skipping right past all of this bailout business to get to the stuff that affects us everyday.  I almost feel weird not acknowledging it all so…how bout that bailout!

…ok, now on to the stuff that affects our jobs today.

Last week President Bush spoke on TV and declared what most of us heard as a Financial State of Emergency.  Using words like crisis, panic, and instability, the message was clear that there was about to be some additional government influence in our world.  Currently, the candidates are standing in front of us saying that their opponent, if elected, will make fatal mistakes for this economy.  And everyday, we all show up to work and live with the definition of "tighter credit standards".  If you are a builder, Realtor, underwriter, branch manager, account executive, or loan officer you are seeing and managing through Tighter Credit Standards and you may not even know it.

Have sellers with reasonable prices that can’t find buyers?  ...tighter credit standards.

Trying to sell a house to a Self Employed customer with an 800 fico score and can’t figure out why he’s not ready to close?  … tighter credit standards.

Submit a loan package and get 34 conditions on your approval?  ...tighter credit standards.

Have a lender require 6 comps, a market analysis, and 3 pending sales...then request a second appraisal?   Yup...tighter credit standards.

Update on Jumbo Loans and We're Hiring!

Hi everyone, I know I’ve been absent from the postings a bit the last 2 weeks.  I was at our annual convention last week and between all the awards and compliments I couldn’t find time to write (actually it was 3 days of meetings and hearing about our executive’s golf handicaps).

You’ve all been keeping us so busy that it’s getting harder and harder for me to find time to write.  Mind you, I’m not complaining and we are again actively interviewing for more help.  So, the first part of this, is to ask if any of you know of any well educated loan officers?  As most of you know, we generally like to hire only the hardest working and the most education committed loan officers.  We feel that we’ve had great success with this approach, but it does makes hiring a challenge as there are less of these in the business than ever before.  We offer an industry leading compensation package including 401k, base pay, commission, and health insurance.  If any of you know displaced loan officers or former managers looking to simplify their duties, I hope that you’ll think of us at Eagle Nationwide.

Most of you know that we are very competitive from a rate standpoint and I wanted to bring to your attention a loan that we are seeing used over and over.  Our “Agency Jumbo” loan has been one of the best programs out there for well qualified borrowers.  Thursday of last week I locked an $855,000 purchase at 6% on a 30 year fixed with no points or lender fee’s. 

Yet another FHA MIP/PMI change

It’s getting hard to keep up with the legislatures as they decide what is and isn’t ok for FHA loans.  The most recent update is to the up-front mortgage insurance.

At the end of this, I’ve included a short primer for understanding FHA Mortgage insurance.

I recently wrote to you all about a risk based pricing model that adjusted the cost of the up front insurance on an FHA loan based on the credit score and the loan to value ratio.  Our legislative bodies have now decided that a “one year moratorium” needs to be placed on this concept.

They have opted to change the up front insurance to 1.75% for all borrowers.  If you recall, the previous level was 1.5%, so the net change here is that all borrowers now pay .25% more in up front mortgage insurance.  If you look at the chart from the old premiums, you’ll see that this is the same or an increase from the recent changes for many borrowers and a decrease for only a few. With more well qualified borrowers taking FHA loans, this feels to me like a penalty to them (as much as a half point more in cost now).

• If you have clients that are well qualified and will possibly be going the FHA route, please have them call me now.  I will have their FHA case number assigned which, if done before October 1st, will lock them in to the lower premiums even if they don’t buy a home for several months.

• If you have customers with lower scores, we will be advising them to hold off on having the case number assigned until after October 1st as it will likely save them money (of course we can still pre-approve them and they can even go under contract in the meantime).

Mortgage insurance primer:

There are 2 types of insurance that a home owner pays when they finance a purchase or refinance using an FHA loan; upfront and monthly.

• The upfront is an amount (as explained above now 1.75% for all borrowers) that is added to the balance of a loan and is financed into the loan and monthly payments without effecting the loan to value.  This effectively means that if you put 3% down, you actually only have 1.25% equity the day you buy the house.

• The monthly amount is smaller and is a percentage of the loan amount divided by 12 and tacked onto each payment.  Most borrowers will pay .50 percent (.005 x loan amount/12) if the LTV is less than or equal to 95 percent. For LTVs above 95 percent, annual premiums will be .55 percent of the loan aount. Borrowers of 15 year loans will pay no annual premium if the LTV is less than or equal to 90 percent, and .25 percent if the LTV exceeds 90 percent.

--Keith

http://www.wstarmortgage.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

FHA Expanded -- Officially Available

Drum roll please…

Borrowing money just got easier!!   (I had to actually say that…because it’s the first time this year I can)

I am happy to announce the completion of a multi stage project that I have been working on for the hardest to approve home buyers.  WestStar Mortgage has secured sourcing of 500 Fico FHA loans!  That means that while other lenders are turning down your buyers, we are now able to get those loans closed.  I’m sure you are not all as excited as I am, but this step marks a true expansion of lending guidelines, and we all know how rare that is!  Even more exciting is that we are doing it while other lenders are increasing their minimum fico to 580, 600, and some as high as 640!

Some Details on the program:

• Income Ratios are very important!  We are looking for buyers that can afford their house.

• 2 months of mortgage payments in reserves.  This is not required, but will make the approval much easier.  401k, IRA, 203b, and some pensions can be used!

• Collections accounts, outstanding medical bills, and delinquent credit is ok (with a 500 credit score, this is all expected).

• Judgments must be paid prior to closing.

• Down Payment Assistance can be used!  (For now; that will be changing in the future)

• Rates are very competitive, current rate for a 500 fico borrower with good income and reserves -- 7%.

• Only 30 year fixed will be offered at this time.

Some of you already knew that I was close to completing this and have already sent me a few customers that are now approved.  Others of you are going to have clients that I’ll need to speak with right away, please pass on my information and know that I will take the proper time with each and every one of them.  We started approving these customers yesterday and are very excited about the help we can now extend to you and your clients.

--Keith

http://www.wstarmortgage.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Housing Bill Notables, Part 4

This will be the last in our Housing Bill Series; pretty amazing that 700 pages came down to 4 important paragraphs.

The last, and some would say most important part, is the “cram down” of a loan.  I’ve read and heard a lot of explanations and most (all) of the explanations have been wrong in some way.  I’m going to try to explain this “offer” from the government without inserting my opinion about it, guess we’ll see how that goes…

Part 4: FHA Backed Lender Bailout

 (AKA, the best deal ever written for the government)

The intention of this center piece of the housing bill is to minimize the foreclosure rate.  It acts essentially as a way of offering a “short sale” to the current homeowner.  Well, at least that’s the intention.

The first important note about this is that it is OPTIONAL for the lender to participate.  If the current lender on a mortgage decides that it is in their interest, they will be able to add FHA insurance to a loan given a very specific set of criteria:

Housing Bill Notables, Part 3

Thanks to all of you for the referrals last week, I am glad I could turn so many last minute crises into home closings.  We recently hired more help so we are ready and able to handle all of your challenging cases (we have great rates and incredibly quick turn times for well qualified home buyers too!).

On to part 3: A somewhat well known tax loophole is about to be closed, and if you or your clients own a vacation home or an investment property it may be motivation to sell.

As some of you may know there is a capital gains cost on any profit from the sale of a non-primary residence property.  This tax on the profits could be avoided in the past, however, if the owner moved into the property and called it his/her residence for 1 day.  Rarely, did a property get sold and not have the owner “move-in” for a day.  Effective with the passing of this bill, the reduction to taxes on profits will now be based on how long the owner lived in the property.  One day will provide virtually no tax relief and it will be hard to “fudge” the numbers if you want to get rid of a substantial portion of the taxes.  The profit will now be taxed as ordinary income.  If you have a big profit available in a non qualifying personal residence, now may be a good time to sell even with the market being a little slow.

--Keith

http://www.wstarmortgage.com

**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com

Housing Bill Notables, Part 2

Free money from the government?  (did that sound like an infomercial to everyone?…if you were wondering, I am not wearing a suit with numbers and question marks all over it.)

In Part 2 of the Housing Bill series, we are going to get everyone up to speed on the First Time Home Buyer Tax Credit. (Which is not just for first time home buyers, nor is it really a tax credit.)

First, let’s set the record straight, this is not free money from the government.  Let’s look at who and how much.

Housing Bill Notables, Part 1

Today we’ll start a series of brief updates that will focus on the Housing Bill that was signed into law on Wednesday July 30th.

The bill is 700 pages and I have read enough of it over the last 5 days to make all of our eyes water.  I’ve picked out the items with the biggest and most immediate impact on all of us.  The bill includes a few things that produce challenges as well as a few that produce opportunities.

Part 1: Removal of Down Payment Assistance (DPA) loophole

For quite some time, lobbyists in Washington have been trying to get rid of this program that essentially allows an FHA borrower to buy a house with only $500 coming out of their pocket.  Through some nifty loophole work, a seller could “donate” the 3% down payment to a company that, as a non-profit, qualified as a source for the buyer’s down payment.  This method has been essentially a paper transaction that allowed selling homes with little to no money down and is one of the last ways for a buyer to do so.