Archive for May, 2009

Hard to say goodbye

May 28, 2009

Sometimes we just don’t know how good something is until it’s too late. Gone are the days of no credit requirements for FHA loans, and it appears the requirements will only get tighter.

Once upon a time, borrowers with bad or no credit turned to FHA loans to buy a home.  FHA did not have minimum credit score requirements and even allowed non-traditional forms of credit such as rent and/or utility payments, college tuition payments, etc. 

Today most FHA programs require a minimum credit score of 620 with a negative rate adjustment for credit scores under 660.

How long will it be before FHA minimum score is 660?!?  Think that sounds crazy? Who would have thought there would have been any credit requirements for FHA loans two years ago?

It is hard to say goodbye to great things, but at least this is a feeling we can all relate to in life. We’re in this together!

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

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Watershed moments

May 27, 2009

Historical events all have a starting point…

– July 4, 1776: signing of the Declaration of Independence

– June 6, 1944: D-Day

– July 20, 1969: first steps on the moon

– November 4, 2008: Obama elected as President of the US

– May 27, 2009:  the bursting of the historically low interest rate bubble?

While the last date doesn’t exactly carry the significant historical importance of the other dates, May 27th could be the beginning of the end to the refinance bubble.

Before we get too carried away, know that tates are still historically low. That said, today’s events have pushed rates up to 8 week highs and that trend looks to continue over the short-run.

What’s catastrophic event is causing this swing in rates?  It isn’t what you would expect… good economic news.  Yeah, that’s right, good news is causing it!  Consumer confidence is up.  Consumer spending is up. There are signs the recession is coming to an end, and all of this good news is actually bad news for interest rates.

Will rates continue to climb?  Possibly… the economy has been in dire straits for quite some time. Any positive signs the down turn is ending will have a dramatic effect on rates as the markets seem to be overreacting to any good news. 

This could all change with another bad jobs report, poor economic news, etc.  Even so, refinance booms and low rates don’t last forever.  I’m not saying 6% is just around the corner, but 4% rates may soon be a thing of the past. 

big+bubble+burst+1

If you are considering refinancing your mortgage and are waiting for the right time, now is the time to talk to someone about your options.  People always miss out beacuse they wait too long to get started.  Don’t be one of them!

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

Buy a home with a $100 down payment

May 11, 2009

Yes, you read that correctly.  Regardless of what you may hear in the news (must have a 20% down payment), there are homes available to buy with only a $100 down payment.  All a potential buyer needs is $100 for the down payment, 600+ credit score, the home must be their primary residence, and well, a pulse!

For more details on the program, you can go to HUD’s website here.  For a quick look at some of the highlights:

– The home must be owned by HUD and requires an FHA loan to purchase the property.

– Buyer must give a full price offer on the home.

– Provisions are made to offset some (if not all) of the closing costs.

The pros to this program are obvious – a home buyer only needs $100 for a down payment and can use an FHA loan (with flexible credit qualifying) to buy the home.

The biggest downside to this program is location, location, location.  The only properties eligible for the program must be owned by HUD.  This makes targeting a home with a certain number of beds/baths, a specific neighborhood, or school district a little more difficult.  It just depends on what is available.

Interested?  If so, you need to find see the homes available. To do that, try this link.  If you are in Georgia, go here.

Don’t believe everything you see on TV or read on the internet.  You don’t need a 20% down payment to qualify for a mortgage.  Homes can be purchased for as little as $100 down through this special FHA program.  Generally, FHA loans only require a 3.5% down payment, and conventional loans only need 5% down.  That is a far cry from the “20% needed” you may hear on the news!

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

A bit of a letdown

May 8, 2009

In a post from March, I mentioned the high expectations for the most recent stimulus bill, but was a little cautious of how it would be implemented.   You know how it goes.  You get hyped up to see a movie, a play, a ballgame, etc., and it just doesn’t live up to your expectations.

You can apply that same concept to one of the provisions in the stimulus bill – the one that was designed to help home owners who are underwater.

The premise of the refinance plan allowed home owners to refinance their homes up to 105% of its current value.  That sounds great, but it may not be working out quite as well as anticipated.

– loans that currently have Private Mortgage Insurance (PMI) are not eligible for the program.  Mortgage servicer companies are not allowing loans with PMI to be transferred by refinance to another mortgage servicer.

– that would be an easy hurdle to pass if PMI companies would provide coverage for these new loans up to 105%, but they are not. The max coverage in the state of Georgia is 95%. Without PMI companies providing the coverage, banks won’t allow the loans.

– anyone with a first and second mortgage probably does not have PMI on the first mortgage.  That makes the first mortgage eligible for the program and there is no limit on the Total Loan to Value (TLTV) from the stimulus bill.  The TLTV is figured by combining the first and second mortgage and dividing that number by the value of the home. 

The problem here is that second mortgage companies MUST agree to the terms of the new first mortgage, and on average, current guidelines set by second mortgage companies will not allow the TLTV to exceed 90%. 

If there is a second mortgage on the home, it will most likely need to be paid down in order to qualify to refinance the first mortgage.

– some home owners may have a TLTV on the first and second mortgage below the 105% limit, but the refinance plan only allows the first mortgage to be refinanced.  This reverts us back to the previous problem of getting the second mortgage company to agree to the terms of the new first mortgage.

While this portion of the plan sounded great in its construction and approval phase, its application is a bit frustrating.  It seems the plan really only applies to home owners who put 20% down when they bought their home (so there was no PMIon the loan) or to a home owner that has already paid off their second mortgage.

That is all well and good, but those two groups weren’t exactly the targets the bill had in mind.  There are rumors of modifying the stimulus bill to help more home owners qualify, but how long that takes remains to be seen.

Clay Jeffreysis a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

A rehab loan gaining momentum

May 7, 2009

We all know there are numerous bank-owned properties available to buy.  We also know that foreclosed homes can be in need of repairs.  What options do borrowers have to buy a home in need of repairs?

Of course the borrower can always pay for the repairs out of pocket, but not everyone has that kind of cash just lying around.  Once upon a time, it was easier to obtain a rehab loan, but those loans are riskier.  In this market, anything “risky” is hard to get and fewer banks offer these loans.

However, there is a loan program that borrowers can use to purchase AND repair/remodel a home.  This program is more readily available because it is backed by the Federal Government. What is it? — an FHA 203k Streamline loan.

With this program, borrowers can acquire money to not only purchase the home, but also repair and modernize the home.  Here are some of the program highlights:

– The basics requirements of the loan are the same as a typical FHA loan. Borrowers must have a 620+ credit score (640+ with some lenders), a 3.5% down payment, and their debt to income ratio can’t exceed 31% on the front end.

– Borrowers can add up to $35,000 to the purchase price in order to make improvements to the home (must have 10% contingency reserve)

– Improvements can include anything from new appliances, updating the kitchen, to building a deck, and even landscaping.  They main thing to remember is the improvement/addition must be a permanent part of the home.

– That said, none of the renovations can involve structural changes to the home (can’t knock out walls, add walls, or even repair existing structural damage)

– “Luxury” items are not eligible for this loan program.  Think something extravagant, like a $5,000 custom made iron front door.

– An additional $8,000 can be added to the $35,000 if you choose to couple the 203k Streamline loan with the Energy Efficient Mortgage program (giving you a total of $43,000 for repairs/remodeling).

– Borrowers can add up to 6 months of mortgage payments into the loan amount so long as they are NOT living in the home while repairs occur.

After reading this list, it is easy to see why borrowers would be interested in a loan program like this.  Banks owning foreclosed homes are also warming up to it because they know most of the homes they now own are in need of some repairs.

For more information, you can check out some information from HUD.gov here and here, or feel free to contact me.

In conclusion, if you are looking at homes and find something that needs some TLC and you have enough for a 3.5% down payment (or can get this as a gift from an approved source), this just may be the loan program for you!

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

What is today’s rate?

May 6, 2009
After a long hiatus,  A Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile is back and here to answer a very common question these days…
 
“What is today’s rate?”
 
Rates are low, historically low and many people are taking advantage of these rates and refinancing their existing mortgages.  Even with the unprecedented number of refinances taking place, there are still many people sitting and waiting for a better rate.  Here are a couple of things to consider.
 
– If you know you want to refinance, go ahead and start the process now but not lock in the interest rate.  When the loan is approved, you can then lock the rate and take advantage of a shorter rate lock window (say 12 or 15 days) which is at least 0.250% lower than a 45 day rate lock.  For more details, see this previous post.
 
– If you want to continue to wait to lock in a 45 day rate lock, keep this in mind. The longer you wait, the more you may be missing out.  For instance, today rates for a 45 day rate lock are 4.75%. If you are thinking about passing up 4.75% to wait for 4.5%, I would consider the math.  For each month you wait for lower rates, you are passing up the opportunity to save $$ each month.  Let’s say you are going to save $200 per month by refinancing; if you wind up waiting 6 months to refinance, you have lost $1,200 just in the time spent waiting and watching . . . all in an effort to hopefully save an additional $30 per month (0.25% for a $200,000 mortgage is about $30 per month).  And the cost of waiting the 6 months will now take 40 months to recoup at the extra $30 you have saved.  Of course, this example assumes that interest rates will still be at their all-time historic lows when you are ready to move forward.
 
Bottom line… if you know you want to refinance and take advantage of these historic rates, at least go ahead and start the process today.  You can lock in at any time, and by at least getting “in line” for underwriting, you ensure that if rates to hedge up, you won’t completely miss out.  Every time there is a refinance boom, people miss it because they continue to wait for the rate to improve. 
 
For what it is worth, I’ve already refinanced not wanting this opportunity to slip away.  I know this sounds like a stereotypical “used care salesman”, but truly, these low rates won’t be here forever.
used-car-salesman

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.