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.  

 

Focus On Listings!

Happy Friday

Yesterday Evergreen Home Loans celebrated our 25^th Anniversary with a little campaign and… reflection!  Each year has its own challenges.    Right now it’s LACK OF GOOD INVENTORY for you all to sell.  

The owner of our company, Don Burton said that as a young realtor in the 1980s he didn’t know anything about why high interest rates would make it difficult to sell homes.  He had a strategy for focusing on where the business is and letting the rest go: 

“Pick up the Quarters and Dimes… Leave the nickels and pennies”

The “Quarters” right now are listings:

• Sellers that have equity in their homes
  • Check out neighborhoods that have had recent sales that bring values back up.  One of the guys in our company bought a home at the height of the market in a new neighborhood.  Values have of course dropped since then, but recently a home sold in the area at a price comparable to about what he bought his home for….don’t you know, a couple weeks later 2 more ‘for sale’ signs popped up in his neighborhood.  Be that listing agent.
  • Divorces – align yourself with a family practice attorney or two.  Their clients will likely need to sell their home.
  • New Babies/recent marriages – talk to your past clients.  Whether it’s them, or their kids/friends kids someone might need more space. 

While many lenders are focusing on the new HARP2.0 loan right now,  we’re focused on our purchase business…last year it was 82% of our closings.  Let us know what we can do to help you. 

Rates are still ridiculously low, with no signs of reversing that trend.    

Interest Rate Charts And More!!

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)