Archive for the 'Mortgage News' Category
Most people know they need to look their best when trying to get approved for a mortgage. Like brushing our teeth and combing our hair for a family portrait, we know that our credit scores, job history and general financial health are important. (To see how to avoid common pitfalls after you have been approved for a loan, see my recent post Your Loan is Approved! Now Avoid These Four Pitfalls That Can Really Ruin Your Day).
However, did you know that the type of property you choose may also have a major impact on your loan approval? If not, dear reader, then Press On!
Let’s say you start out thinking you’re looking for a cute house with a white picket fence. But then you begin to see different options. Let’s see how those choices may change, limit or even eliminate your financing options:
A Planned Unit Development, or PUD
A what? They look like a regular house, but are part of a large, master-planned community. Most homes built in recent years by major builders are PUDs. This property choice invariably comes with a required membership in a Home Owners Association (HOA). The monthly HOA dues can commonly run into the $200 to $400 range, especially in Southern California. This will reduce the amount of financing you qualify for because it will be included as part of your debt-to-income ratio.
Condominiums
- Non-Warrantable Condo Projects – This is a condominium that does not have official Fannie Mae or FHA approval (required to get financing from these agencies)
- Condo Conversions – These are condos that started life as apartments and then were converted to condominium building codes. Most are OK, but a few may be little more than cosmetically-enhanced apartments. Again, look for that all-important Fannie Mae or FHA approval on the project
- High-rise Condos – commonly defined as a condo above 4-stories tall. Some lenders won’t do mortgages on them
- Those ubiquitous HOA dues will change your qualifying debt/income ratio
Manufactured and Modular Homes
This can be a tricky area with regard to financing. These types of homes are partially built and assembled in a factory and then moved to the property site where they are permanently affixed to the land. Such homes manufactured in recent years can look like a traditionally-constructed or site-built home except to the most discerning eye (like an appraiser). However, lenders definitely make the distinction and the types of loans available to purchase or refinance this type of property are quite limited, especially in the current financial markets. Where available, a mortgage on this type of property will likely require a greater down payment. Options such as interest-only payments will be almost impossible to find. While this type of housing can be ideal for the right Buyer, be aware that it will limit the financing options for you now, and most likely for the next person looking to purchase it (from you)
Large or Unusual Properties
This one can catch you by surprise. A common example might be a home built on 18 acres of land. Regardless of how big or nice the house is, a large tract of land may actually dominate the total value of the property. Conventional mortgages are intended to finance residential property, not land. As a result, some lenders will limit the maximum size of the property they will finance; 5 acres is not uncommon. Other lenders will allow larger acreage but will require the appraisal to consider the value of the improvements (house) and limit land value to 5 acres. Another issue can arise if the property includes improvements other than what is common to residential property. Examples might be a home on 4 acres that includes 300 avocado trees, or a duplex where 1 of the 2 units actually houses a business such as a barber shop. These properties may be viewed as commercial or mixed-use in nature, rather than residential.
Multi-Family Property (Duplex, Triplex etc.)
Conventional financing is still widely available for 2 to 4 family properties. However, recent changes in the mortgage markets have tightened a number of requirements to qualify for financing on these property types. Examples include larger down payments, higher credit scores, higher interest rates and more conservative debt-to-income ratios.
The important point to draw here is that one size does not fit all when obtaining financing. It’s best to have a reasonably clear idea of the type of property you are seeking to purchase before you obtain loan approval. And if that idea changes, be sure to let your mortgage professional know as soon as possible. That will avoid unpleasant surprises and assure that your approved financing will work for the home of your dreams!
For questions about matching your loan to your home, call Paul Gonzales, Countywide Mortgage Lending at (760) 746-7388 or email me at paulforloans@aol.com
Foreclosed properties and “short sales” are certainly in the news today. We are all aware that they exist in every community right now including our own neighborhoods. Properties that have been taken back by a bank or lender and held on their books are known as “real estate owned” or REOs. For both regulatory and business reasons they must work to sell them as soon as they can and get the REOs off their ledgers. So-called short sales are where the private owner and the lender agree to sell the property for less than what is owed. In our current markets, this need to liquidate properties often forces the lender to sell at a loss. As seen in recent sales figures for many areas, this practice has at least the potential to drive market prices lower in some areas.
OK – So how can the sale of a nearby foreclosure or short-sale affect me?
Any individual home sale in the area is only one statistic, not the entire local market. In fact, a common misperception is that the lowest recent home sale “sets the price” for similar properties around it. Not so. Understanding just a couple of basics about how a professional appraiser determines value can illustrate the impact that recent nearby sales have on your home’s value.
Appraisers are required to identify recent sales of properties that are similar and near in proximity to the home being appraised; these other sales are called comparable sales, or “comps“. There are extensive rules and formulas that they use to accomplish all that but those are the general criteria that they seek. After adjusting the sales prices for considerations such as age, size, amenities, quality and condition (among many other issues) the appraiser then has a finely-tuned range of prices that he or she will use to determine the value of the subject property being appraised. While not impossible, it is rare that the final value ascertained will be equal to the lowest comparable sales price (REO, short-sale or otherwise). Most commonly, the final value will be somewhere within the range of prices analyzed.
Which brings us back to the topic of the sale of a nearby REO or “short“. If the lowest sales price in the pool of comps used by the appraiser is an REO and is also significantly lower than the rest of the comps in the pool, the appraiser has the latitude to comment on that aspect. Depending upon how solid the remaining sales comps are, the REO or short-sale could have only a minimal impact on the value of the subject property. It may thus represent only the low end of the value range for that particular market. On the other hand, if the majority of recent comps happen to consist of REOs and/or short sales, then they may well define that local market and collectively have a significant impact on the value of the subject property.
In the final analysis, the value of your property is determined by your local market and is usually defined by recent multiple sales. Regardless of whether comparable sales are private sales, short sales or REOs, the market “is what it is” at that point in time. What’s most important to remember is that for the vast majority of markets, value is not defined by any one single sales transaction!
for more information contact Paul Gonzales, Countywide Mortgage Lending (760) 746-7388 or paulforloans@aol.com
Guys – the statistics are out and they speak for themselves; women out-purchase us in the real estate market two-to-one! National data for the year ending last June reveals that single women accounted for 21% of all home purchases, to 10% of purchases for single men. That may just be an eye-opener for many of us in the business. Such a significant demographic group deserves to be both recognized and well-served by the real estate and financing industries. Click on the link below to read an excellent article on this subject posted by Marilyn Kennedy Malia on Bankrate.com:
“4 Tips for Single, Female Homebuyers”
Paul Gonzales, Sales Manager, Countywide Mortgage (760) 746-7388 or paulforloans@aol.com
For all of you Homebuyers and Homeowners out there who intend to get your home mortgage financing this year. The latest updates from the mortgage world are that interest fixed rates are expected to increase fairly soon.
At the present time Interest Rates have been kept artificially low and will soon begin their upward climb to around 6.5%. as the Feds return the mortgage market to private investors. This will reduce the loan amounts available.
So Homebuyers don’t loose out on the great interest rates we have at the moment – give us a call today and we will help you find the home of your dreams!
PAM PARTON: 760-580-1615 JOANNA WOOLLEY: 760-580-1630
This is the fourth and final post in a series that deals with important aspects of FHA financing.
Minimum Down Payment
In today’s challenging market, this is probably the most attractive feature of the FHA home loan – the minimal down payment requirement. The minimum allowable down payment is 3.5% of the purchase price. This benefit is enhanced further by the flexibility allowed for the source of those down payment funds, as discussed below:
Reserve Requirements
Reserves are funds that a buyer has “left over” after purchasing the home. Most conventional home loans require enough reserve funds to cover at least two months of mortgage payments including property taxes, insurance, mortgage insurance and home owner’s association (HOA) dues if required.
FHA financing does not have a reserve requirement if purchasing a 1 or 2 family property (a 3 or 4 family property requires at least three months of reserve funds).
Acceptable Sources of Funds
- Borrower’s depository funds – Funds owned by the Borrower in bank accounts, stocks and bonds, Certificates of deposit, retirement accounts such as 401k plans
- Gift funds – Can come from a wide variety of sources, including family members, a close friend with established close ties to the borrower, an employer or labor union, charitable or non-profit organization, government agency or a public entity such as a city through a homebuyer’s assistance program. A couple important caveats: the gift funds must be thoroughly documented and provide a clear paper-trail. Depending upon the source of the gift funds, such documentation will include a detailed “gift letter”, copies of cancelled checks and bank withdrawal slips or evidence of bank wire transfer. There must be reasonable evidence that the qualified donor has the financial ability to give the gift. As of October 1st, 2008, funds from certain non-profit organizations which are matched by donations from the home seller can no longer be gifted to the buyer
- Sale of existing home – proceeds from the sale of an existing home may be used to purchase a new home with FHA financing
- Sale of personal property – the sale of a car or other personal property is acceptable as long as the funds can be paper-trailed to the sale
- Cash or “mattress money” – this requires a written explanation describing the source of the cash, how it was accumulated and how long it took to accumulate. Such cash accumulation must make sense for the borrower, such as not having a checking or savings account or credit accounts.
- Commission from sale of property – acceptable if the borrower/buyer is a licensed real estate agent and entitled to a commission from the sale
Mortgage Insurance
A lesser appreciated, but very vital benefit of FHA financing, has to do with mortgage insurance, or MI. Until recently, it was generally easy to avoid having to pay for mortgage insurance when purchasing a home with less than 20% down payment. This was accomplished by getting a second mortgage to “piggy back” with an 80% first mortgage. Thus a qualified buyer could buy a home with little or no money down by obtaining two mortgages. In the reality of today’s markets such second mortgages are all but non-existant or exorbitantly priced.
The only remaining option for a homebuyer with less than 20% for a down payment is to pay for mortgage insurance. In certain areas such as California and Florida, most companies that provide such insurance have limited the maximum coverage to 90% (or less) of the purchase price. In addition, they have tightened their underwriting guidelines and it is indeed more difficult to actually qualify for the insurance.
Enter the FHA home loan. It is generally considered easier to qualify for MI under the FHA and it will go to 96.5% of the purchase price. In short there is a significant portion of the home-buying population who have no other option than FHA financing just for these two reasons alone.
In a Nutshell…
FHA financing may not necessarily be the best fit for everyone in the home-buying market. However, these hallmark features of the FHA home loan – minimal down payment and reserve requirements, flexible sources of funds and availability of mortgage insurance – are far and away the primary reasons that many home buyers, particularly younger first-time home buyers, seek FHA financing. It’s clear to see why.
For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com
New Rules For Home Loan Modifications
Those seeking to ease their mortgage terms must now document their finances before a trial modification will be approved. Loan servicers must adopt the policy by June 1st 2010.
Taking borrowers at their word for how much they earn was a major cause of the mortgage meltdown. That practice may also be why an Obama administration program has struggled to convert temporary home loan modifications into permanent ones.
The government said last week that it would overhaul the program by requiring homeowners to document their incomes before trial modifications are granted. Read the rest of this entry »
How is your credit?
Most people at one time or another try to improve their credit to be able to secure the best rate for a mortgage, car loan or to just repair their damaged credit.
Here are some helpful tips to improve your credit score;
DO pay your bills before the payment is due preferably as soon as you get the bill. For millionaire credit building, this does have an impact on your credit score. Additionally, it keeps your average daily balance low and saves you money on interest when determining interest and insurance rates.
DO keep your account balances less than 40-60% of the limit. Potential creditors like to see that you use your credit appropriately, but not excessively. The old adage “The best way to get approved for credit is to not need the money” is true.
DO pay your biggest bills first. The larger the missed payment, the more it hurts your credit score. Simiarly, if you are forced to juggle bills, choose to skip the payments for the creditors who don’t report to the credit bureaus like utility companies and pay the ones who will report to the bureaus.
DO pay your mortgage or home loan every month. Lenders frown on late payments on your old home loan when you are applying for new loans.
DO maintain a variety of types of loans. A previous mortgage or auto loan will increase your chances of getting the next mortgage or auto loan.
DON’T cancel your credit cards. Even unused cards help your credit score. It is not until you have a long credit history with a large number of accounts that lenders start to be concerned that you are possibly overextending yourself. If you have trouble not using your cards wisely, freeze them in a block of ice, even cut up the cards. But don’t cancel the account!
DON’T sign up for more cards or get too many rate requests over an extended period of time . Strategically plan and concentrate your efforts when applying for additional credit or loans.
DON’T pay old unpaid bills. This will draw attention to the old accounts. Showing recent activity can keep the information on your report for an extended period of time. Sometimes it is better to leave sleeping dogs lie.
For more information on home buying or selling, give us a call!
Pam Parton & Joanna Woolley
760-580-1615 or 760-580-1630
Brian Olenik of
Corinthian Title
contributed to this
article
CALIFORNIA HOME PRICES SHOW YEAR-TO YEAR GAIN FOR FIRST TIME IN TWO YEARS!!
This is great news!
INCREASE IN CALIFORNIA HOME SALES
The median price of a home in California experienced its first year-to year gain in over two years during the month of November 2009, as the California housing market continued recent trends in terms of prices, supply and sales.
The monthly median home price crossed the $300,000 threshold in November with a median of $304,520, up 2.4 percent from the October median price of $297,500 and up 5.8 percent from $287,880 a year earlier.The situation has improved greatly from a year ago during the worst of the financial crisis, when the median price had registered 41.3 percent year-to-year decline.
After a 59 percent peak-to-trough decline, the California median home price has increased 24.1 percent from a trough of $245,170 that occurred in February 2009. The increase in price has been sustained by a combination of lean supply and high demand, the latter triggered by historically high affordability. By comparison, the National Assoc of Realtors national median price for existing single family homes, which experienced a 29 percent peak-to-trough decline, has increased by 4.7 percent from its trough of $164,00 in January to $171,900 in November 2009.
Nine consecutive month-to month increases in the California median price have been the result of the lean inventory conditions throughout the year. The MLS-based unsold inventory index for California has averaged 4.8 months since the start of the year, well below the 7 month long run average. By comparison, the national unsold inventory index for single family homes has averaged 8.4 months over the year. Inventory levels in both California and the US have trended down for most of the year. As for sales, California returned to pre-peak levels of sales in late 2008 and sustained them through 2009.
With Sales of 536,720 homes in November, the market was 4.6 percent lower than the October sales figures of 562,400, but 4.7 percent above the November 2008 figure of 512,840. Sales throughout the year have averaged 545,600, compared with the pre-peak monthly average over the 2000-2002 period of 537,300 homes. Over the 2000-2002 period, US sales of existing homes averaged 4.8 million homes, compared with the low-to mid-4 million range of sales that the national market experienced from late 2007 until late this year when sales finally exceed the 5 million threshold.
Call Pam and Joanna if you are thinking of buying or selling a home.
Voted “Best in Client Satisfaction Real Estate Agents for 2009 and 2010 – fewer than 7 percent of all licensed real estate agents in San Diego recieve this award.
Pam Parton 760-580-1615 Joanna Woolley 760-580-1630
Content Courtesy of: Robert A. Kleinhenz , Ph.D., Deputy Chief Economist
Understanding your FICO score and how it affects your ability to obtain credit.
FICO scores
REMOVING SOME OF THE MYSTERY ABOUT CREDIT SCORING
Fair, Isaac Co., the major provider of credit scoring systems to lenders, revealed how it determines credit scores, also know as FICO scores. Many lenders use these scores to predict how likely a borrower is to repay a loan.
FIVE MAIN FACTORS INFLUENCE YOUR FICO SCORE:
1) PAYMENT HISTORY
Payment history accounts for about 35 percent of your score. Paying your bills on time is the best way for you to receive a high FICO score.
2) YOUR CURRENT DEBT
About 30% of your score is determined by how much you currently owe. If you owe a lot of money in relatio lto your available credit limits, you may appear over extended. The key is to keep your balances low on unsecured debt such as credit cards. Even closing unused accounts may not improve your score.
3) HOW LONG YOU’VE HAD CREDIT
The longer you’ve had credit and handled it responsibly, the better your FICO score will be. The length of your credit history accounts for 15% of your score
4) APPLICATIONS FOR NEW CREDIT
Applying for several credit accounts in a short period of time could indicated that you may soon be over extended and may lower your score. This is about 10% of your score.
5) MIX YOUR CREDIT
The final 10% of your score is determined by the kinds of credit accounts you have, such as credit cards, retail accounts, installment loans, finance company loans and mortgage loans, and how many of each.
Ther are other elements, mostly subcategories of the items listed above, that go into your score, including your occupations, time at present job, time at your current address, home ownership and much more. For more information or to obtain a copy of your FICO score, visit www.fairisaac.com
Following these guidelines will help you obtain better financing rates when you are ready to purchase your next home.
Give us a call with any real estate questions you may have, we’re here to help and we answer our phones!
Pam Parton and Joanna Woolley
760-580-1615 or 7605801630
Brian Olenik of
Corinthian Title
contributed to this article
MORTGAGE NEWS
A growing number of homeowners looking to refinance are finding the 15 year mortgage appealing instead of the traditional 30 year term.
Recent data according to the Mortgage Bankers Association reveals one in five applications during October 2009 were for the 15 year term, up 9.1% from a year ago.
The attraction of this mortgage is because interest rates have dropped to near historical lows. Mid December rates for a 15 year fixed conforming mortgage averaged 4.46%, well below the recent high of 5.25% in mid June. Rates on 30 year fixed-rate conforming loans averaged 4.99% or about half a percent point higher.
15 year home mortgages can have their disadvantages, even with low rates monthly payments can be much higher as the loan is being paid off over a shorter term.
Originations of 15 year mortgages at Wells Fargo & Co. are up 55% through November from a year earlier. At J.P. Morgan Chase & Co., 15 year loans now account for 20% of refinances, up from 10% a year ago.
Many homeowners who have paid down a substantial part of their home loan seem to think it makes sense to refinance to a shorter term and pay the difference than put that money in the bank or invest in the stock market and feel lucky if they make 1% interest!
For example – a homeowner in long beach, Calif is in the process of refinancing his investment property to a 15 year loan which carries a rate of 4.375%, this will raise his monthly payment to $294. He states my loan will be paid down quicker – its a win win situation.
Pam Parton 760-580-1615 Joanna Woolley 760-580-1630
content courtesy of the Wall Street Journal by Ruth Simon.
