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.
Friday, October 3, 2008
Thursday, October 2, 2008
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.
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.
Wednesday, October 1, 2008
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.
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.
Sunday, August 24, 2008
$7500 Tax Credit For First Time Home Buyers
Amount of Credit -Ten Percent of the cost of home, not to exceed $7500
Eligible Property -Any single-family residence (including condos) that will be used as a primary residence.
How Credit is Obtained -Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year. Individuals should consult a professional tax advisor for exact tax calculations.
Examples:
If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability. If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.
Income Limit -Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income. Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit. Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.
First-time Homebuyer Only -Purchaser (and purchaser’s spouse) may not have owned a principal residence in three years previous to purchase.
Effective Date -Purchases on or after April 9, 2008 until July 1, 2009
Eligible Property -Any single-family residence (including condos) that will be used as a primary residence.
How Credit is Obtained -Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year. Individuals should consult a professional tax advisor for exact tax calculations.
Examples:
If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability. If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.
Income Limit -Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income. Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit. Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.
First-time Homebuyer Only -Purchaser (and purchaser’s spouse) may not have owned a principal residence in three years previous to purchase.
Effective Date -Purchases on or after April 9, 2008 until July 1, 2009
Friday, August 22, 2008
FHA Loans To The Rescue!
Did your rate go up on your conventional loan because of Fico score? FHA loans are priced better than conventional loans with Fico scores under 720.
Did your conventional loan get turned down on a 97% loan to value as you can no longer get PMI? No problem with FHA.
Is your buyer short of cash at closing? Seller can contribute up to 6%.
Did your conventional loan get turned down because bankruptcy was 2 years old? Try FHA
Maximum loan amount is $271,050 for FHA loans in the Dallas, TX area
Please let us know if we can assist you. I have over 25 years of experience with FHA lending.
Be cautious with Lenders who have just recently started doing government loans.
Do you want "Service without Suprises?" I attend my closings to insure that my customers will be given the product and price that I quote.
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