BIG FHA changes coming soon to a loan near you.

The FHA will raise the up-front Mortgage Insurance Premium, paid by borrowers, from 1.75 percent to 2.25 percent as well as request legislative authority to increase the maximum annual MIP that the FHA can charge. This is the second time in two years that it has raised the premium.

MIP is the monthly mortgage insurance that borrowers pay until the LTV reaches 78%
It's currently .55 unless you put down 5% and then drops to .50 per month.

On a loan of $619,000 it's roughly an extra $282 per month in your mortgage payment. You must carry this insurance at least 5 years no matter the LTV. Unless you have 205 down this is generally the most cost effective way to secure a low fixed rate mortgage, especially in the high cost areas of DC, MD and VA.The DC area is for loan amounts up to $729,750 with only 3.5% down. FHA uses the monthly and up from MI to cushion themselves for all the foreclosures which are sharply up.

The FHA will also reduce allowable seller concessions, or how much the seller can help the buyer, from 6 percent to 3 percent. The change will give borrowers a greater financial stake in their home purchases, as well as brings the FHA into conformity with industry standards on seller concessions. They want far more "skin in the game" and this trend has been in place for years. No more seller help to buy, you must have the downpayment from your own funds. The UFMIP used to be 1.5 and now will be 2.25% Downpayments have risen from 3% to 3.5% and I think will soon be 5% for the best borrowers. Tiers will be created based on FICO and even greater down payments will be required. We have used the extra money from the seller to pay all closing costs and use the extra money to buy down the rate so the borrower could get an even lower payment. This will be much more difficult to do moving forward.

The FHA, which does not lend but only insures home mortgages, has been under increased scrutiny of late, as rising defaults put the agency below its required reserves. The authority went from insuring barely 3 percent of all home loans at the height of the latest housing boom to now backing an estimated 35 to 40 percent of new loans. It has been a significant player in housing's so far weak recovery.
We have been hearing rumblings that this was going to occur so it was no surprise but other than the Spring we don't have a firm date at this point. Be sure to check back and I'll post as soon as they are announced.

If FHA became insolvent lending would virtually stop in it's tracks overnight. If 35-40% of loans are FHA insured and they run into problems the real estate industry will crash which will lead to a further depression of home prices from coast to coast.

As always anything I can clear up or assist with I am only an email away. Don't wait for these and other changes if you are thinking of buying contact one of our excellent realtor partners and get out there.

Thanks,
Brent

2010 New rules on getting a loan

A few quick rules and thoughts on more recently announced changes to refinancing or purchasing a home in 2010 and whom they affect.

1. Anyone that has not filed taxes for 2007 and or 2008 will not secure a loan at this time. EVERY loan is checked against the IRS using what's called a 4506T.
If they aren't on file you don't close it's that simple. And you can't wait to the end to file them. Just filing them doesn't make any difference. Unless the lender can see them thru the website they use the loan will be denied. It can take the IRS 6-8 weeks from submission to get to the point we need.

2. Self employed borrowers but also anyone that is W-2 and on commission such as a car salesman or say a loan officer or realtor is going to run into more trouble. First off lenders will want to see two years tax returns to verify any write offs you may take. Several lenders are in Jan 2010 requiring that the 2009 taxes be filed. AS I write this most people don't have the required paperwork to meet this requirement. Though it is coming soon but again these things take time.

3. Lenders are now putting out the guidelines and everyone does it differently. One lender I know isn't accepting a profit and loss statement but rather demanding he 09 taxes be completed now.
One lender is saying a 12 month P&L is acceptable but won't be used in determining income.

So what that means is this: Since people in these profession have different incomes from year to year what lenders do is take an average generally from the previous two years minus any business deductions. So now it will be 07, 08 and they want to see 09 but now use it unless it's an actual tax return that is verified by the IRS. Getting your taxes done is not enough.

I can promise you if the income shows a decline from 08 to 09 though you will have major problems if not out right denied. So they want to have it both ways, if you make more in 09 we won't use it to help you qualify but if you made less then we will hold that against you.

Bottom line lenders are afraid to make new loans for several reasons, government interference, a possible new wave of foreclosures and because FNMA and FHLMC are refusing to buy loans on the secondary market. Or even worse buying the loans and then demanding their money back a few months later. Of course the GSE'S are still losing BILLIONS of dollars each year and it is all flowing down hill from them.

I hope this helps and please contact me for any further questions or assistance. Remember if your loan officer isn't aware of these types of changes then run away as fast as you can.

Thanks,
Brent

Beware Zillow and the online quoters

I have listened and read with great interest the debate that I see unfold every day on Zillow and other platforms that mimic what it does. In theory it's great, submit quotes anonymously and see which lender is the best for you. Problem is so many of the quotes are considered by me and many others to be bogus. Now there is a debate about what a bogus loan quote means; is it an absurd lowball quote or is it a quote with 2,3 or even 4 points and origination fees baked into the loan? What's worse is people focus on the wrong things when they look at the lowball quotes. They focus exclusively on the rate instead of seeing how the lender arrived at the rate and what is COSTS to get to that low rate. Considering the average American moves or refinances every four years ago paying all the fees that get pushed on them doesn't make sense for the average borrower. On a 417k loan that is the conforming limit around DC, MD and VA that would be a cost of $12,510 PLUS the other closing costs that come with any loan. The smart way to figure out if this makes sense for you is to divide what you save by the estimated time you believe you will spend in the home. So if you get a rate of 5.0% with no points and 4.0% paying a large upfront fee you save $248 per month. However you will need to live there 50 months or just over 4 years just to recoup the money you spend on the points. That doesn't include the other fees which run a few thousand dollars depending on where you live. So more like 6 years. Now if you know for sure that you will live there 10-15 or even the entire 30 years then it can make sense.

My point is if you see these types of absurd rates from a loan officer right away then he or she is simply not looking our for your best interests. It's our job to give you options and look at everything not push a particular loan upon you. Now we do have more experience of course doing this as we do it every day and know as best we can the massive amount of changes that still seem to be popping up every day.

It's harder than ever to get a loan these days and more time consuming for both you and for me not to mention more expensive. Always keep in mind how much you will save versus the time period you need to recapture the outlay in funds. Each situation is totally different so talk to someone that has your best interest at heart and follows most if not all of these steps. 15 and 20 year loans should be considered and numbers run. With and without points also. Again if these loan officers aren't looking how to save you money on every single aspect of your loan, strongly consider shopping around until you find one that does. Make sure you get referrals also from his or her past clients. Most good lender have their referrals posted online.

I really hope this help clear up the mystery of the best way to get a good low rate but one that makes sense for you and is tailored to your personal situation, not a one aize fits all computer generated auto quote such as is done on Zillow by so many lenders. Talk to me and a few other local lenders and make sure you are comparing apples to apples.

2010 FNMA Loan Limits Announced

The 2010 loan limits have been announced for and again there is some good news for people who want to purchase or refinance in most areas of DC, MD and VA.

These numbers apply to conventional loans but FHA limits generally the same in all areas. VA loan limits are actually higher in the most expensive regions but these have been slightly lowered. As a loan officer that specializes in VA loans please contact me for precise loan limit amounts depending on where you live.
The 2010 limits remain unchanged from 2009. That means for suburban DC and the city itself are $417k for a conforming limit all the way up to $729,750. Please note these are still considered "temporary". FNMA and FHLMC did not buy until very recently loans over 417k. When the mortgage market crashed it became impossible to obtain a loan over 417k very quickly. The GSE'S who buy the vast majority of our mortgages revised their rules and now purchase the so called jumbo mortgages. This has caused jumbo mortgage rates to fall just slightly over the so called conforming mortgages . Again this will be temporary until private banks and hedge funds purchase MBS Without government umm prompting there would virtually be no market for larges loans. When and if they exit the market expect this problem to return.

If you live in different parts of Maryland the limits can range to as low as 417k for a jumbo loan in Allegany county to a 560k loan limit in Anne Arundel, Howard, Baltimore and Baltimore City. In more rural areas this can buy alot of home but not quite as much in the Baltimore region. The same holds true in VA. The close in counties like Fairfax and Loudon are at $729,750 but is as low as 417k in say Scott county VA.

The price limits are derived from median home prices that are estimated by HUD. Bottom line the median home prices have been falling nationwide the last several years but the loan limits have raised. See there are obvious reasons to buy now ie, low rates and the homebuyer tax credit. Depending on where you live if you wait the limits could be lowered and you will not be able to get a mortgage at all. Think I am kidding, take a look at what interest rates where before the limits were raised and when banks started to pull out. I remember pricing over 417k loans at 8% or above. Many banks didn't even bother to offer, there was simply no demand. Take these changes and other ones such as no DTI allowed over 45% for the most case just shows it's getting harder and not easier to buy a home. This is why I think you need to move NOW and at least talk to a loan officer to see what can be done. Hopefully talk to me but I can't do all the loans so talk to someone that you can trust and take advantage before the rates and the loans are gone.

Montgomery county MD lender

Well 14 days into the new year and I finally get around to posting a 2010 blog. Sorry but I have been spending every free minute I have trying to understand and explain the new 2010 GFE to clients and realtor's. More on that in a future post but suffice to say it's not going well.

But on the good news front the Montgomery county transfer office that oversees short sales has announced the following. The position that short sales should be taxed on the unpaid principal balance if the excess debt is over and above the sales price is halted.

This matter is under review but they have received many complaints from all interested parties in the home buying process.

Until further notice short sales are being counted at the actual contract sales prices as it should be. Now this can obviously change again as the policy is merely under review, never the less, a very good sign.

Combined with the low rates that should be gone in a few months and the money available for both first time buyers and even for repeat buyers there NEVER has been a better time to buy a home!! If you need help with financing call or email me right away so we can get started. If you need to buy a home contact one of the experienced Choice Real Estate team and they can get right to work for you.

For your own sake please don't wait, contact us now. It won't cost you anything to talk adn review plans and options before the free money is gone and the rates are higher.