The World of Mortgage Blog - According to Kimberly and Cathy

Summary Of Lending Ideas To Spark A Sale!

With the inventory shrinking a bit, we thought a quick email reminding you of “What’s Working” in this market with regards to financing:

High End

• Up to 90% loan-to-value for a primary residence
  • Max price of $890,000
  • No Monthly mortgage Insurance
  • 5 and 7 year ARM rates very low right now.  In the low 3s.
  • If your client is considering a remodel, can get cash out of up to $200,000 an avoid a construction loan.

Does the House need some Love?

•  203K rehab – max loan amount is FHA loan limit
  • Streamline rehab to about $32,000 of non-structural repairs
  • Work is done after closing
  • Great loan for fixing kitchens, baths, flooring
  • Did the home get abandon prior to completion?
    • We have an investor that will provide construction financing to complete the home
    • We would provide ‘take out’ financing after construction is completed.

First Time Home Buyers

• Remember FHA can be combined with down payment assistance to make it Zero Down
  • Minimum credit scores 620
  • Fannie Mae Homes offering the Home Path program
    • Minimum 3% down.  No mortgage insurance (but higher interest rates on the higher Loan-to-values).  This is a bit more difficult for buyer to get approval on a high LTV. 
    • We have a conventional loan with 5% down payment requirement, with 3% coming from buyer’s own funds and the additional 2% can be from a gift.  This is a good solution for a condo that’s not FHA approved.  

 

Would a GUARANTEED loan from us help get your buyer's offer accepted?

Back in the ‘Old Days’, circa 2007, we always used Evergreen Home Loans “Security + Loan Guarantee” which, in a nut shell says that If for any reason, Evergreen Home Loans fails to close the loan we will pay the seller $1000!  This loan guarantee is subject only to an acceptable appraisal and title report.   Our buyers had a leg-up on the competition when it came to multiple offer situations. 

 

As bank owned homes and short sales took over the market we moved away from this powerful tool.  But we’re pulling it off the shelf! 

 

When it’s a seller’s market, you’ve got to make sure your buyer looks as strong as possible.  Sometimes the highest priced offer doesn’t win the bid…it’s the one the seller and their agent KNOWS is going to close.  

 

Here’s how it works:

• Buyers supply ALL of the required documentation
• We run the complete loan file through our underwriter (not the automated system, but through Judy our underwriter)
• She reviews and signs off on the entire loan file (sans the appraisal and title report)
• You get the guarantee to accompany your offer.
• The seller knows that you have a strong buyer, so YOU get the offer accepted
• We CLOSE FASTER! No hiccups, no mess!

 

It takes about 5 business days to run through this process but the benefit in the end is priceless.  Let us know how we can help. 

Fun Facts about the Real Estate/Mortgage Market

In 2011 investors purchased 1.23 Million homes.  This is up 64% from 2010.

• Investment purchases made up 27% of all the activity in 2011
  • ½ were cash purchases. 
  • ½ were distressed homes
• In a recent survey by Transunion, a troubled homeowner is more likely to let their house payment slip BEFORE they are late on their auto loan or credit cards! Yikes!
  • 9.5% of the troubled homeowners were late on their auto loans and 17.3% were late on their credit cards
  • 40% of them were late on their mortgage.
• In January, more short sales were closed than foreclosures.  This means the banks are agreeing to more deals – good sign!
  • Short sales accounted for 24% of sales
  • Foreclosures accounted for 20% of sales
• The average loan closed in March has a FICO score of 749, and LTV of 77% and a debt-to-income of 35%. – that’s a nice loan. J
  • The average loan denied was a FICO of 699, 85% LTV and a DTI of 43% - this is surprising. 

 

What’s Driving Mortgage Interest Rates?

Mortgage Rates continue to remain low – here’s why. Various European countries continue to struggle with their debt. As they do, US Bonds look more appealing to investors…as they’ve got to park their money somewhere. Mortgage rates benefit when investor’s flock to our bonds. This is likely the largest factor influencing our low mortgage rates these days. When will rates go up: when Europe looks stable and the news comes out that their debt issues have been resolved. Inflation (officially) remains in check. When will rates go up: If (when) inflation takes hold. Those bond holders (holders of mortgage debt) will want a better return on their money once inflation cuts into their margins. Rumors as still swirling about additional Quantitative Easing (QE3) – This is when the Fed buys up mortgage debt. The possibility of this happening keeps mortgage rates low. If the Fed rules it out completely, rates would likely move up.

Programs That Save Deals...

Want to Lower House Payment:  We allow a buyer to buy out of paying monthly Mortgage Insurance….makes the house payment much lower.

 

Low Credit Scores:  FHA will allow 600 minimum score if the buyer has their own 3.5% Down Payment (no gifts)

 

Need $ for Down Payment:  Utilize USDA Zero Down Programs, Utilize State Bond $10,000 Down Payment Assist Funds.  Ask Seller to pay closing costs, or raise the interest rate to cover the closing costs.

 

No Income:  Utilize FHA with parents co-signing on loan.  Try one of our Asset Based loans.  If the buyer has a ton of cash in their own savings. 

 

Stretching Buying Power:  Pay off debts, utilize a 5/1 ARM with lower rates, Get a co-signer on FHA. 

 

Interest Rate update. 

Rates are improving and staying steady because of the possible need for a bailout for Spain. This means investors believe investing in US Treasury Bonds is more safe….making rates good for us all.

 

Financing for Condos, Non-Conforming Condos and Condotels

Financing for Condos, Non-Conforming Condos and Condotels

“Normal” Condo Financing:

€        For new construction/conversion: 70% of units sold or under contract for owner occupied/second homes

€        Existing Projects: NO owner-occupancy ratio requirement if purchasing as an Owner Occupied/2^nd Home. If the subject property is an investment purchase then the owner-occupancy requirement is 51%.

€        100% LTV – through USDA

€        95% LTV – through conventional loan

€        96.5% LTV – through FHA – condo project must be FHA approved

€        Rates are at current market (except conventional loans that have an additional Fannie Mae charge of .75% of the loan amount for condos over 75% LTV)

Home Path Condos

€        If property is classified as a Home Path property, no condo certification or appraisal is required.  So, none of the condo requirements above apply.

€        Rates vary by LTV and credit score

Non-Conforming Condos

€        Defined as: Less than 51% owner occupancy on an investment purchase, over 10% of the units held by one entity, greater than 15% HOA delinquency, some litigation

€        Minimum Loan amount $300,000

€        Max 60% LTV

€        Rates in the 5’s.

€        3 year, 5 year, and 7 year ARMs only

Condotels

Evergreen Home Loans can help under these scenarios:

€        Minimum Loan amount $300,000

€        Max LTV 50% (60% on a case-by-case basis) – so price on the condo would have to be $600,000.

€        Interest Only possible

FHA Changes and Exciting New Programs

Exciting New Programs – We can offer loans with the following situations: 

• Revocable or Irrevocable Trusts. 
• LLC, Partnerships and Corporations
• Job Transfers when job has NOT started.  Just need signed offer letter.
• Foreign Nationals – Requires a sizeable down payment.
• Asset-based loans for people who have a lot of cash and not job income.

FHA Changes: 

FHA buyers need an FHA Case Numbers before April 9, 2012 or they will be subject to the new higher upfront MI fee.  Increasing from 1% to 1.75% upfront MI that is added to buyer’s loan amount.  AND the monthly will increase from 1.15% to 1.25% monthly.  That will increase their monthly payment by approx $17 per month.

Rates Have Dropped For WSHFC Loans

Washington State Housing and Finance Commission have lowered it's rates....

Effective March 2, 2012, for new reservations only:
 

House Key State Bond:

4.00% with 2 points

4.25% with 1 point

4.50% with 0 points

(Inclusive of Origination point) 

(this is a .25% drop in rate from the previous issue)
 

New Home For You:

3.75% with 2 points

4.00% with 1 point

4.25% with 0 points

(Inclusive of Origination point)

Current Timeframes To Lend AFTER Foreclosure, Bankruptcy, Short Sale

Conventional:

Foreclosure:    (Home was given back to the bank – No owner participation) Wait 7 years if they had NO extenuating circumstances, as measured from completion date of foreclosure

Wait 3 years if they had extenuating circumstances* AND 10% Down Payment.  Primary home purchase and limited cash out refi.  No non-owner or second homes purchase or refi allowed.

Short Sale:  (Home was sold but price couldn’t cover the amount owed)  Also known as a Deed in Lieu of Foreclosure.  Wait 2 years with 20% Down Payment, OR wait 4 years with 10% Down Payment, OR wait 7 years for less than 10% Down Payment.  Potentially can wait 2 years with extenuating circumstance* and 10% Down Payment

Bankruptcy 7:   (Client doesn’t pay back any of the debts owing)  Wait 4 years,  Potentially wait 2 years with extenuating circumstances

Bankruptcy 13: (Client pays back all the debts owing on a monthly scheduled payment plan)  If discharged (paid all the debts in full) it’s only 2 year wait, if dismissed (not completed the pay back of all debts) then wait 4 years before purchase of new home.

FHA: 

Foreclosure:    (Home was given back to the bank – No owner participation)

Wait 3 years

Short Sale:      (Home was sold but price couldn’t cover the amount owed)   Also known as a Deed in Lieu of Foreclosure

If buyer has had no mortgage late payment leading up to short sale or no other late payments on revolving/car/installment debts leading up to the short sale AND they are did not take advantage of a declining value market, they can be approved right away.  Other wise, they have to wait 3 years OR have extenuating circumstance to purchase before 3 years.

Bankruptcy 7:   Wait 2 years with logical reason for Bankruptcy and have reestablished credit

Bankruptcy 13: Need to show they have 12 month history of bankruptcy payments on time, qualify with Bankruptcy payments in debt to income ratio AND the Bankruptcy judge must give permission to purchase a new home in writing.

VA:

Foreclosure:    (Home was given back to the bank – No owner participation)

Wait 2 years

Short Sale:      (Home was sold but price couldn’t cover the amount owed)   Also known as a Deed in Lieu of Foreclosure

If buyer has had no mortgage late payment leading up to short sale or no other late payments on revolving/car/installment debts leading up to the short sale AND they are did not take advantage of a declining value market, they can be approved right away.  Other wise, they have to wait 3 years OR have extenuating circumstance* to purchase before 3 years.

Bankruptcy 7:   2 years with logical reason for bankruptcy and have reestablished credit

Bankruptcy 13: Need to show they have 12 month history of bankruptcy payments on time, qualify with Bankruptcy payments in debt to income ratio AND the Bankruptcy judge must give permission to purchase a new home in writing.

                                                                     

Mortgage Market Forecast for 2012

Happy New Year to you and your family!

 

Many of you are familiar with Barry Habib of the Mortgage Market Guide – he provides us daily updates on the stock and bond market as well as events happening around the whole that impact mortgage rates.  It helps us tremendously in our efforts to guide our clients in interest rate lock/float decisions.  The following is a summary of his forecast for 2012.  If any of you would like more information we’re happy to talk through this in greater detail.  His forecast is 8 pages long…we’ll try to be a bit more brief.  J

 

Events that will likely affect interest rates in 2012

€        The European Debt situation – This is an enormously important issue for the world in general but it’s specifically interesting for us in the real estate/mortgage industry as it could have a significant impact on mortgage interest rates.  As The European nations continue to struggle, our mortgage interest rates benefit.  As Barry put it in the forecast, “we’re still the cleanest shirt in the dirty laundry”.  As a result, investors looking for a safe place to put their money are flocking to our bonds.  This helps mortgage rates.

€        Unemployment Rate - He forecasts that unemployment will continue “north of 8% throughout 2012” with more gains in the private sector offsetting losses in government jobs.  With little change in this rate, it won’t be a driver of interest rates for 2012.

€        Quantitative Easing 3 (QE3): The Fed is considering another round of QE under the guise of helping to boost the housing market.  When QE2 was announced (in 2010), rates went down on the rumor but once the program started actually went up.  The current rumor is that there is a 50/50 chance of this happening in the spring - So, rates should currently be benefiting by this rumor for another several months. 

€        The Housing Market forecast:

• o        Delinquency rates have declined and they will continue to do so. 
• o        Home prices will likely decline modestly (1 to 2%) in the first ½ of 2012 and then recover in the 2^nd 1/2  
• o        Rental/Investment properties will make up a larger portion of the market in 2012

 

Interest Rate Forecast

€        He sees interest rates moving ‘a leg’ lower in the first part of 2012 as QE3 rumors swirl

€        These lower rates, as we talked about above, would likely quickly reverse after QE3 actually gets implemented.

€        If the Fed doesn’t do QE3, rates will continue to be attractive through the first part of the year, moving a bit higher towards the end of 2012 as the economy picks up.

€        Rates may dip down near 3.5% and rise somewhere in the mid-to-high 4’s in 2012 but not likely higher than that unless inflation starts to spike higher. 

 

We find this whole topic fascinating, but understand that not everyone does…so we’ll leave it there.  If you’d like have a deeper understanding of how any of the issues above may affect the real estate/mortgage market give us a call.