Author Archives: Roger

I've been helping people in Idaho with their single most important financial comittment, their home finanacing!

I became fascinated with home financing over 10 years ago when I was buying and fixing up homes. My mortgage broker made it look easy and fun. Soon I was leaving my old career in restaurants behind and started as a new loan officer in Pocatell, Idaho. This was during the subprime boom, and there were pleanty of subprime borrowers in Pocatello that needed my help. Soon I was asked to open an office in Boise, and I jumped on the opportunity.

The new construction market was taking off at this time, so I became an expert in construction loans and rehab loans. During this time I also built and sold some homes in Canyon County.

The market meltdown of 2008 left many of us without the programs we were used to providing and many of my coleagues left the business when the easy times were finished. I knew that there will always be peole who need my help, and that the bid, dinosour banks werre not equipped to serve them. For this reason, I have stayed in the industry when others fled for eaiser work.

The market has changed so much in the last 5 years. I've become an expert in FHA, RD, VA and Idaho Housing loans. They have become the primary mortgages for people in Idaho. Almost all those specialty loans of yesterday have gone away.

Today, the name of the game is to quickly qualify people for the loans that are available and close them quickly and with the least amount of stress possible.

My company, Fairway Independent Mortgage Corporation is a mortgage bank. This gives us much more control of the loan process and as a result, we can do this faster and at a lower cost than the big banks. We still have the ability to broker a loan if the client needs it.

I'm always available to discuss your mortgage needs, I can be reached at 208-861-7579 or to get started right now, go to my secure online website at https://www.rogerhowell.com

What is the cost of waiting to buy?

The spring is here, and that means the Boise, Idaho real estate market is awaking from its winter slumber.  Experts are saying our market will appreciate about 5% this year, but some segments might go even higher, say 10% or more.

 

Here is an info graphic that illustrates the costs of waiting.

Cost-1024x561

 

Anyway, we expect costs to go even higher as demand for housing confronts the shortage of housing in the Treasure Valley.  Combine that with expected higher rates and you can see a definite “cost” top waiting.

If you don’t want the next home to cost more, then call me today and lets put a plan together for you next home.

 

 

 

Who is Fairway of Idaho?

The quickest way to increase your credit score

I’ve been seeing a number of people who have lower credit scores lately.

A common attribute is excessive revolving debt or credit card balances that are close to the limit.

Having a credit card balance that is over 30% of the available limit will lower your credit score.  Being close to or even over the limit will put a hurting on your score.

Recently, a borrower who was over their limit by a few dollars said the credit card company told them to charge up the balance then pay the minimums to pay it off.  The only benefit for that “advice” is to the credit card company who is making interest off them.

Furthermore, with many people cutting back on credit cards, they can hurt them selves by closing accounts they don’t use often.  By reducing the amount of available credit to the ratio of credit in use, you can hurt your score as well.

So……My advice on how to increase your score the fastest, probably by next month is………Pay Down your outstanding credit card balances!

Further example, you have 3 credit cards.  One has 300 with a 500 limit.  The second one is 1500 balance on a 2000 limit and the last one has 400 on a 500 limit.

Pay the 400 balance down to less than 250 first.  Next pay the 1500 balance down to 1000 or less and finally pay down the 300 to 250 or less.  If you are tight on money, maybe the 300 before the 1500.  By reducing the credit used to under 50% of the balance available, you will get more points on your scores.

If you want even more points, the next step is to lower them to less than 30%, and finally to zero every month.  Don’t close them out but keep them open and available with minimal use.

“But  XYZ Bank is offering me a zero percent balance transfer?” I hear this sometimes.  That is great if you are trying to minimize your payments but if you are trying to get qualified for a mortgage, you have a different goal.

I’ll save my thoughts on the balance transfer scam,  strategy for a later post.

More changes to Mortgages this month

On January 10th, new regulations went into effect for residential mortgages.

The “Qualified Mortgage” rule and the “Ability to Repay” rules are now part of the process when obtaining a mortgage.

At first glance, these appear to be major changes to how mortgages are approved but upon further review, it looks like most mortgages already comply with the new rules.  We examined our business the last few years and we estimate that 97% of our loans made would be Qualified Mortgages.  The ones that weren’t were probably commercial or hard money loans from a time when we could broker those types of loans.   As a residential mortgage banker-since August of 2011, we don’t offer commercial or hard money loans.

The Qualified Mortgage rule defines a type of mortgage that can be sold on the secondary market-Fannie Mae and other agencies. This Qualified Mortgage is one where the fees, terms, and features are defined so that in theory, agencies don’t run a high risk when they buy the loans from banks. One of the features is a lender needs to consider the borrowers ability to repay the loan.  This falls into the “DUH, we already do that” category.

Once again, it appears that much to do was made over nothing.  Life in the mortgage business goes on.

 

10 Misconceptions about VA Loans

  1. You can only use them once:  The VA loan program allows subsequent use of the loan program up to the full entitlement.
  2. Only a Veteran can be on the home loan; Spouses can and should be on the loan.  Widows of veterans can qualify in some instances.
  3. You can’t have more than one at a time.  Subject to the limits of your entitlement, you can have more than one VA loan at a time.
  4. You can buy a rental property or vacation home.  Sorry, the VA loan program is for primary residence use only.
  5. The loan is from the Government.  The VA loan program is funded through private lenders but guaranteed by the US Government in the case of default by the homeowner.
  6. You have to have unblemished credit.  The VA loan program allows for bankruptcy and foreclosure after a short waiting period, usually 24 months.
  7. There is mortgage insurance if you don’t have 20% down payment.  The VA loan program does not have a monthly mortgage insurance requirement like the FHA and Conventional loan programs.  It does have a “funding fee” which is added to the loan balance.  This fee ensures the long term viability of the VA loan program
  8. They are an expensive loan-Dave Ramsey says they are but he doesn’t realize that the last few years the rates on Conventional loans have been higher.
  9. The VA does a home inspection; you should hire your own inspector if you have concerns about the property condition.  An appraiser will inspect the property according to the minimum property standards that the loan program requires, but it is not a comprehensive home inspection that a consumer would order.
  10.  I need my original certificate of eligibility or DD214 to qualify; nowadays, we can obtain them online in a very short time.

Are you buying a home next year and need an FHA loan? Better check with your lender first.

Next year the loan limits for new FHA loans has been lowered in our area.

The new loan limits are $271,050 for new FHA loans reserved after 1/1/14.

Previously, the loan limits for the Boise are was $303,750.

If you have found a home and are in the process of obtaining a home loan but plan on closing in early 2014, make sure your lender gets the FHA case file # before the end of the year.  By doing this, you get “grandfathered” in with the current, higher loan limits.

 

So what is it, “eaiser” or “tougher” to get a mortgage in 2014 and beyond?

It seem that everyday you see an article from the MSM that says lenders are relaxing their guidelines for mortgages one day and the next, you’ll see another predicting gloom and doom for anyone who seeks a mortgage in the future.   No wonder people don’t know what to believe.

 

If you want the facts, you should talk to a local mortgage professional you trust.  They are the “boots on the ground” and have to deal with the new rules and guidelines everyday.

As someone who has been in the business a long time and seen the massive changes, I will say it will be tougher in 2014 for some people to qualify.  The “qualified mortgage” rule is only one reason why.  The agencies such as Fannie Mae and the big banks like Chase and Wells will react, tighten guidelines and what they call “overlays”, additional rules for their underwriters, on all mortgages they agree to buy from smaller banks and mortgage brokers.  If you got a mortgage a few years ago and seek one in 2014, you will be surprised at how much more documentation is required and how much work a borrower has to do to get their mortgage funded.

That being said, the mortgage market reacted to the meltdown long before Congress passed Dodd-Frank and created the new super agency, the Consumer Finance Protection Bureau.  The CFPB will now regulate almost everything financial in the country and will certainly use its power to justify its existence.

 

I think we can all agree that not everyone is well suited for home ownership, a long-term commitment that requires financial stability and discipline.  The push to make everyone a home owner that started under President Carter forcing Fannie and Freddie Mac to relax guidelines and accept subprime loans into their portfolio did not work.  Our home owner ship rate has fallen back to where it was in the 70’s.  Being a renter is not a mark of a bad person, it’s just a better housing solution for some people than ownership.

 

Bottom line is if you think you are going to seek a mortgage in 2014, gather all your documents and go see a local mortgage lender.  They should be able to tell you in a few minutes if you could qualify and what, if anything else you need to do before you start looking at homes.

What does it take to buy a home in Boise? Meridian? Eagle? Nampa? Here goes…

This is a local variation of an article that MSN real estate re hashes every few months.

http://realestate.msn.com/what-you-must-earn-to-buy-a-home-in-25-cities-in-2013

The gist is that you would need to make x dollars to by the average house in these markets.

It assumes a 20% down payment and a conventional loan at the national average rate of 4.64%.  For Ada County, I will use .6% as the property tax with home owners exemption and $500/yr for home owners insurance.  I will also use the 28% housing payment ratio.

I think some local insight would be helpful to my fellow Idahoans, so here it is:

Boise Metro average: Median home price:  $199,900 $964/mo estimated PITI.  You need a salary of $3442 per month or $41,299 per year.

Now to break it down into specific sub-markets

Eagle, ID Median home price: $379,500 (according to Zillow) $1814 est, PITI.  You need a salary of $6477/mo or $77,728 per year.

Meridian, ID Median home price $ 210,000, $1005 est. PITI.  You need a salary of $3590/month or $43,083 per year.

Nampa, ID Median home price $140,000, Estimated $732 per month, $2049 per month or $24,589 per year.

 

Numbers came from this site: http://www.deptofnumbers.com/asking-prices/idaho/boise-city/

and Zillow: http://www.zillow.com/local-info/ID-Ada-County-home-value/r_66/

 

With the new Qualified Mortgage rule, the debt to income limits are 43%, a bit lower than what has been approved in the past, that means if you earn $4000 per month gross income, your total debts are limited to $1720 per month.  For the record, the old banker standard of 25%/36% works very well for most people’s budgets. That would mean a person with the $4000 per month gross income should spend no more than $1000 per month on their house payment and no more than $1440 for all debts, monthly utilities and groceries excluded.

The salaries mentioned are well within the range one can find in the Boise, Idaho area.

Everyone’s situation is different, I recommend talking to a Loan Officer you know and trust and get your Pre-Qualification ahead of time.  If you don’t have one, I would love to help.

 

 

FHA’s back to work program requirements

The changes to FHA’s back to work initiative have opened up the housing market to many potential home buyers  who otherwise would have to wait another year.

The Back to work guidelines allow for a home buyer to purchase a home after 12 months from the date of a Foreclosure, Bankruptcy, or short sale.  Until now, the guidelines required 24 months or longer after those events.

Its not without its qualifications, here they are:

  • Borrower(s)      must have a FICO score of 640 and above.
  • Borrower(s)      experienced an “economic event” such as job loss, loss of income, or combination of both which caused a foreclosure/pre-foreclosure, deed-in-lieu, or short sale.
  • “Economic event” resulted in at least 20% decline in household income and      lasted six months or more.
  • A   minimum of 12 months has elapsed since “economic event”.

Borrower(s) must receive HUD-approved counseling.

 

I’m not sure how I feel about the changes, on one hand it gets people into homes earlier than in the past.  On the other hand, I didn’t feel than 24 months after a bankruptcy and 36 after a foreclosure was too long to sit out of the home ownership market.

Bottom line is, some people will be sufficiently motivated to go through the counseling, gather documents proving the economic event and have made efforts to get their credit straightened.  Those people are probably the ones who will be ok buying a home sooner than later.

 

 

Good article from USAA on building credit history from scratch

1146426_house_question_2I get many first time home buyers in my office who have no idea about their credit history much less their credit score.  With a little preparation ahead of time, they could prevent an unpleasant surprise.

If you have an adult child that is just going out into the real world or college, it would be wise to discuss this with them. https://www.usaa.com/inet/pages/advice_building_credit?offerName=logoff_advice_building_credit

You should take advantage of the free reports offered by the bureaus once per year at www.AnnualCreditReport.com.  These reports won’t give you their score-they make you pay for that, but you are looking for any surprises and how any existing creditors are reporting your credit history.

Even if you’re one of those types who says I don’t need credit, you do need a credit history to get the best financing when the day comes to apply for a mortgage.  Contrary to what some like Dave Ramsey say, living without a credit score has many disadvantages.

If you open credit accounts, buy a tank of gas a month on the account and then pay it in full when the bill comes, you’ll build a history of responsible use and avoid finance charges.  This method works well while avoiding debt building up.  After 6 months, you’ll see the positive effect on your credit score.

I would add that if you’ve had a bankruptcy or foreclosure, you really need to make an effort to repair and rebuild your credit history.  You can’t shun credit simply because you had problems.  A good part of your credit score is how you manage your credit.  Avoiding it is not the same as managing it.

With a little advance effort, you can detect any errors, bad credit, and monitor how your existing credit is showing.  It’s common for me to work with borrowers some time in advance to get ready to purchase.  Should you need this help or know someone who might, call me.

 

 

%d bloggers like this: