Will a so-called “government shutdown” affect the mortgage market?

It could, depending on the type of loan you are seeking and what still needs to be done on your loan.

There are several government agencies that come in to play when you seek a home loan.

  1. First of all, borrowers will have their tax returns verified through the IRS with a form 4506t.  The IRS has said its staff will still be operating in the event of a so-called “shutdown” but I wouldn’t take that for a definite that you can get the tax transcripts in a timely manner.  If you are seeking a mortgage, get your mortgage loan officer to order them asap!
  2.   Government insured programs such as VA Loan, FHA loans, and the USDA require a special report called CAVIRS to be run beforehand.  Once again, get it done asap.  If you don’t have a clear CAVIRS, your loan can’t be approved.
  3. Third, the USDA has indicated that its staff might be furloughed in the event of a “shutdown” and that will affect the final approval from USDA that is a part of getting an RD loan.  If you have an RD loan and it’s not ready to close right now, you should have a conversation will all parties about a possible extension if there is a “shutdown.”
  4. Furthermore, the RD’s eligibility map is in limbo over the budget.  Right now, the map is not fully accurate as to what properties are in an eligible area.  I would be hesitant to rely on an RD loan in an area such as Kuna, where they have indicated it is coming off the eligible areas.  We won’t know for sure what parts of Kuna will be eligible and what parts wont.

Anyway, the next week or two could be very exciting to say the least.  The key is to be proactive in the event of a “shutdown” of the Federal Government.

 

Big changes to mortgages next year!

The Qualified Mortgage Rule is taking effect on January 1st of 2014.  what does this mean for the prospective borrower?

It could be a lot.  First we must explain what is defined as a Qualified Mortgage.

A Qualified Mortgage is a mortgage that is assumed to be non risky and that the lender has done adequate qualifying to ensure the borrower can repay the loan.  the consumer Finance Protection Bureau released this definition earlier in the year.  To see the exact definition, here’s a link:

http://www.qualifiedmortgage.org/definition/

Lenders who do not make Qualified Mortgages will have to retain 5% of the loan on their books as a hedge against the risk of default.  this is not an ideal situation for lenders, as they want to sell the loan to an agency like Fannie Mae and simply service the loan.  Fannie Mae and Freddie Mac are probably not going to buy a non qualified mortgage as of this time, so essentially all conforming loans will have to be Qualified Mortgages.

What are the features of a Qualified Mortgage?

     No Excessive Upfront Points  and Fees-Points and fees cannot exceed 3% of the amount borrowed

No Toxic Loan  features Interest only, negative amortization, balloon payments and terms over 30 yrs. are prohibited.

Limits on Debt-to-Income  Ratios-The new standard will be 43% of total debts to pre-tax income.

 

Who is likely to be affected by the new Qualified Mortgage rules?

Jumbo loans for those seeking to borrow more than $417,000 in most areas

Borrowers with high debt to income levels.  right now, it is possible to get up to 50% debt to income level approvals if the borrower is strong in other regards, but that will go away with the new rules.  Most of the time, this comes up when a borrower is buying g a new home but hasn’t sold their old home and is trying to qualify with both house payments for the short-term.

Borrowers seeking to buy down the rate.  Paying discount points to get a lower rate will probably not be an option once the Qualified Mortgage rules go into effect.  the 3% cap would not allow for that.

Borrowers buying less expensive homes.  If there is that 3% cap on fees and the borrower is paying $475 for an appraisal, $600 in title fees, and say $1000 in other fees, that would mean any loan under $69167 would be a high cost loan according to the Qualified Mortgage rule.  Here in our market, Boise Idaho, there are some homes that fall under that price.

Mortgage Brokers typically have to charge a 1% fee on top of the other fees and that can put them over the 3% cap.  I expect to see the rate on brokered loans to increase to cover this fee.  Many Mortgage Brokers are changing to Mortgage Banker if they can as they do not have that extra fee, typically.

The next few months will see many changes to the market.  It will be important to keep a local lender who stays up to date with those changes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Another cool local home for sale, check it out!

 

This Home is in the Park Center area, really close to all the cool stuff that Boise has to offer.

The dinning room and kitchen allow for entertaining large family get togethers.

The rooms are spacious and even the walk in closet is bigger than some apartments I had in the 80’s.

2541 S. Nantucket Way

See more photos at:

http://www.sellmyboisehome.com/property/98535565/

Now if you want to see this, contact Sara Brosier at 208-697-4111.

 

The payment would run about $1625 with 20% down and current rates on a 30 yr fixed rate mortgage.

For more financing options, call me at 861-7579 or apply online 24/7 here.

 

What is a VA Mortgage?

In many instances, younger people who return home from serving their country would like a home to call their own. Not having built up a vast credit rating in the community, it is quite possible that this would be denied to them. One thing that they can do is to avail themselves of a Veterans Administration home loan, part of the perks attached to being a veteran.

 

A Veterans Administration home loan helps veterans, surviving wives or husbands, or service men and women to become home owners when they may otherwise not be able to do so. The mission of the Veterans Administration and the home loans is to bring home ownership into the hands of those who have served our country. In Idaho a VA mortgage can assist you in gaining access to a home more rapidly.

The VA can help you to buy a home, to repair a home, to retain your home, to adapt a home if necessary in order to make it ready for your personal use. In some cases, as veterans who have been injured come back to the United States they require some adaptation of their homes in order to be able to use them well. The VA mortgage can help with that too.  VA home loans are  home loans which are provided by private lenders but which are guaranteed by the United States government so that the monies are more easily attained by the veteran and the lender can offer terms for your Idaho VA loan which are much more favorable to you.

 

Changes to FHA loan program waives the 3 yr waiting period after a foreclosure or short sale!

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Borrowers who lost their homes through foreclosure or short sale will no longer have to wait three years to get a mortgage to buy another home.

The Federal Housing Administration has changed the rules to help buyers whose credit was tainted due to the loss of a job or income reduction. They will now be able to get a mortgage to buy again after a one-year waiting period through the FHA’s new lending program, dubbed Back to Work. The FHA previously required these buyers to wait three years before applying for a mortgage.

Buyers who can document they lost their home to foreclosure or filed for bankruptcy because they were laid off or because their income was reduced by at least 20 percent will be eligible to apply for a loan after paying their bills on time for a year, according to the instructions the FHA sent lenders last week.

The change is effective immediately until September 2016.

Some of the qualifications:

Borrowers will be required to provide documentation showing the loss of income or employment, including termination notices, tax returns and W-2s.

The program is designed to help potential buyers who went through a period of financial distress but have been able to get back on their feet and can afford a home again.

The program is especially helpful to borrowers who went through bankruptcy and foreclosure simultaneously. Often, the lender doesn’t take title of the property until years after the discharge of the bankruptcy, which has delayed the start of the waiting period for many potential buyers.

During the one-year waiting period after the foreclosure sale, bankruptcy discharge or short sale closing, the borrower should have:

  • No late housing payments (rent/mortgage).
  • No more than one 30-day late payment on all other      accounts.
  • No accounts in collection.

Borrowers will also be required to go through housing counseling prior to being approved for the loan-I expect Idaho Housing to offer this and be a leader in this program.

As you can see, it’s not simply a wipe the slate clean and start over program, it will take some preparation to get requalified.

If you need a lender who will do the hard work, call me.

Are you really “pre-approved” for that home loan?

I sometimes get calls from a home buyer who states they are pre-approved at ………. Bank.

In the course of conversation, I ask the usual, necessary questions to provide good information and recommendations and discover that they have not been asked these questions by the other lender. Many times I hear that the other lender hasn’t seen their tax returns or bank statements.

Since lending in 2013 is much more complicated and requires documentation for all aspects of a borrower’s finances, credit, and the property being purchased, I’m very surprised that other lenders didn’t go into these questions.

Bottom line is; if a lender has not asked for and examined your W2s, paystubs, tax returns, bank statements, and ran credit, you don’t have a pre-approval for a home loan, you have at best a pre-qualification.  Pre-approvals are based on actual documentation and pre qualifications are based on whatever the borrower says to you.  We know that some borrowers will not tell you the whole story because they think that its not important.  Some will outright lie about past credit problems, and some simply don’t want to do their part in the home buying process, ie gathering the necessary documents that it take s to get a home mortgage in 2013.

I say that you approach getting a home mortgage the same way you approach a health concern with your doctor.  You tell them everything you are experiencing or are concerned about, you take the pre-appointments blood test or other screenings, you answer honestly the questions your doctor asks and then you can get the best advice and treatment.

If you are a home seller, you should insist that your prospective buyer provide a solid pre-approval letter from a reputable lender.  some home builders in my market, Boise Idaho , have required that any prospective buyer pre-approve with their lender to be sure.  If you are a Realtor, don’t let your buyers put offers on homes without having a solid pre-approval letter.  Yes, they want to go look at houses as that’s the fun part, but it will be well worth the time to make sure they have a solid pre-approval beforehand.

If you need a lender who will do the hard work beforehand, I know of one.

How long do I have to wait after a foreclsoure or bankruptcy to get another loan?

Bankruptcy:

  • Chapter 7 or Chapter 11: A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.
  • Chapter 13: Requires two years seasoning from the discharge date to loan application date or four years from the dismissal date to the loan application date.
  • Multiple Filings: For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.

Foreclosure: Loans require 84 months seasoning from foreclosure completion to loan application date regardless of reason

 

Now for Short Sales and Pre-Foreclosures, the rules are a little different:

 

2 years – 80% maximum LTV
  • 4 years – 90% maximum LTV
  • 7 years – standard LTV

Now for FHA loans, the waiting period is less:

Bankruptcy: 2 years must have elapsed since discharge or dismissal of Ch 7 or Ch 13.

 

Bankruptcy High Balance Cash-Out Refinance: Not allowed in past 7 years.

 

Foreclosure, Deed in Lieu or Short Sale: 3 years must have elapsed since completion. The wait period for short sales can be waived if all of the following conditions are met:

·        The loan was current at the time of the short sale

·        The loan was paid on time in the 12 months preceding the short sale

·        All other installment debts were paid on time in the preceding 12 months.

 

The key to a successful home purchase is preparation

As with most activities, preparation makes a big difference in the outcome.  When buying a home, you need to ask yourself the following questions:

How much can I afford to pay and still pay my other bills and meet my other financial goals.

What do I really “need” in my new home?  What is a “want.”  Wants are often optional and always more expensive.

Is the new home closer or further from my work.  If further, did you take into account the extra cost of commute?

What does the surrounding neighborhood look like and is it changing?

How long do I see myself being there?

The next preparation is a financial one.

Gather your last 2 years w2 statements, your last month’s paystubs, the last 2 months bank statements and go visit your local lender.  If you don’t have one, I know a great one in the Boise, Idaho area!

Your mortgage loan officer will look at your income and assets and come up with an amount and loan program that will meet your needs.  You’ll probably want to have them run your credit report to make sure its in order as well.

When your mortgage loan officer has all three, he can run a pre-approval and give you a mortgage pre-approval letter.  Having a mortgage pre-approval letter will make your home offer more attractive to the home seller.  In many cases, a mortgage pre-approval letter is mandatory when making offers on government or bank owned homes.

The next preparation is to find yourself a Realtor you want to work with.  It seems that you can find a Realtor anywhere you go, but finding the right Realtor is vital to have a successful and positive experience buying a home.  You could call the agent who has a sign in front of the house you are interested in, but their duty is to the seller who listed the home with them.  They will probably be happy to show you the home and may be the greatest
realtor in the world, but remember, their duty is to the seller.  Anything to tell them, they are required to report it back to the seller.

This is why you should get your own Realtor, a buyer’s agent.  If you need the name of a great Boise are Realtor, I work with many great agents.  Each one has their own uniqueness, abilities, and personalities.  You will be spending a lot of time with your Realtor, so choose wisely.  A great Realtor will be one you will use again on the next house and would be one you could refer to friends and family.

When you make your offer on a home and get it accepted, then the real fun starts.  You have to set a deadline for closing and during that time many things will have to happen to make it close on time.  You probably should spend the money on a professional home inspection, it could turn up an expensive defect in the home.  You also should make arrangements  for utilities , mail forwarding, moving help, and final walk through.  When your loan is past final underwriting, you can set an appointment with the Escrow company to do your signing.  Having a few days notice to get off of work early or take a long lunch is helpful.  Escrow is done during business hours so plan on taking some time or ever the day off if possible.  It’s good practice to let your supervisor know that you are going to need a little time off soon to close on your house.

Once you close on your home, its yours.  You’ll probably have a lot of moving and unpacking to do, but that’s a subject for another post.

As you can see, with so much to do, its vital to be prepared or else it can be a very stressful experience!  If you need help getting ready to buy and are in Idaho, feel free to contact me.

Best of Luck!

 

Can I get a “gift” from my parents for a down payment?

Yes, you can! This is the classic case where the parents help out the kids buy their first home. It is allowed under Fannie Mae, Freddie Mac, and FHA mortgage guidelines.

The rules vary by program, but generally, the rules are it has to be a true gift and no expectation of repayment. It can’t be a loan to be paid back.
There will be a letter stating that it is a gift from the parents (or any other family member) to the borrowers and it is signed by all parties.

There is also a set of documentation that needs to accompany the gift to prove that it was the parents to give, it was deposited into the borrower’s account, and what the balance is after the gift was deposited. FHA also requires that the parents show what account it came from.

There is also a provision in the FHA mortgage guidelines that allow a family member’s “gift of equity” to purchase a home that the parents own but want to sell to the kids.

For Fannie Mae and Freddie Mac, the rules are slightly different. You can get a gift for part of the down payment but you would need a minimum of 5% of your own funds into the deal. Here is how this could work. You have 5% saved for a down payment and want to go with a conventional loan. You can get a gift for 15% from a family member and that would give you a total down payment of 20%. Having 20% down allows you to get a conventional loan without having to purchase private mortgage insurance. This is the exact deal that my wife and I got when we purchased our first home. Thanks Mom and Dad!

Anyway, if you think you will need a gift for a down payment, its best to come see your local mortgage professional ahead of time. There is a little extra work and time required to put this together. You also want to make sure your family members are aware and able to do the gift when you need it.

If you need further assistance with a gift for down payment, contact me at 208-955-1234 ext. 30.

Just finished up my busiest month since May of 2006!

Interest rates moved up around memorial day but my clients who listened to my advice to lock their loans got deals that probably wont come around again.

Right now, if someone was looking for a no cost VA refinance or an FHA streamlined refinance would pay about 1.25% higher than what was available before memorial day.

That doesn’t mean that rates are bad, in fact they are still great, just higher than they were a short time ago.

I keep track of my clients situations and needs and when I see a chance to improve it, I will contact them and let them know what is available. It was those past clients that listened to my advice and had me lock their rates that were successful in getting a no cost refinance in the low 3’s. The clients who didn’t want to lock all thought the rates would drop a little more and missed the opportunity when rates moved up 4 weeks in a row.

While I wish everyone had listened to my advice, most did and that made for a lot of work and long hours getting their loans set up, processed and closed. I did have to skip a few trips to the gym or lunch invites, but it was worth it to take care of my clients.

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