USDA Rural Housing is back...more to follow

The Agriculture Department has reopened the Rural Housing Service single-family program by offering lenders $2.5 billion of conditional loan commitments, according to Rep. Ruben Hinojosa, D-Tex

Top Ten Dos and Don'ts While Buying a Home As a First Time Homebuyer

Top Ten Do's and Don'ts While Buying a Home As a First Time Homebuyer

By: Michael Foote


I recently attended a seminar in which a startling statistic was thrown out. 47% of the previous months residential sales were by first time homebuyers. As a banker this is an important statistic. I need to make sure that segment of the buyers is served to the best of my ability. To that end, I want to share some of the mistakes I've seen during my 22 year mortgage career made by borrowers/buyers.

#10 - Do not change jobs

The purchase process is daunting enough as it is, but to compound things and get a new job during the process may just jeopardize your prospects for an easy loan approval. Hey, I am not saying you can't take a great opportunity I am just saying it can cause issues.

Here are two examples. You have a nice W-2 job paying $75000 a year and you decide the company net door has a job similar with a smaller base salary but offers additional commission and bonus structure that you will likely earn more in the long run. Well an underwriter does not know if the job will work or not and cannot forecast earnings for you. She would likely be required to qualify you on only the base salary as there is no history of the commission or bonus income.

In another example you are a CFO for a plastics company and are hired away by another firm in another industry. Provided base salary and compensation are guaranteed there would likely be no underwriting concerns.

The best solution is to delay any job change until after your financing is complete.


#9 - Do always file tax returns and keep copies



You'd think it would go without saying but many out there still don't file tax returns regularly. Taxes are due in April and if you delay filing you must have filed an extension prior to applying for a loan.



Delinquent tax filings will always complicate and almost eliminate any form of reasonable financing out there. So if you are going to buy a house, you need to have filed your tax returns and up to date.



#8 - Do keep your monthly mortgage statements and other monthly statements for any and all debits of credits.



I am a big fan of keeping documentation from any financial transaction where my money is involved. Well I probably keep too much, but if you are applying for a home loan, there are a whole host of reasons why you should have six months of bank statements, bills accounts statements etc. You should also have at least 3 years tax returns on hand. In the mortgage business we often need support, proof, and documentation to prove many things in a borrower's financial picture. Having these documents handy will save you time and frustration if you have them out and available earlier.



#7 - Don't co-sign for anyone



It is certainly possible you have the wherewithal to co-sign for another person or family member. I cannot share with you how many times I've seen this ruin someone's credit scores. If at all possible avoid doing this ever. If you sign for someone else be prepared to have to qualify with those additional payments as if they were your own debts.



#6 - Don't move money around in accounts



When you are buying a home, you are telling the bank that you are credit worthy, you have been able to properly save the money required for the down payment and closing costs and in some cases you have the reserves to show additional strength.



It is very hard to prove that you have saved properly and have "seasoned funds" if you have recently transferred or had amounts of money transferred between your own accounts and the accounts of others.



Your money should be sourced properly and seasoned appropriately or else additional time consuming conditions will be added to your application.



If you absolutely have to move money - keep every receipt small and large and the statements both with drawls and deposits.



#5- Research your monthly payments options



There is no substitution for experience when it comes to mortgage banking. I pride myself and a very good and very educated mortgage professional. In todays mortgage market it is more important than ever to be technically proficient in all forms of conventional, portfolio and government lending.



Once you do find you mortgage professional you need to consider your payment obligations versus the home and sales prices that will come with them.



While we in lending qualify using your gross wages you are paying with your net income every month. Even though you may qualify for a mortgage does not mean it makes financial sense. It is always important to heavily weigh financing and the tools available for down payment assistance and lower start rates.



#4- Do the math



Know what you are getting into. Read your disclosures we send them to you for a reason. Know what your mortgage terms are, how must it all costs, what your payments are.



#3-Do choose a bank or verified direct lender



Although I have been a mortgage broker in my career I have to say that dealing with a direct lender and/or bank is today the best way to go. The shear truth is these institutions are better able to adapt to the ever changing lending atmosphere. That is not to say there are not good brokers, you just don't have time to figure out who is good or not.



#2-Do make sure you are ready for the commitment of ownership



Let's face it, you are thinking about settling into a home, investment, and an anchor. Houses are a look like pets. You can't just leave them. You have made a commitment. Are you thinking about moving to China for that job or back to Kansas, to be with Dad? If you are contemplating these things...it's not time to buy.



#1- Do Relax



If you are lucky enough to find the right mortgage lender he or she will instill the confidence that will help get through the emotional rollercoaster of buying a home. It is the biggest financial transaction you will be part of and undoubtedly that strike fear in many. I am here to tell you it's all going to be OK. If it is meant to be it will be. If you've done what I've said above you'll be fine.



And congratulations on your new home!



With over twenty years experience in mortgage lending, a Certified Mortgage Banker Designate (CMB) from the Mortgage Bankers Association of America, and billions in funded loan experience, I can assist you and/or your clients with the most important financial decisions realted to your residential and commercial real estate. Please call or email me today



Michael A. Foote, CMB

Certified Mortgage Banker

949.584.4600 begin_of_the_skype_highlighting 949.584.4600 end_of_the_skype_highlighting

michael@michaelfoote.com



Article Source: http://EzineArticles.com/?expert=Michael_Foote

Down Payment Assistance programs

May 27, 2010


Down Payment Assistance Programs (DPA’s) for First Time Home Buyers

By: Michael A. Foote, CMB

There is money available for first time homebuyers today. In a much needed addition to financing products available today, down payment assistance programs are available once again. Down Payment Assistance Programs are generally a local, state or federal grant or bond program designed to assist certain persons with certain income levels in certain areas, with money that can be used for down payment and closing costs on many purchase loans.

These tax free grants or loans are generally forgivable provided the buyer stays in the home for a designated amount of time. And these dollars can dramatically change the amount of money required for closing when these first time homebuyers buy a home. For example, a typically FHA borrower may have to come up with over 4-7% total of the sales price whereas a borrower with a WISH down payment assistance program may only need to bring in 2-3% total. That’s a huge amount of money on a several hundred thousand dollar transaction. If you amortize out that difference the savings are literally tens of thousands of dollars since most closing costs are financed in the new mortgage.

So what does the process with “DPA” look like when compared to the regular loan process. Quite frankly, it’s seem less to the user insofar that the lender will generally have to deal with the additional hoops during the process. For the borrower/buyer they probably wouldn’t know the difference. The only real difference is a potential for a slightly longer loan processing time.

So is DPA a good idea? Well, lately it has been a challenge for Realtors to get clients using FHA let alone FHA WITH Down Payment Assistance so an argument could be made that using DPA on an Offer to Purchase could be a determining factor for the seller’s side when these choose the offer to open escrow with.

The only cure for this pitfall will need to be more product on the market for properties up to the $400,000 range as DPA generally have no purpose and no qualifying borrowers as the sales price rises and/or in areas of high per capita income.

Undoubtedly, DPA has a place in today’s financing landscape and those of in the industry are happy to have it, it is one more additional tool to increase homeownership for low to mid income families. And this product will help sell the forecasted shadow inventory rumored to be lurking around the corner. Only time will tell if that come to fruition or not.

These programs are not free from abuse, there have been in the past scams related to DPA and officials, lenders, and large institutions have really scaled back what is allowable as DPA. Also economics play into the availability of these from all the time. There are many DPA’s completely drained of funds. One bank, Pacific Mercantile, where I work, has two great programs and there are more out there. When consulting your mortgage banker, make sure you inquire into available DPA programs by city, county, state, and federal levels.

Jumbo Mortgages..are actually available

Well it's official lenders and investors are looking for jumbo product. With jumbo rates the lowest they've been for awhile AND a private securitization market that has awaken partially, originators are now being tasked with getting those jumbo borrowers into refinance and buy more property.

What will be different than the jumbo loans of several years ago, will be a steady dose of income documentation..real income documentation, verification of assets, and real clear view of the properties value. Yes, investors want the product but they want the least risky available.

We will not see a stated income deal for...check that. I predict that we will in fact see a state income type transaction for the self employed. Even the Fed's have spoken about the need for loan products geared to our self employed citizens (voters). And I agree wholeheartedly that these products should be available to sophisticated borrowers who understand leverage and risk.

As long as the mortgage industry does not take advantage of itself and keeps these jumbo guidelines in order and with transparency of risk to all, a niche in the mortgage industry can again flourish.

Expect 80% as a maximum LTV and borrowers will need to document everything. Rates for these types of mortgages run about 5.75%-6.00% depending on the particulars. Adjustable and Fixed rates are available. Rates of course float and change often.

For jumbo loans to and the niche to prosper values will need to remain static or at least rise slightly to ensure borrowers have skin in the game. If the economy were to falter again, and values suffer, then more jumbo borrowers will default. So as long as the current economic climate continues to improve, so shall the availability of specialized loan products.

The Mortgage Broker Awakes

We got some very good news for the nation’s small business mortgage brokerage community. FHA recently had announced that they would allow FHA lenders to fund loans originated by mortgage brokers not directly approved by HUD. What this means is all those mortgage brokers who did not have the ability to become FHA approved can now start serve a market argued to be anywhere from 15-30% of the market for new home loans.

The big question was if major lenders would pick up on the ruling and actually allow historically non-fha-brokers to originate this product. The product is itself complex as compared to conventional products and requires a highly level of discipline and even requires specialized FHA DE's or underwriters. The answer to the question at hand appears to be answered as Flagstar Bank has released comments about the ruling and a recently held conference call with HUD. Brokers should expect by December of this year to be able to originate and deliver FHA loans for funding.

In what has been a very difficult several years for the mortgage broker, and with new legislation that would further impair the brokers ability to compete, this is a small silver lining.

Of course the broker has a long way to go. Broker market share was once reported to be as high at 80% of all mortgage originated, that number is now south of 14%. With that drop in market share, many have left the business all together. It is very clear, many just weren't prepared for the brutal shut-off - there was no slowdown.

Only time will tell if pending legislation and new originations will keep the broker afloat - it wasn't the brokers fault alone that the mortgage market to collapse, but they are the last group related to finance that hasn't recovered. Banks are now reporting record earnings and the investment banks cannibalized themselves and are paying out record bonuses. Let's hope the small businessman mortgage broker again has his chance to show his professionalism and dedication to providing quality mortgage finance.

The New Mortgage Market - Age of the order taker dies

There once was a mortgage sales disneyland filled with people who recently sold bottled water, cell phones, cars, insurance, crack, and pretty much everything else related to sales. Why? Because we couldn't hire people quick enough. Those people were fortunate, or not fortunate depending on how you look at it, to meet a person in the mortgage business and if they were real lucky, the subprime mortgage business. And that person then recruited the poor unlucky soul. The money was sickening. These guys and gals were pulling down over a million a year...Now that time of irrational exuberence is bust. Many of those that once flew high in the sky are now back in a world or brutal financial reality where the bills pile up and we all are back to balancing our check books, if it balances at all.

Why do I state the obvious facts? Because it is important for those looking for financing today that our industry has been left to the true mortgage professionals. Those left are in it because this is what we do, we don't sell cars, insurance, crack - we sell mortgages. I want those left in the business to feel proud that we are still here providing financing to all americans regardless if this is the niche business of the year - I am proud to continue to offer great financing to qualified individuals and businesses.

The pointless ocean moans on top of each conventional mathematics.

Freddie Mac asks U.S. for $10 billion

You have to wonder just where is the bottom for these losses.
Freddie Mac, the bailed-out mortgage-finance giant, reported Wednesday that it continues to lose money and needs an additional $10.6 billion in assistance from U.S. taxpayers.

The most recent earnings report follows three straight quarters in which the McLean-based company did not need infusions from the Treasury. Still, the firm is struggling to recover from the mortgage-market meltdown; it reported a net loss of $6.7 billion in the first quarter of 2010, compared with a loss of $9.9 billion a year ago.

Freddie Mac is turning to the Treasury again mostly because of a change in accounting. Revised rules that took effect this year require companies such as Freddie to move all mortgages they guarantee -- but don't own -- onto their books. This shift alone caused the company's equity to drop by $11.7 billion, helping to plunge its net worth into the red.

Under the terms of Freddie's September 2008 bailout, taxpayers make up the shortfall in any quarter when the firm's net worth is negative. The accounting change, along with the firm's loss and a $1.3 billion dividend payment to the Treasury, pushed Freddie's net worth to a negative $10.5 billion, down from a positive $4.4 billion last year.

http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050505227.html