Tag Archives: Boise Idaho

Why aren’t more renters buying?

In our market, Boise Idaho, the cost of renting a house is more than the cost of a mortgage for a similar home. It would seem that everyone would be buying a home.

The Wall Street Journal did a survey on why, and here it is:

http://realestate.msn.com/blogs/post–why-more-renters-arent-buying

The top three reasons are directly related to our economy and job market, not worries about values dropping or other reasons.

What do you think? Comment below:

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

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