Available Programs
First Time Home Buyers
Collin County, Texas

I am getting many calls from clients and Realtors wanting information about the programs available for the First Time Homebuyers. Some of the products will supply the downpayment but there are restrictions. I have defined the current programs which are not freestanding. The bond and grant programs are typically closed as an FHA loan. Qualifying is not more lenient, it simply assists with the downpayment. Most of the programs below have funds available at this time but there is no guarantee as to the availability of funds. I have provided a breakdown and explanation as to what is currently available.

· Bond Loans- Primarily designed for the low- and moderate income families and individuals who are first-time homebuyers. Funds are provided through the sale of bonds by the Texas Department of Housing and Community Affairs (TDHCA) and Texas State Affordable Housing Corporation (TSAHC).

· City Grants – Funds made available to citizens of specific cities (Frisco, McKinney, Plano) who are first-time homebuyers. The funds can be used toward the down payment or closing costs.

· Federal Housing Administration (FHA) – Loan program created by congress in 1934. Offers lower down payment, seller contributions up to 6%, flexible qualifying ratios and more lenient on derogatory credit. Minimum required downpayment is 3% until Dec. 31,2008.

· United States Department of Agriculture (USDA…like the beef) (Also known as Rural Housing) – USDA Rural Development administers the program and guarantees the loan for rural customers. Closing cost can be rolled into the loan and long as total loan amount is not more than appraised value.

· Conventional Access - Affordable loan program allowing second lien to a Non Profit agency for the downpayment to provide homeownership opportunities for low and moderate income families. Combined loan to value is 100%.

· $7500 Tax Credit – 10% of the cost of the home not to exceed $7500. Available to First Time Homebuyers purchasing a home between April 2008 and July 2009. Income limitations apply.

Let's Turn a Negative Into a Positive!

Housing starts hit another 17-year low
Home construction and building permits both fall sharply in September to levels not seen since January 1991. Housing starts have fallen nearly two-thirds from their peak of 2.3 million in January 2006, and were at the lowest annual pace since January 1991.

"This is bad news for anyone who works in the housing industry, bad news for the economy as a whole, and the decline in housing activity just continues to deepen," said Mike Larson, an analyst for Weiss Research. "This is one of the worst downturns in the housing market in the history of our country."
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The above made headlines today.

Now let's stop and think of how this can help our business.

The Realtors, Lenders not affiliated with builders, and the Title Companies not affiliated with the builders will all benefit. When there is less housing available, supply and demand will change.This will greatly benefit the owners that are currently trying to sell their existing homes. We see this as an opportunity to make more loans on the existing inventory of homes available in this area.

There are some great programs for Homebuyers at this time and home ownership is affordable with many homes to choose from. Lets take a negative and turn it into a positive!

Why Fed Rate Did Not Lower Mortgage Rates

The Federal Reserve has cut the Fed rate 7 times trying to deal with the credit crisis. This was to help stimulate the economy lowing the overnight rates where banks loan to banks. This is to assist in controlling inflation by keeping funds available at a low rate . Unfortunately many banks have substantially tightened the credit standards for businesses and consumers so the rate cuts have only offset the tightening in credit conditions created by the financial turmoil that has escalated in the last few months. Conditions would probably be worse if the Fed had not acted.

The price of oil and other commodities have come down this week and the dollar is stronger but global economic conditions will make it unlikely that the Fed rate will be raised any time soon. Keep in mind that the rate is so low that there is very little chance that it can go lower.

The economic system has gone thru 31 “bear markets” defined as a decline of 20% or more in markets since 1900. This has been followed by 31 recoveries. We have no reason to doubt that this will not turn around.

We are not anticipating escalating interest rates but you need to understand that mortgage rates are not necessarily based on Fed rates. Many clients are shocked when they think the Fed rate of 2% means very low mortgage interest rates. I feel that any rate under 8% is a very good rate.

Mortgage Occupancy Classifications

There are new challenges and opportunities in the mortgage industry everyday. I have decided to pick a real scenario each week to help the general public better understand the changes that have taken place in mortgage lending. I choose this topic as I spoke to a potential client last week that was ready to sign the sales contract on Investment property but did not have any idea that he would need a 20% downpayment. It is difficult to obtain PMI or secondary financing on investment property so that means a downpayment of at least 20% which is dependent on FICO scores.

There are only 3 catagories of occupancy on mortage loans which is as follows:

Owner Occupied
· Also known as Primary Residence
· Eligible for homestead exemption
· This is the home where the borrower lives
· Co-borrower can be non owner occupant but program restrictions apply

Non Owner Occupied
· Borrower does not live in this home
· Property can be rented-also known as investment property
· Sometimes a family member lives in home
· Is not eligible for the homestead exemption
· Must do a conventional loan with at least 15-25% down
· Difficult to get PMI
· Difficult to obtain 2nd liens
· Must have strong cash reserves remaining after loan closes
· Must count full payment and cannot offset with a new lease
· Rate is higher than owner occupied
· Seller contribution is maximum of 2% of sales price

Second Home
· Typically in a vacation area
· Property cannot be rented
· Can be purchased if borrower stays in the home on a part time basis
· Rate and downpayment may be higher than the Primary home
· Not eligible for the homestead exemption

Economic Rescue Passed--Now What?

Is is time for a new Dollar Bill?

Ok, deep breathe..... Lets talk about the week. Monday was brutal, followed by some recovery Tuesday and Wednesday.


Yesterday the Senate voted the Revised Economic Recovery plan and Congress finally said Yes today. So in 25 words or less.... what does the Economic Recovery plan mean? Credit lines will remain open and lending should continue. Is it the magic bullet that everything is perfect and all will be the same as before or better? No- but it is a start.

Now it is up to us to get the word out that financing is still available without a large down payment. Inventory is strong and it is a wonderful time to purchase. Many potential buyers are now feeling as if they can't buy a home until they save money for a large down payment. This is not always the case and if buyers want to purchase a primary home, there are ways that are still available to reduce cash required for closing. All programs do require that the buyer qualify for the house, which is a good thing as it won't put people in homes that they can't afford. The credit history does not have to have been perfect. We do have financing for homes for people with credit scores of 580 and higher, as long as they can show a good rental payment history.

On October 1, 2008, the ability to get an FHA loan and have the seller contribute to a seller-funded down payment assistance program such as Ameridream and Nehemiah ended. The passage of Housing Bill 3221 by Congress took this feature away, ending the ability to have the seller help a buyer to get 100% financing on an FHA loan. A buyer will now have to contribute 3% towards down payment (3.5% after January 1, 2009) for an FHA mortgage.

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  FHA mortgage allows a gift from a family member - A family member can gift the 3% down payment required . FHA loan limit is$271,050, making it a very attractive loan in Dallas/Fort Worth area.
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  There are First Time Home Buyer Bond Programs available. Many of these programs are getting their new allotment of funds this month.
  Zero down VA loans are available for those who have eligibility for having served in the military. In addition, using the VA in conjunction with the Texas Veterans Land Board program
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  USDA Rural Housing loan - this program actually has the ability to include closing costs in the mortgage as well as no down payment and no monthly mortgage insurance! There are income and location limitations but many people are surprised to see exactly what areas do qualify (i.e., Rockwall, Wylie, Forney, Little Elm,Princeton, Anna, and Melissa, just to name a few).

Interest rates are still low, and buyers can purchase a home with a lower payment. It is a great time to purchase a home.

Don't Let the Media Attention Cripple Your Business

As we start this last quarter of 2008, we need to remember that we are living in interesting times. This is an election year and nothing is as controversial as the economy. Don’t let the media lead you to feeling like our market is “Doom and Gloom”.

Everyone in the Real Estate and Mortgage industry need to stay focused on what is important:

People need Homes.

It doesn’t matter what the economy is doing.

It doesn’t matter what the interest rate is.

It doesn’t matter who is elected President.

The point is that people will buy and sell homes regardless of these situations.

Fear of the future is not the answer. Positive steps forward by taking one step at a time and doing the best job that we can do is within our control. A positive attitude and hard work will mold our future and the future of our clients.

Remember that bad news sells newspapers. The media frenzy is about sensationalism and it is easy to get into a pattern of following the crowd. I encourage you to think about your business and what you can do to make it stronger. Surround yourself with positive people who understand that attitude is the only thing that is within your control.

Remember the positive things in your life and be grateful for your many blessings. We are all in a position of service and our service can change lives. Assisting with the buying and selling of homes is a life changing event for all of our clients. The economy is cyclical and it is expected to have highs and lows. In times of chaos, we can remain calm and positive. We are fortunate to be working in the best country on earth.

Buy and Bail

Buy and Bail

The term “buy and bail” is becoming more popular. This is where the homebuyer purchases a more affordable dwelling with the intention to cease making payments on the previous mortgage. The mortgage industry has tightened underwriting guidelines on primary residences that are pending sales or converting them into investment properties.

The following are guidelines for FHA and Conventional:

FHA – The following went into effect September 19.

On a temporary basis FHA will not consider any rental income from the property being vacated except as described below:
1.)Relocations: An executed lease agreement signed by the homebuyer and the lessee for at least one year’s duration after the loan is closed is required. Evidence of a security deposit and/or first month’s rent paid to borrower.
2.)Sufficient Equity in Vacated Property: The homebuyer has a loan-to-value ratio of 75% or less as determined by either a current (no more than 6 months old) residential appraisal or by comparing the unpaid principal balance to the original sales price of the property.

Conventional – The following goes into effect October 1.

The current primary residence is pending sale that will not be closed (title transfer to the new owner) prior to the close of the new loan transaction, or the current primary residence is converting into a second home:
1.)The borrower must qualify using both the current and proposed mortgage loan payments
2.)6 months principal, interest, taxes and insurance (PITI-reserves for both properties are required, or as determined by Automated Underwriting
3.)If there is documented equity of at least 30% in the existing property a reduced reserve requirement of 2 months for both properties is permitted. The 30% equity in the existing property must be documented using a full appraisal or automated valuation model (AVM).
4.)If the current primary residence is pending sale, the PITI for the property for sale does not need to be included for qualification purposes provided the following is provided:
The executed sales contract for the current primary residence
Confirmation that any financing contingencies have been cleared
Evidence of PITI reserves as outlined above

If the current primary residence is converting to a second home the property must be located in an area that can reasonably function as a second home.

If the current primary residence is converting to an investment property there needs to be documented evidence of 30% or more equity in the existing property. The borrower may continue to use 75% of rental income to offset the mortgage loan payment amount.

The 30% equity in the existing property must be documented using a full appraisal or automated appraisal service.

The rental income must be documented with both a fully executed lease agreement and the receipt of the security deposit from the tenant and evidence of the deposit into the borrower’s account

Standard reserve requirements apply.

If equity of 30% in the existing property cannot be documented the borrower must qualify using both the current and proposed mortgage loan payment amounts.

Back to Basics of Mortgage Lending

The news media would have you think it is very difficult to get a mortgage loan these days. The fact is if you follow the basic qualifications described below there should not be any difficulties.

Credit History: Paying creditors according to the terms agreed upon is important to maintaining a good credit score. How debts have been paid in the last 12 months accounts for 40% of your score. Your credit score determines the credit risk for the type of loan program an individual qualifies for.

Employment: A verification of employment showing one full month’s of earnings needs to be provided. A 2 year history of employment in the same line of work or profession is favorable on an application.

Savings: A savings history is advisable whether it be in the form of a traditional savings/checking account, 401k or in other monetary investments. The capacity to save demonstrates discipline and responsibility.

Although the information above is pretty basic there are always exceptions, explanations and extenuating circumstances. If you, a family or friend has any questions on qualifying or refinancing a home mortgage please call me for a free consultation.