The World of Mortgage Blog - According to Kimberly and Cathy

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.

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)

Mortgage Year End Wrap!

Some facts of interest pertaining to mortgage: 

1)       Washington State Housing Finance Commission did sign a new contract with a bank servicer.  Evergreen continues to offer and close on State Bond Down Payment Loans.

2)       Don’t forget the benefits of using the MCC Mortgage Credit Certificate Program.  This give the buyer 20% of the interest they paid on their mortgage back to them at tax time.

3)       FHA 90-day Flipping Rule was only extended till 12/31/2011.  To date, we haven’t received confirmation from FHA that they will extend in to the 2012 year.  This means that if you have an FHA offer, the seller has to be in title of the home for 90 days BEFORE the contact is written up.  We’ll keep you informed of changes.

4)       Investment Purchased are picking up – approximately 35% of the sales.  Couple of reminders:  Buyer must put at least 20% down payment, coming from their OWN money (no gift funds allowed).  Seller can only pay a maximum of 2% toward buyer closing costs.  Buyer must have 6 months reserves on their properties after closing.  If buyer doesn’t have experience with being a landlord, then the buyer must qualify with the full house payment of the rental purchase.

Wishing you prosperity in the 2012 Year!

Tax Credit for First Time Home Buyers

We received a ton of emails from our realtors this past week on how the MCC First Time Buyer Tax Credit Program Works. Many buyers are looking for that extra benefit to purchase, aside from interest rates at record low 4% range. MCC is a program offered through the Washington State Housing Finance Commission (WSHFC). Individual loan officers must be licensed to offer the program, and many haven’t taken the required courses because the loans do require a little more work.

Many of you are aware of WSHFC (nick named State Bond) which offer an assortment of down payment assistance to first time buyers. The MCC program stands for Mortgage Credit Certificate. It gives the buyer a DIRECT TAX credit of 20% of the interest they paid on their mortgage toward a credit of what they owe the IRS.

Example:

Let’s say they finance $200,000 at 4.25%. That’s a standard deduction of $9000 of interest paid for the year on schedule A of the tax return.

Under this MCC program the borrower gets 20% of that $9000 as a tax credit ($1800). This would, of course, be a direct credit against their tax bill. The remaining 80% of the interest deduction/payment goes on the Schedule A.

The true benefit to the borrower: The tax credit is a more direct dollar benefit than a tax deduction reducing a borrower’s taxable income.

Here are the basic details:

€ Must be a first time buyer (if they haven’t owned a home in the past three years they are considered a first time buyer.) If they buy in a ‘targeted area” – as outlined by State Bond - they can also not be qualified as a first time home buyer.

€ Max Sales Price of $475 King and $395K in Pierce County

€ Income Limits based on household size: $97K for 3 people in King, $90K for 3 people in Pierce

€ State Bond will charge the buyer a $695 non-refundable fee on their HUD 1 to originate loan

€ Program can be used with Conventional, FHA, VA

****YOU CAN NOT use the MCC program with the State Bond Down Payment Assist Program. Buyer must have their own funds for down.

Solutions for Recent "Tightening" in Conventional Loan Underwriting Systems

Happy Thanksgiving to you and your family.  Our entire team appreciates the opportunity we have each day to support you in helping people with their home purchases.   

Quick update on a trend we’re seeing… (and some options to keeping the transaction together)

Within the last month Fannie Mae’s underwriting system (DU) has tightened up on their underwriting guidelines.  This is affecting conventional loans with 5% - 10% down payment with high debt-to-income (DTI) ratios.  While you guys aren’t the lender and don’t necessarily know the nitty-gritty details of the loan, you may want to know some of the ‘fixes’ to this issue so if your transaction is affected you can keep things rolling forward.

 Switch to FHA – Rates are a slight bit lower, they allow higher DTIs and the loan has a provision for  ‘assumability’ for the future buyer (a nice bonus in a rising rate environment)

1. Change-up from your standard mortgage insurance options.  Evergreen has partnered with a couple of PMI companies that have some really creative mortgage insurance options that can lower a borrowers overall monthly mortgage payment.  This gets them back in the game!

 

Let us know if there is something we can help you with.  We’re a creative bunch…!

 

Speaking of which…we added our first two “Mortgage Minute” videos to our blog yesterday.  They are about “Should you Pay Points to Buy down your rate?” and “Three ways to Lower your Closing Costs”. 

***Reminder**** High Balance Conforming Loans set to Expire

Why is it important to share this with your Buyers and Sellers in the $450,000 - $600,000 price range?

Each year for the last several years congress has extended the normal loan limits for conventional and FHA loans from $417,000 to a temporary loan limit of $567,500.  While we aren’t 100% sure, we are starting hear very firm talk that the loan limits will not be extended past October 1, 2011.  It’s prudent to make your clients in this price range aware how this would affect their potential purchase or sale.

 

For Sellers:

• Currently buyers can purchase a home for just 3.5% down payment on a home priced up to $588,000 - Lower Fico scores/Lenient Debt-to-income requirements
• If the High Balance loans do disappear on 10/1/11 down payment requirements will increase to at least 10%, with stricter underwriting requirements
• NET AFFECT to Seller:  Fewer number of Buyers may be able to qualify. 
• Discuss with you seller a strategy for this next 30 days to get the home under contract before mid September.

 

For Buyers:

• Take a moment to review their financing with their lender so you understand if they’d be affected by this loan expiration.  If they are, help educate them about the importance of locking in on a home now.
• Try to close by 9/30/11 if possible.  If that’s not possible, check with the lender to check their drop-dead date for closing.

 

As a quick note: Mortgage rates have been a wild ride this week with the ups and downs of the stock market, the European debt issues and discussions over our debt.

New Program and Save Of The Week!

Evergreen launches new 10 year fixed rate mortgage.  Perfect for individuals buying a home that they want to pay off prior to retiring.  The rate today is 3.375% (APR 3.615%).  The monthly payment is almost double that of a 30 year fixed mortgage…but the interest savings over the life of the loan is substantial.  Might be just the ticket for someone.

Update on High Balance mortgages.  (Loan amounts between $417,000 - $567,500).  The Conforming Loan limits are set to revert back to $417,000 on October 31st.    There has been some talk of extending but it appears less likely this time around (congress must vote for the extension).    If it looks like it won’t be extended investors will start to pull back from this product in August.  If you have buyers or sellers that are in this price range, make them aware of this potential pullback.  Without this high balance loan anything over $417,000 will be considered a Jumbo loan with larger down payment requirements.
 

Team Evergreen’s SAVE – OF – THE – WEEK… 

US Citizen lives and works in the Middle East for the last 4 years
Wants to purchase a tri-plex in Seattle as an investment property
Other banks contacted couldn’t lend because the income was made overseas.
We are able to fund the loan as a normal with a written verification of employment and two year’s tax returns.