Mortgages

We picked up these myths from Experian (the credit reporting bureau) and thought they would be interesting to share:

Myth #1: Checking my own credit report will lower my score
Personal inquiries, also known as "soft inquiries" or "below the line inquiries," are not visible to lenders and therefore are not part of your credit score calculation. So you can rest easy—checking your own credit report or score does NOT negatively impact your score.

Myth #2: Applying for new credit will actually lower my score
This depends on the type of credit you're applying for. If you apply for several credit cards within a short period of time, the number of inquiries will go up, which could drop your score...

Yesterday HUD released changes to their FHA mortgage lending practices:

1. They consolidated their pricing for the two reverse mortgage programs Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM
2. They increased their Mortgage Insurance Premiums by 0.1% for normal loans and by 0.05% for jumbo loans ($625K+), and extended the payment over the whole life of the loan (i.e. borrowers no longer can automatically drop paying MIP when their equity reaches 22%)
3. FHA will now requiring Manual Underwriting on Loans with Decision Credit Scores below 620 & DTI Ratios over 43 Percent
4. FHA raised the minimum down payment on Loans above $625,500 from 3.5% to 5%
5. They wi...

100% Loans - Can You Still Get One?

100% financing used to be fairly common during the "boom" years of 2003-2007, but nowadays it is almost a thing of the past.

There still are a few programs that offer up to 100% financing, but they are either geographically restricted or limited to lower income levels.

Most of these programs don't require "stellar" credit scores, but they do require fairly "clean" credit history, with no bankruptcies, foreclosures or recent collections:

1. VA loans - applicant must be eligible (veteran, former or active military). Contact Michael Gobin, Wells Fargo Mortgage (843) 475-1066.

2. USDA loans - available only in some "rural" areas (some areas in Goose Cr...

BB&T has changed their guidelines for their CHIP loan program as follows:

1. 100% financing for HH income under $50,400 in any area, with min. credit score of 680
2. 97% financing for HH income under $63,000 in any area, with min. credit score of 620 (no mortgage insurance)
3. 97% financing for HH income under $75,600 in underserved areas only, with min. credit score of 620 and no mortgage insurance.

These programs may still be an attractive alternative to FHA loans!

For more information about buying a home with the CHIP program, please call us on 843-416-1434.

The $25 Billion Settlement With Mortgage Lenders: What Does It Mean To Homeowners?

On Thursday the five major mortgage lenders reached a $25 Billion settlement deal with the federal government to compensate homeowners for their abuses in the mortgage lending industry. The settlement with  Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) has three components that may help borrowers in distress:

1. Former Borrowers Who Lost Their Home to Foreclosure

These people may get $1500 to $2000 each as compensation for "improper" foreclosure proceedings.

Who is eligible? Borrowers whose mortgages were serviced by one of these five banks (notes could have ...

Up until now, BB&T's CHIP loan has been one of the few options that still provides the ability to borrow 100% loan-to-value for certain geographic areas that included Cainhoy, Hanahan and parts of Ladson, Summerville and Goose Creek. Therefore, buyers who were able to negotiate for seller-paid closing costs can purchase a home with no money down, provided (they and the property) are eligible. 

On December 5th, BB&T changed the eligibility parameters for their CHIP loans. Here are the new guidelines:

New guidelines (Highlights) starting Dec 5th

• Income limits will apply for all properties
• Over 97% loan to value 80% applicant must be below median HUD income = $49,760 (for total househo...

The USDA Rural Mortgage Loan was one of the only remaining 100% loan-to-value opportunities for lower income buyers who do not have a lot of savings for downpayment. Bobby Wallace from Anchor Mortgage sent me a very timely reminder email that I thought would be good to share with the followers of this blog:

The changes being implemented as of October 1st are:

1. "USDA will now start requiring a Mortgage Insurance Premium on these loans.
2. USDA will now require a 0.3% annual mortgage insurance fee. While this fee is an annual fee, it is collected monthly in escrow like most Mortgage insurance payments. Another major difference between USDA’s annual MI premium and most other premiums. USDA’...

Robert Weaver from Ikon Mortgage put together this information - which I found really informative - about the maximum allowed contribution from Seller to Buyer depending on the LTV (loan-to-value ratio) and the use of the home:

For more information contact Robert Weaver.

Why Pay Private Mortgage Insurance (PMI)?

Reese Ward from Benchmark Home Loans, one of the mortgage providers we work with sent me this article which I thought was interesting to share:

"Private Mortgage Insurance (PMI) is required by most lenders when a borrower puts less than 20% down on a purchase loan. Paid for by the borrower, PMI not only protects the lender from foreclosure, it also enables many buyers to qualify for loans and purchase real estate when they couldn't have otherwise. On January 1st, 2007, legislation went into effect making PMI tax deductible for new borrowers whose personal adjusted gross income is $100,000 or less. This has created additional opportunities for ma...

WELLS FARGO RELAXES CREDIT SCORE REQUIREMENTS

Wells Fargo announced last week that they will consider issuing mortgage loans to buyers with lower credit scores.

FHA loans are usually requiring a 620 middle score and will lend up to 96.5% (3.5% downpayment) Conventional loans usually require a minimum 10% downpayment. 

As of last week, Wells Fargo was the only lender to have relaxed their requirements to:

• Credit scores from 550 (with a 5% downpayment)
• Credit scores from 500 (with a 10% downpayment)

This will allow some buyers that may have had some problem with their credit but are still "good risk" to borrow money for a home purchase. These loans will be manually underwritten, s...

Bank of America announced it is launching a new loan program for medical professionals

The Doctor Loan from Bank of America is for licensed, practicing physicians or residents, dentists or other eligible medical professionals. It features a range of fixed and adjustable rate loans and offers significant advantages including:

• As little as 5% down on mortgages up to $850,000
• Employment start date up to 60 days after closing
• Student loan debt excluded from total debt calculation

Bank of America joins SunTrust in targeting this segment (see below).

The Doctor Loan Program is a residential mortgage loan developed specifically for Licensed Residents/Interns/Fellows and Licensed doctor...

Condo Loans Now Require HO6 Insurance

All CONDO LOANS, including those backed by the government, Fannie Mae & Freddie Mac, now require the buyers to purchase HO6 (contents/wall-in) insurance, and require the premiums to be included with the escrow reserves.

Although these guidelines were published back in 2008 by these agencies, it had never been enforced by them until now. Fannie, Freddie and other investors are now requiring this coverage.

Blog Author's Note: This article does not necessarily reflect Keller Williams' or my own point of view. But Robert brings up some key points that I thought would be interesting for would-be buyers and homeowners looking to re-finance their mortgages.

How We See It

By Robert Weaver 

Interest rates provide the key ingredient to the mortgage recipe. They determine the cost of your borrowing, how much you can borrow, and how much of your time will be consumed repaying what you borrow.  Their importance cannot be overestimated and an explanation of such would fill volumes. The vital nature of interest rates in our economy begs the question: where are they heading? 

We believe that interest...

Buy Fast! FHA is Changing Its Guidelines!!

Starting this summer, the Federal Housing Administration (FHA) is tightening its lending guidelines as a way to shore up its finances. FHA loans are currently the most popular mortgage loans, because they provide up to 97.5% loan-to-value (LTV). Most "conventional" loans (i.e. non-FHA) can only go to 80% or 90% LTV, making it difficult to borrow for people with good earnings and credit scores, but no savings.

What Will the New Guidelines Be?

FHA is following suit with other lenders in tightening their standards. The announced changes will be:

1. Increased Minimum Credit Score - borrowers will now have to have a minimum of 580 credit score to ...

30-year Fixed Mortgage Rates Fall Below 5%

Two major economic stories this past week influenced mortgage rates favorably:

First, the news that China intends to slow down its economic growth to try and prevent inflation from getting out of control. In addition, the news of President Obama's proposed new restrictions on financial institutions and banks, which may impact their growth negatively. 

Both of these measures are expected to lead to a slower economic growth in the US economy, which hurt the stock market but helped the fixed income (i.e. bonds) markets, which had a positive income on mortgage rates.

FHA Toughens Down Payment Rules, Raises Mortgage Insurance Premiums

The Federal Housing Administration (FHA) announced that will raise the minimum down payment required for its higher risk borrowers, limit the allowable seller's contributions and increase their mortgage insurance premiums.

To build capital and reduce risk, the FHA said that it will raise mortgage insurance rates and tighten credit score requirements. The major changes include:

• increasing upfront mortgage insurance premiums from 1.75% to 2.25%;
• reducing the maximum seller contribution to buyer's closing costs from 6% to 3% of purchase price; and
• increasing the level of FICO scores from 500 to 580, below which a down...

How to Get an Easy Mortgage Loan...

Many clients ask me the same question: How can I get better prepared to go smoothly through the loan approval process with a lender?

Great question! And one that merits consideration, given than an increasing percentage of real estate transactions are falling through because of financing problems (mostly at underwriting stage).

So, how can you get better prepared to avoid nasty suprises and unsavory delays?

Get Organized - lenders usually ask for the same documents that you will have to show over and over, update and verify:

• Last two years' federal tax returns. Include detail forms in addition to the 1040 if you are self-employed.
• If you are a s...

Do You Know Your Mortgage PNPs? Savvy Borrowers Know Them Well...

If I had been asked this question yesterday, I would have returned a blank stare. I read last week a very informative article on Inman News written by Professor Jack Guttentag of Wharton School of Business that talks about PNP's as it relates to mortgage loan pricing.

PNP stands for "Pricing Notch Points" and is a factor that determines pricing of goods. For example, when buying corn, a supermarket may offer "$0.75 per ear for the first three, $0.70 per ear for 4-12 ears and $0.50 per ear if you buy more than 12 ears". In this case the "thresholds" or PNPs are 3 and 12, which are the quantities that trigger the change in ...

The Washington Post reported on a national study done by credit bureau Experian and consulting company Oliver Wyman on 24 million credit files.

The results of the study are both surprising and very revealing: 

*** HOMEOWNERS WITH HIGH CREDIT SCORES ARE 50 PERCENT MORE LIKELY TO DEFAULT (DELIBERATELY) ON THEIR MORTGAGES ***

So much so that the mortgage industry calls these "STRATEGIC DEFAULTS" and their numbers doubled to 588,000 from 2007 to 2008, well beyond most earlier estimates...

The study also highlighted:

• These defaulters tend to go straight from paying their mortgages dependably to not paying at all, and two-thirds have only one mortgage;
• Most are heavily concentrate...

Lenders require mortgage insurance for conventional loans when buyers don't bring 20% or more of the purchase price as equity to their closing.  Mortgage insurance only protects the lender in case you default on the loan. It doesn't provide any benefit to you! The sooner you can get rid of it, the better off you are.

So, it is essential to make sure you calculate your percentage equity in your home regularly, so you can eliminate paying mortage insurance as soon as possible! 

First, you have to know what TYPE of loan do you have: Is it a CONVENTIONAL, VA, or FHA loan?

VA

VA loans are designed so that veterans can borrow up to 100% of the value of the home WITHOUT mortga...