The World of Mortgage Blog - According to Kimberly and Cathy

Some Nifty Charts On Historical Interest Rates!

We hope these charts provide food for thought for anyone wondering if now is a good time to get off the fence regarding a home purchase or refinance. They are all really good charts but the
last one is a great example for the first time home buyer. 

 

 

A Couple Of Thoughts On Mortgage Interest Rate Trends...

1. The short answer is ‘not much’ (rates are continuing in the mid 3’s) and here is the ‘why’….
   1. Stock market is performing well – this is typically bad news for mortgage interest rates
   2. Concerns over the EU and Cyprus debt woes – this is good news for mortgage interest rates (caused by a flight to the safety of the US bond market)
   3. Our mixed economic news causes a tug-of-war with mortgage rates

                       i.      When we get good news in the economy this generally causes interest rates to go up

                      ii.      Bad unemployment figures, for example, cause rates generally to trend downward

….And the back and forth continues while the interest rates remaining fairly consistent. 

 

Here are a couple of interesting tidbits to pass along:

• The number of underwater mortgages has declined by almost 12% since the peak at the end of 2011
• Freddie Mac predicts that interest rates will likely go lower this spring – and home sales will jump 10% in 2013
• Fannie and Freddie have extended the HARP refi program till 2015 (but they’ve kept in place the requirement that the current mortgage lien must have been purchased by them prior to June 2009 in order to be eligible)

FHA MI Effective 4/1/2013

Short and Sweet:

 

1)       The monthly mortgage insurance will be going up ever so slightly

2)        The monthly mortgage insurance payment will NO longer be removed during the term of the loan – no matter the equity growth over the time.

Financing Options To Hold Together A Deal On A Distressed Property

Good afternoon – We know there are some homes out there that are less than perfect.  Here are some options available for working through DISTRESSED properties:

1.         Easiest option – FHA 203K Streamline rehab loan.

-Get some bids, up to $31,500.  Have the appraiser include it in the value, and add it to the loan amount. 

-Work done after closing.

2.         Another easy option – FHA loan appraiser calls out some work.

-Add the cost of the work into the loan.  Work can’t be more than $5000 and the home must appraise high enough to cover the additional cost.

-Work done after closing. 

3.         Escrow Holdback – only works for cosmetic issues.

-Get three bids and we hold 1.5% in escrow. 

-Work must be completed shortly after closing.

4.         A full 203k (rehab) is another option and they can borrow up to the FHA loan limits in your county.

-Must keep the existing foundation – but the project can be major in scope if needed. 

-If you’ve got a huge construction issue/remodel/repair consider a construction loan. 

-Usually requires 25% down on the home price and funds 100% of the construction cost.

-Buyer can do the work themselves.  Pays monthly interest only payments on the amount drawn.

 

We’re trying to keep this short and sweet so if you have any questions on any one of these options give us a call/email.  Have a great day!

Mortgage Updates....FHA

Lock Interest Rates:

We recommend buyers lock due to an improvement in the labor market.  We have had the third lowest reading in 5 years for American’s filing for first time unemployment benefits…..meaning more jobs.  AND….more jobs mean less pressure to keep rates low.

 

Interesting Fact:

The MBA's research group came out with numbers confirming what Realtors and lenders in several states know: foreign-born ownership demand comprised the majority of all growth in homeownership in the established "gateway" states, California and New York. From 2000-2010 immigrants accounted for 82% and 65%, respectively, of growth in homeowners in those states. In that decade immigrants also accounted for the major share of net growth in owner households in Illinois, New Jersey, Pennsylvania, Massachusetts, Ohio and Michigan. Homeownership and rental demand of foreign-born households will continue to increase as growing numbers of immigrants settle longer in the United States, per the MBA's Immigrant Contributions to Housing Demand in the United States: A Comparison of Recent Decades and Projections to 2020 for the States and Nation.   Info shared via Rob Chrisman Blog

 

FHA Mortgage Insurance Important Dates:

FHA Increase of Mortgage Insurance – Case Number must be assigned before 4/1/13

FHA revision to not remove Mortgage Insurance – Case Number must be assigned before 6/3/13

 

Closing Dates:

We recommend the bank have 30 days to close AFTER the seller/bank and buyer have mutual agreement.

Case Shiller Report from Cathy Pizzini and Kimberly Terry

We hope this Chart helps you get some buyers off the fence!  Give us a call or email if there's anything we can do for you!

Jumbo Loan Financing Options **New Options Available**

With the High end market heating up a bit, we thought it would be timely to share some financing options available from Evergreen Home Loans.  Many of you know that Kimberly and I are licensed in WA, CA and ID so we will include info on all three areas. 

 

If you have a unique property or buyer please give us a call – we’ve got 5 or 6 top-notch Jumbo guidelines that we can pick and choose from to find you the winning combination for your transaction.  Many of these options are internal to our bank (we underwrite internally), some of them are broker relationships we’ve developed….but options we do have. 

 

Generally:

• Buyers need 700 FICO scores (but we have one investor that will go off the primary wage earner’s credit scores and the secondary wage earner can be lower)
• Buyers will need some sort of reserves after closing – these are funds not used for the transaction but are available in an emergency after closing to pay the mortgage
• Buyers will have a minimum down of 10-15%
• Debt-to-income ratios will need to be below 41%-45%

 

Some Funky Stuff:

• Loans over $5M
• Hobby Farms
• Cross Collateralization with other properties – to reduce the down payment on the new purchase
• Using “Pledged Assets” for a portion of the down payment – investment funds don’t have to be liquidated

 

Primary Residence

• Up to 90% LTV (WA/ID) – we have two different NO PMI options available – up to $835,000 price
• Up to 85% LTV (WA/ID)- $1,175,000 price
• Up to 85% LTV (CA) – again, no PMI options are available – to $1,175,000 price

 

Second Homes

• 20% down – multiple different options available

New Home Sales Chart & Mortgage Info!

Download New Home Sales Nov 2012

Above is a recent chart showing the increase of New Home Sales.  Feel free to share with your clients.

On a good note:

HARP Refinances dropped 18.5% in October even with record low rates.  This will be beneficial to all your purchase transactions because you won’t have as much competition for closing with fewer refinances in process.

Side Topic:

Will the Mortgage Forgiveness Debt Relief Act of 2007 be extended by Congress by the end of the year?  If not, homeowners will have to start paying income taxes on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction. That means if someone owes $150,000 on their home and it sells for $100,000 in a foreclosure auction, they could owe taxes on the remaining $50,000. For someone in the 25% tax bracket, that would mean paying $12,500 in taxes on the foreclosure. Similar taxes would apply for amounts that were forgiven in short sales and principal reductions." Attached is the link.  Enjoy the read.

Flipping Rule!

The waiver of this rule has been extended. This is a confusing rule, made more convoluted by varying underwriting “overlays” (or additional requirements) by different banks.  The Flipping rule (prior to the waiver) prohibits the writing of an FHA offer within 90 days of a title transfer by the seller.  Here’s the general scoop accepted by most banks:

• If you write an offer within 90 days of the title transfer by the seller AND there is more than a 20% increase in value, an independent inspection of the property AND 2^nd appraisal will be required.  The increase in value must be addressed to the underwriter’s satisfaction. 
• If you write an offer within 91-180 days AND the value has increased over 100% a 2^nd appraisal is required.
• If you write an offer within 91-180 days AND the value has increased less than 100%, the underwriter retains the right to require additional documentation (including a 2^nd appraisal)

The easiest way to deal with a house affected by this rule is to talk with your lender PRIOR to writing the offer.  This is really difficult to unwind if you accidentally write the offer early but it can be an easy fix if everyone is aware of this rule.

 

Best Tip we can share:  Allow for a 30 to 40 day close date on your purchase & sales contract (allow additional time if the seller is a bank/short sale or Fannie Mae because they require additional time to review the loan docs).  Have you noticed the shift in advertisement for refinances on the radio?  Refi's just won't stop! Nationally, mortgage applications were up over 7% from the previous week for purchase & refi business. I’ve heard of some banks telling clients they can’t start an application until the New Year.  Thank goodness Evergreen currently has a majority of purchase business in our pipeline so the timeframes are down to a minimum, allowing us to still close within 30 days.  If your seller requires a 5 day review of the HUD1, please add those days to your closing date.

 

On a side note:  The Fed has stated that it will keep interest rates low for at least two more years. They will continue to be aggressive in support of the economic recovery. However, the Fed does not directly control long-term rates which determine the cost of home loans and even loans on automobiles. It can influence long-term rates through the purchases of government securities, and is indeed doing so. When the markets perceive that the recovery is picking up steam, it will react accordingly. The day of the release of positive employment figures, we saw long-term rates go up. That does not mean that the economy is out of the woods and that the increase was permanent. It was a reminder that when and if the economy gains strength all bets are off. The recent strength in the real estate market is one factor which can make that happen.

What Can You Do With 2nds?

Today we’ll give you a quick reminder of how you can put 2^nd mortgages to work for your clients to save them some money.   It’s been close to 5 years since the market soured on this loan product….and Evergreen has it back. 

 

Let’s say your client is purchasing around $300,000.  The options with 10% down (for example) would be:

• FHA 10% down – monthly mortgage insurance would be around $270
  • Monthly payments for JUST the P&I + MIP would be $1,346 – rate of 3.25% (APR 4.10%)
  • Conventional with 10% down – monthly mortgage insurance would be around $110 monthly
    • Monthly payments for JUST the P&I + PMI would be $1,201 – rate of 3.5% (APR 4.21%)
    • Or – the new 2^nd mortgage option.
      • Monthly payment on the 1^st and 2^nd loan only –
        • 1^st - $969/month - rate of 3.5% (APR 3.86%)
        • 2^nd - $142/month – rate of 4.84%
        • Total payment of $1,111 AND a savings of about $90 over the next lowest payment. 

 

Then, just for fun.  Assume they are okay with spending that extra $90/month in payment – that would allow them an extra $20,000 in purchasing power. 

 

A few of the 2^nd loan guidelines:

700 credit scores minimum – and no bankruptcy/foreclosure in the last 10 years

Owner occupied properties only

Max loan amount of $350,000

Max combined loan-to-value is 89.99%

Available for Purchase, Refinance AND Cash out refinances