Wednesday, July 14, 2010
7/14/2010 04:47:00 PM | Posted by
Arbor Mortgage
Technically, the news about the Fannie Mae Loan Quality Initiative is not new. In fact, it’s pretty darn old; being first announced in February of 2010. But, a big “to-do” is still being made over it since its implementation on June 1, 2010. The section that has every one up in arms is “undisclosed liabilities”. This is FNMA’s way of shifting some of the responsibility for a loan’s performance to the lender, by requiring that the lender verify that all the borrower debts have been disclosed in the loan file.
This means that the lender has to double check to be sure that you didn’t get a new car loan or increase the balance on an existing credit card. If anything material changed on the credit profile before closing, the lender will be on the hook for that loan.
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Thursday, July 8, 2010
One of the most confusing parts of the home loan process these days is the appraisal. There have been so many changes in guidelines and legislation that you practically need an advanced degree just to figure out who is even ALLOWED to appraise your home.
Let’s start with the basics:
What is an appraisal?
An appraisal is a professional appraiser’s opinion of the current market value of a home. An appraisal performed for a mortgage transaction will often involve a physical inspection of the subject property. The appraiser will collect and analyze local real estate sales data along with your property information; including condition, prior sales information, sales contract data, and other pertinent property information. The appraiser is not a home inspector and will only be inspecting the home for the purpose of concluding an opinion of value for your lender.
Why do I need an appraisal?
Every mortgage lender requires an appraisal when lending money on real property. The most common appraisals are the full physical inspections mentioned above. The appraiser not only determines an opinion of market value, but they also inspect the property for adherence to specific loan program guidelines. For example, FHA appraisals have additional rules that conventional appraisals do not.
Who picks the appraiser?
The appraiser is always chosen by the lender. Recent legislation requires that someone not within the loan origination process (i.e. – not the loan officer) to order the appraisal. Many banks and lenders have interpreted this law in a way that causes them to use third party Appraisal Management Companies (AMC) to order their appraisals. This often raises the price (to pay the middle man) and lowers the quality of the appraisal (AMC’s generally pay appraisers less and choose outside the geographic area).
Some lenders, like Arbor Mortgage, have an internal appraisal ordering system separate from the loan originators that orders from a specified list of appraisers local to your market. Always use a lender that utilizes an internal system to order appraisals, instead of outsourcing it. Appraisals that are managed by internal systems generally have lower costs, faster turn times, and higher quality.
How long does an appraisal take?
There is no one size fits all answer for the turn-around time on an appraisal. Each appraisal has its own level of complexity that will affect the amount of time it takes to complete. For a suburban area, with a common style home, it should take 3-5 days to receive an appraisal after inspection. For more rural areas or unique properties it can take a little longer.
What happens if my appraisal is too low?
In today’s market, many appraisals are falling short of contract prices. For a home buyer, this is not the end of the world. While it will take additional work and negotiation, this can actually be a GOOD thing. The appraiser is there to make sure that the contract price is a fair price, based on comparable local sales. If recent sales in the area are much less, than the last thing you want to do is overpay. Having the appraiser come back with a lower value gives you an opportunity to negotiate a lower purchase price with seller, potentially saving you thousands.
That’s not to say that all sellers will agree to a lower price. In some cases the seller may refuse, or even ask the buyer to bring the difference. But, that is the your choice, since most contracts have an appraisal contingency that allow you to walk away from the sale if the appraisal falls short of the agreed upon sales price.
For other questions about appraisals or the home buying process, Contact Us.
Tuesday, June 29, 2010
With the mortgage market tightening up over the last couple of years, many people think their only down payment option for a new home is 20% or more. That couldn’t be further from the truth. Surprisingly, there are many options for low down payment loans.
Zero – That’s right, $0 – down loans
Didn’t zero down loans go away with the mortgage meltdown? No way, there are still some terrific zero down programs available.
USDA Rural Development – The United States Department of Agriculture has a Rural Development loan product that is truly zero down. USDA loans come in 2 flavors – Guaranteed and Direct. The Direct program is for low income buyers and is only available through the USDA offices. The Guaranteed program is available through mortgage lenders or brokers and is for low-moderate income families purchasing in rural/semi-rural areas. Aside from not requiring a down payment, these loans have many other advantages. There is no monthly mortgage insurance, interest rates are very low, and the areas of rural eligibility are very liberal.
Tuesday, June 22, 2010
Raise your hand if you've ever received the dreaded "Escrow Analysis" from your mortgage lender? I see it, dozens, hundreds, no thousands of hands are raising right now.
It usually comes once a year and describes which bills, tax and insurance, were paid out of your escrow account and how much money was put into your escrow account each month. Inevitably, there wasn't enough money to cover those bills and keep a cushion, so now your mortgage company is {gasp} raising your payment!
Thursday, June 17, 2010
The web is just abuzz today with reports that the Homebuyer Tax Credit has been extended. This is not quite true. In fact, it’s downright misleading. In the first case, the issue on the table is extending the deadline for those already in contract to still be eligible. It would not allow new buyers to take advantage of any credits. Second, it was not approved.
The original proposal, which would extend the deadline for those with executed contracts before April 30, would give until September 30, 2010 to close their loans; extending it 3 months. The Senate actually voted AGAINST it. They did, however, accept it as an Amendment to the Tax Extenders Bill. The Senate Finance Committee just has to rework the proposal, and any amendments will stand, as long as the reworked proposal is approved.
What does this mean for you? This means that if you entered contract on a home before April 30, you could have up until September 30 to close your transaction. For those waiting bank responses on short sales, this is a big relief. Those transactions typically take much longer and are out of the buyer’s hands. It does not change the deadline of April 30 for the contract date. If you don’t have a contract now, you won’t be eligible for a tax credit.
The proposal is likely to be approved with the new amendment, but the House will have to reconsider the new amendment and agree to the final version. It’s hoped that this will be resolved by July 2.
Tuesday, June 15, 2010
On June 10, the House of Representatives passed the Federal Housing Administration Reform Act (HR 5072) in a practically unanimous vote of 406-4. This law is intended to boost the reserves held by the FHA, which now insures roughly a third of the nation's mortgages.
This vote just finishes what was started back in April 2010, when the up front mortgage insurance was increased from 1.75% to 2.25%. The passage of the bill allows FHA to increase the annual mortgage insurance premium, which is paid monthly, from .50% or .55% to 1.5% maximum. However, FHA says they only intend to raise it to .9% at this time.
Wednesday, June 9, 2010
If you don’t know anyone in the real estate business, how do you choose a real estate agent? It doesn’t have to be a drawn out process. Try these easy steps:
- Start by asking friends or family for a personal referral. If you know someone has had a good experience with a person, chances are good you will, too. If you can’t find a personal referral, speak to your loan officer about a referral. Arbor Mortgage has a list of Preferred Real Estate Agents all over the state of Michigan. Try to interview a couple of agents to find a good fit.
Tuesday, June 1, 2010
The most stressful step for a first time home buyer is often the first one. Where do you start the home buying process? It’s not as daunting as it seems. Let’s walk through the home buying process step by step.
Step 1 – Become Pre-Approved for Financing
Many new home buyers make the mistake of looking at homes first, before becoming pre-approved for financing. They could spend countless hours finding just the right home, only to find out they don’t qualify for a home loan. For this reason, many real estate agents won’t even start working with a client until they know that they can be approved for a mortgage.
Your first phone call should always be to a trusted financing source. Many people ask, “How do I pick a lender?” Start by asking your friends and family for a referral to someone they have worked with successfully. Try getting at least 3 options, and then research those companies. Be sure to call them all on the same day for quotes when you’re ready to be pre-approved. Calling them the same day solves two problems; it ensures that you are getting “apples to apples” pricing from each (since pricing changes every day) and it ensures that your credit pulls will all be grouped together and only count as 1 mortgage pull. If you don’t have any friends or family that can refer you to someone, you can still check online or your phone book; just be sure to research the company with places like the Better Business Bureau.
Step 2 – Choose a Buyer’s Agent
Friday, May 28, 2010
Breaking News! (again)
The USDA is back to issuing conditional commitments on loans. The Emergency Supplemental Appropriations bill passed on 5/27, giving up to $2.5 billion in funds to the program. However, the bill referring to the program itself has not yet been addressed in the Senate, so we aren't sure what the actual Guarantee Fee will be. The majority assumption for the time being, seems to be 3.5%.
Stay tuned....
Wednesday, May 12, 2010
UPDATE: 5/25 - Senate convenes today at 10:00 am for consideration of HR 4899, Emergency Supplemental Appropriations
UPDATE: 5/14 - Funds are now officially exhausted for this program and there is STILL no further guidance.
UPDATE: 5/12 - USDA recalled their announcement to continue issuing conditional commitments in the wake of fund exhaustion. Their bulletin states that new guidance will be issued within 24-48 hours of that date. Back to the waiting game!
Funds for the USDA RD Guarantee program are likely exhausted today (or will be shortly). No word on the bill in the Senate to increase funding to the program. The good news is that on May 11, 2010, the USDA National Office released a statement authorizing the issuance of Conditional Commitments for the Single Family Guaranteed Loan Program. The Commitments will be issued "subject to the availability of funds and Congressional Authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans".
UPDATE: 5/14 - Funds are now officially exhausted for this program and there is STILL no further guidance.
UPDATE: 5/12 - USDA recalled their announcement to continue issuing conditional commitments in the wake of fund exhaustion. Their bulletin states that new guidance will be issued within 24-48 hours of that date. Back to the waiting game!
Funds for the USDA RD Guarantee program are likely exhausted today (or will be shortly). No word on the bill in the Senate to increase funding to the program. The good news is that on May 11, 2010, the USDA National Office released a statement authorizing the issuance of Conditional Commitments for the Single Family Guaranteed Loan Program. The Commitments will be issued "subject to the availability of funds and Congressional Authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans".
What this means is that the Rural Development offices will continue to accept applications and issue commitments. Lenders can continue to close and fund these loans with those commitments. RD will "obligate" funds for those loans when they become available, as long as Congress authorizes the increase in funds and fees.
The big change here, of course, is the increase in Guarantee Fee to 3.5%. This was certainly expected based on the bill currently in the Senate, but now we're seeing it right from the horse's mouth - RD. Anyone who hasn't closed their RD loan yet, will be paying more for the program. It still is a small price to pay for a 0 down payment loan program with no mortgage insurance.
For more information on the USDA Rural Development loan program, Contact Us.
Wednesday, April 28, 2010
One of the best, and most under appreciated, home purchase loans today is the USDA Rural Development Section 502 Guaranteed loan. This program is a $0 down purchase loan intended for rural America. These loans are for buyers with low to moderate income that are purchasing homes that fall within the USDA’s rural maps. The maps happen to be very outdated, meaning that there are many places you or I wouldn’t consider rural, that actually qualify for 100% financing.These loans aren’t just great for buyers, but for lenders, too. The lender funds the loan, but the USDA Guarantees it up to 90% of the original loan amount – that’s far and away better than conventional mortgage insurance. Guarantee funds aren’t unlimited, though. In the past, it has taken an act of Congress each year to appropriate funds for the program.
With credit becoming tighter every day, more and more people are turning to this (used to be) little know loan product to secure $0 down financing. As a result, those congressionally appointed funds are running out faster and faster. In 2009, the program ran out of funds midyear, only to be funded again by the stimulus package. Funds are again running low and are not expected to be available past May. Many lenders stopped taking applications a month ago, in anticipation of the funds being drained, with no hope for Congress to step in.
Luckily, there has been a new bill introduced to turn the USDA into a self funded program. H.R. 5017 has already been approved by the House of Representatives, but has not yet been introduced in the Senate. The bill authorizes up to $30 billion in loans during the 2010 fiscal year. In order to make the program self-funded, the Guarantee fee, paid by the home buyer, would be increased from 2% to as much as 4%. While this is a hefty fee increase, this is one of few programs with no monthly mortgage insurance, even at 100% financing.
This bill is more important than ever, because this loan program aids an under served community. Lower income families in rural communities often have less financing options than those in urban areas. This program is also the only option for many people to secure 100% financing. Loan guidelines allow buyers to finance their closing costs and even appliance purchases up to the appraised value of the home. There is no other loan program like it.
For more information on USDA Rural Development loans, Contact Us.
Tuesday, April 20, 2010
Everyone understands that a foreclosure is bad for your credit. But, how bad? How long before someone will lend to you again? There’s a common misconception that it needs to fall off your credit report all together, which could take 7-10 years. Good news is the wait is actually much shorter than that.
Foreclosure/Short Sale Waiting Periods
Event | Wait for FHA | Wait for VA | Wait for Fannie Mae (FNMA) |
Foreclosure | 3 years | 2 years | 5 years |
Short Sale | 3 years (if late pays) No wait (if no late pays) | 2 years | 2 years (w/ 20% down) 4 years (w/ 10% down) 7 years (w/ less than 10% down) |
**These guidelines are as of the day posted, and are subject to change at any time without notice | |||
Exceptions can be made to gain an approval in a lesser period of time if the foreclosure event was due to extenuating circumstances beyond a borrower’s control. Death of a wage earner, or severe medical issue could possibly fall under that category. Whatever the event, be sure it’s well documented and that your current credit is in good standing.
Monday, April 12, 2010
Divorce is a rough time for anyone; causing squabbles over the tiniest of details. The home and mortgage, however, is not a tiny detail. It is likely the largest debt in play. If both spouse’s names are on a mortgage how do you remove the other spouse’s liability?
It is a common misunderstanding that if the marital home is awarded to one spouse in a divorce, the other spouse is free and clear of that debt. Not true at all. Even if you remove a name from title of the home, if that person is still on the mortgage note, they are still responsible for that debt. This means that the mortgage will remain on both credit reports making it near impossible for the other spouse to obtain a new mortgage. Or, even worse, if one spouse stops paying the mortgage, it will damage BOTH credit ratings.
Tuesday, April 6, 2010
Effective February 1, 2010, HUD has suspended the rule that prevented a buyer from obtaining FHA financing on a home which had been owned by a seller for less than 90 days. This guideline was commonly called “the anti-flip rule”. This suspension of the rule or “flipping waiver” is valid for 12 months and is a boon for real estate investors because they can now turn their flips much more quickly by opening up the huge pool of FHA buyers.
Now, this may seem like old news – it’s April already, and this has been out for 2 months. Yet, the lending canvas has been strangely silent on it. Many lenders just aren’t allowing it. They are refusing to honor the flip waivers, because they see the limited time the seller owns the home as a large risk, and possibly an easy area for fraud.
Wednesday, March 31, 2010
The most common question we get at Arbor Mortgage is “Can I even get a loan?”. Mortgage loans are about the 3 C’s – Credit, Capacity and Collateral. Collateral, or the home being secured by the loan, is most often not in the client’s control. Credit and Capacity (or ability to pay/income), however, are in the client’s control. So, let’s talk about what YOU can do to make yourself approvable.
Credit
Most lenders are requiring at least a 620 credit score in order to obtain a mortgage loan. 620 is not a magic number, though. Lenders are still looking at the actual credit history as well. It’s important to have at least 1 year “clean”; meaning no late payments in the last year. If there are late payments in the last year, be prepared to explain and document them.
Tuesday, March 23, 2010
Many will argue that the biggest problem affecting mortgage lending today is declining property values. According to First American Core Logic’s Negative Equity report, more than 1 and 4 families are underwater on their mortgage; meaning that they owe more than the property is worth. Michigan is actually fourth in the nation with 38.5% of mortgages underwater. These are the same people that are struggling with today’s other problems; unemployment and underemployment. At a time when home owner’s need lower payments to survive, and the interest rates are actually low enough to make that happen, people think they will never get approved because their home value is diminished.
This is simply not true. Cue “short refinance”, with the glowing white light and “hallelujah” chorus. What is a “short refinance”? Much like a short sale, it’s when a bank or lending institution takes less than the full balance of the loan as payment in full. In the case of a refinance, they provide a payoff to the new lender for the lesser balance and they write off the difference.
Tuesday, January 26, 2010
On January 20, 2010 the Federal Housing Administration (FHA) commissioner David Stevens announced a set of policy changes that will tighten the qualifications even further, making it even harder to obtain a government backed mortgage.
The first change to take effect will be the increase in mortgage insurance premium (MIP). The increase is to build up the agency’s reserves. On April 5, 2010, the premium will increase from 1.75% to 2.25% of the loan amount for single family programs with certain exceptions. This adds $500 to every $100,000 of mortgage loan to a borrower’s closing costs.
Another proposed change requires a minimum credit score for FHA’s 3.5% down payment program. If a buyer has less than a 580 credit score, a down payment of up to 10% may be necessary. According to the Department of Housing and Urban Development (press release HUD No. 10-016), “This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer”.
The first change to take effect will be the increase in mortgage insurance premium (MIP). The increase is to build up the agency’s reserves. On April 5, 2010, the premium will increase from 1.75% to 2.25% of the loan amount for single family programs with certain exceptions. This adds $500 to every $100,000 of mortgage loan to a borrower’s closing costs.
Another proposed change requires a minimum credit score for FHA’s 3.5% down payment program. If a buyer has less than a 580 credit score, a down payment of up to 10% may be necessary. According to the Department of Housing and Urban Development (press release HUD No. 10-016), “This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer”.
Tuesday, December 22, 2009
1. Know what factors determine an interest rate:
Credit Score
The first thing any lender looks at is your credit scores. Most mortgage lenders pull a tri-merge credit report. This is a credit report that shows all 3 major credit bureau scores. Lenders use the middle of those three scores to determine your qualifications. The higher the credit score, the lower the interest rate. To qualify for conventional or government loan programs, you’ll want to have greater than a 620 middle score. FHA pricing doesn’t vary much by score, but conventional loan pricing can vary wildly. For the very best rates, you’ll want to have a 740 middle score or better. To find out where you stand, start with getting your own free credit report at www.annualcreditreport.com. This report won’t give you the scores, though. For that, www.myfico.com has the closest model to the report mortgage lenders pull.
Friday, December 18, 2009
Prospective home buyers have a unique opportunity under the newly expanded government tax credit program. First time and repeat home buyers can gain up to 10% of the home’s purchase price as a refundable tax credit. First time buyers can claim up to a maximum of $8000, while repeat buyers are limited to a maximum of $6500. A refundable tax credit is a credit that can be claimed on income taxes even if the taxpayer has little to no federal income tax to offset.
Each credit has its own qualifications. Below is a list of key points to help you determine if you may qualify.
- The refundable tax credit of up to $8000 is available for first time home buyers (anyone who hasn’t owned a principal residence in the last 3 years) purchasing a primary residence before April 30, 2010. In the case where a legal sales contract has been executed by April 30, 2010, the purchase would only have to be completed by June 30, 2010.
- The refundable tax credit of up to $6500 is available for repeat home buyers who have owned a home for at least 5 consecutive out of the last 8 years. This tax credit only applies to homes sold between November 6, 2009 and April 30, 2010. In the case where a legal sales contract has been executed by April 30, 2010, the purchase would only have to be completed by June 30, 2010.
- The income limits enacted on November 6, 2009 require a single home buyer to make less than $125,000 per year and for married couples filing jointly to make less than $225,000 per year to receive the full credit.
- If you currently make more than the income limits, a partial credit may be available. See the IRS website or speak to a tax professional for more information.
- Any home type that will be used as a primary residence will qualify, but the home must be priced under $800,000 in order to claim either credit. New home builds also qualify for the credits, but the settlement must be completed by April 30, 2010.
- Purchases must be made from an uninterested third party. Purchases from relatives of the buyer or buyer’s spouse will not qualify for the credit.
- Married couples can only claim the first time home buyer credit if both spouses qualify. They may be eligible for the repeat home buyer credit, though.
- Neither tax credit has to be repaid, unless the home is sold or is no longer used as the buyer’s primary residence with the first 3 years of purchase. Qualified service members may be exempt from this requirement.
- To claim either credit, taxpayers must submit a copy of the HUD-1 settlement statement and IRS Form 5405. Home purchases made in 2010 can be claimed on an amended 2009 tax return. See a tax professional for more details.
The above information is for general use only and should not be construed as professional tax, legal or accounting advice. This information is no substitute for professional tax or legal advice and a professional should be consulted before making any decisions. This information is provided as-is and no warranties or guarantees are made as to the completeness, accuracy or timeliness of the information.
Thursday, December 17, 2009
- Not getting pre-approved for a mortgage
It’s important to know whether or not you qualify for the financing you need. If you look at homes before knowing if you’re financeable and for how much, you could end up with a lot of time wasted.
- Not using a buyer’s agent
A buyer’s agent is a real estate agent that works exclusively for the buyer, negotiating the best possible price and watching out for only your interests in any contract. What’s the best part about using a buyer’s agent? It’s free to you, since the seller pays any real estate agent commission. Arbor Mortgage provides a list of Preferred Real Estate Agents during your pre-approval.
- Not getting a home inspection
Even if the house is brand new, there is bound to be something that needs attention, so never forgo a home inspection. A good inspector will look for possible costly problems, such as mold, structural issues, and hidden damage.
- Not adding contingencies to your contract
Never enter into a contract that doesn’t have contingencies in place to protect you. There should be an inspection contingency, allowing you terminate the contract if the house isn’t inspected to your liking. There should also be a financing contingency in case any problems occur with your mortgage financing.
- Not researching the neighborhood
You may be a young married couple now with no children, but what happens when the family starts to expand? How are the schools in the neighborhood? Is it safe at night there? Visit the home at all hours of the day and find out all you can about the town amenities and public works.
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About Me
- Arbor Mortgage
- Arbor Mortgage is a Michigan based mortgage lender that has been providing mortgage solutions for more than a decade. Since 1998, Arbor Mortgage has helped more than 20,000 people purchase or refinance their homes. Arbor offers a variety of mortgage programs including FHA, USDA Rural Development, VA, Conventional and Alternative loans.
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