So I have eagerly, OK not eagerly, awaited the passing of the FINREG 2010 what is touted to be the biggest increase in government oversight in the financial industry since the great depression. Of course, I am keenly interested in how the bill will impact me, my family, my career, and therefore my future.
So I get on the Internet last night and guess what. No one has published a detailed accounting of what this bill will actually create. I've seem some bullet points, but even those bullet points fail to fully layout or even explain how the bill will change the mortgage market. Some talk has been "Yield Spread is illegal now", is it? I don't see that - wholesale companies are everywhere and last rate sheet I checked had rebate all over it and lots of it.
2300 or twenty-three hundred. It seems like ever more when you write it out. But that is how many pages it takes to protect the consumer from the evils of the banking empire. Funny enough, no one who voted for it has even read it. And even if you did ( and I am not going to) the text would likely cripple your brain into a mush unrecognizable to all but physicians.
Written by attorney's and legally like minded MBA's, the bill is really only a road map and rough draft on how to prevent the train wreck that is the financial crisis.
Even this morning, after the bill has been signed and ready to deliver to the President for signature,Goldman Sachs settled with the SEC and largest earthquake recorded in DC struck. You tell me what that means, but in my world that's an omen.
So what does this mean for consumers since we clearly cannot determine how this bill will really impact lending. They say no more Stated Income loans? Well unless you have 5% capital at risk for those loans (that's not that much) It also exempts FHA and many want fannie mae and freddie mac added to that exemption. So the big banks won't lend then...Well they really aren't right now all that much anyway. So expect it to get harder- not easier to get a new loan.
Fees? Did you say fees. yes these are the things we will all need to get used to seeing more of. Banks will undoubtedly send the costs of ANY new legislation on to the consumer in one way or another. Just wait to see how expensive it will become to have checking account.
Bottom line, no one really knows the true impact of this bill. But one thing is for sure - it's gonna be expensive for all of us.
Friday, July 16, 2010
Thursday, July 15, 2010
fannie mae ok's bk's after two years?
some have asked if fannie mae will allow a new purchase with a bk being dismissed over 2 yrs ago. the short answer seems to be only if a dependent or spouse passes away or a bonafide medical issue causing extreme financial distress. yes....it must all be documented. most loan officers are just declining these - so stay informed.
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Wednesday, July 14, 2010
4.5% at no points - feels good to lock rates this low.
closing times are still consistently 25 days on average.
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Friday, July 9, 2010
The role of the mortgage broker in today’s mortgage market. “GFE” Good for Everything, or a good faith estimate.
With the launch of the 2010 Good Faith Estimate we read articles about the fall of the mortgage broker and that brokers will be unfairly disadvantaged when reporting rates and terms. I am here to call all that poppycock. The simple truth is a borrower can clearly determine how much is being charged or made by the broker and when dealing with a bank or direct lender a borrower does not see all the income being made on their loan. The “TIL” or Truth In Lending Statement still reports the same APR for a broker and lender assuming the same exact terms even if the broker is receiving lender compensation for the loan. Lender compensation or yield spread premium is how brokers offer no points loans and is no different than a bank selling your loan to Freddie Mac except a bank does not disclose this income they receive.
But let’s not forget the role of a mortgage broker. The broker should be presenting him or herself as an authority in the market place, and have multiple investors whereby to deliver their loans. The assumption being that the broker has delivered the best loan product for the client at the most competitive rate and terms to the best individual investor at the time. And every broker should be able to beat a big bank or big bank lender – if they want to. But therein lies the real issue - broker abuse.
Being a mortgage broker became the go to job in the 90’s 00’s for many getting into the industry - and licensing couldn’t have been easier. It just became too easy for mortgage brokers to hijack their clients and charge excessive fees all the while really only being regulated by the wholesale lenders themselves. Of course, those firms had insatiable desires for more paper, so that wasn’t really good oversight, and the states and federal government were apparently asleep for 10 years.
Having originated both as a broker and lender after the new GFE was put into place; I feel I am as capable as anyone to speak to the differences between dealing with a direct lender, bank, or mortgage broker. There aren’t really any differences.
Direct lenders will tell you mortgage brokers cannot be trusted to fund a loan, and mortgage brokers will tell you the banks take 90 days to close. The reality, they are both accurate. There are brokers who can just simply not operate in today’s lending environment and can therefore really train wreck a transaction. But equally frightening is that banks do often take months to close the most simple of refinance or purchase transactions. And often time tell clients late into the process they are not approved or the transaction cannot be completed. Many times due to their own lack of experience mortgage professionals.
Today more than ever it is important to know who you are working with – and be familiar with the actual experience level. Referrals are always great way to determine who to work with. This is not a part-time job. Mortgage professionals need to be licensed and educated in all aspects of residential lending in today’s market. Mortgage brokers generally need even more licensing and education than their bank peers. So your local mortgage broker may be the most knowledgeable mortgage professional available and the cheapest.
So before you go knocking the mortgage broker make sure you are comparing apples to apples and oranges to oranges, and most important, work with someone you trust.
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 related to your residential and commercial real estate. Please call or email me today
Michael A. Foote, CMB
Certified Mortgage Banker
949.584.4600
But let’s not forget the role of a mortgage broker. The broker should be presenting him or herself as an authority in the market place, and have multiple investors whereby to deliver their loans. The assumption being that the broker has delivered the best loan product for the client at the most competitive rate and terms to the best individual investor at the time. And every broker should be able to beat a big bank or big bank lender – if they want to. But therein lies the real issue - broker abuse.
Being a mortgage broker became the go to job in the 90’s 00’s for many getting into the industry - and licensing couldn’t have been easier. It just became too easy for mortgage brokers to hijack their clients and charge excessive fees all the while really only being regulated by the wholesale lenders themselves. Of course, those firms had insatiable desires for more paper, so that wasn’t really good oversight, and the states and federal government were apparently asleep for 10 years.
Having originated both as a broker and lender after the new GFE was put into place; I feel I am as capable as anyone to speak to the differences between dealing with a direct lender, bank, or mortgage broker. There aren’t really any differences.
Direct lenders will tell you mortgage brokers cannot be trusted to fund a loan, and mortgage brokers will tell you the banks take 90 days to close. The reality, they are both accurate. There are brokers who can just simply not operate in today’s lending environment and can therefore really train wreck a transaction. But equally frightening is that banks do often take months to close the most simple of refinance or purchase transactions. And often time tell clients late into the process they are not approved or the transaction cannot be completed. Many times due to their own lack of experience mortgage professionals.
Today more than ever it is important to know who you are working with – and be familiar with the actual experience level. Referrals are always great way to determine who to work with. This is not a part-time job. Mortgage professionals need to be licensed and educated in all aspects of residential lending in today’s market. Mortgage brokers generally need even more licensing and education than their bank peers. So your local mortgage broker may be the most knowledgeable mortgage professional available and the cheapest.
So before you go knocking the mortgage broker make sure you are comparing apples to apples and oranges to oranges, and most important, work with someone you trust.
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 related to your residential and commercial real estate. Please call or email me today
Michael A. Foote, CMB
Certified Mortgage Banker
949.584.4600
Wednesday, July 7, 2010
Rate Update
Clearly, rates have hit all time lows - I have been tracking rates for quite awhile and we are truly at a new low. Today's rates are 4.625 no points for a standard purchase or refinance mortgage. Non-owner or investor pricing is down to 5.00 and almost under 55 for the first time I've seen ever.
If you are in a position to benefit from a lower rate, for heavens sake get your application in today.
If you are in a position to benefit from a lower rate, for heavens sake get your application in today.
Thursday, June 17, 2010
Lock your rate --- Look at the chart it's time
Here is a chart of the 10 yr t-bill from 1962 to date..Clearly you can see that you are in a dratiscally low period. It's time to get it done - If you are going to get mortgage financing of any type for any purpose it's time to pull the trigger. Ironically, applications were at a 13 year low last week. Wednesday, June 16, 2010
Last year chart of the 10-Tbill
Shop for a mortgage - Pick your mortgage professional - trust your mortgage professional - and you will end up happy.
You can always apply with me here.
Tuesday, June 15, 2010
Rate Update and Comparable Sales
Comparable sales are becoming a greater and greater drag of refinance and purchase transactions. As sales for existing homes continue to drag, those sales prices are further preventing some homeowners from refinancing since depressed sales, are in fact, sales.
Thursday, June 10, 2010
Well those market rates are already on the way out - well there are actually already gone. The 10 yr is at 3.29 as of this post which is a 48% pop from yesterday - If yo didn't lock your loan you are out of luck on the lowest of rates. Still worth locking if you are purchasing a home - but if you are trying to time the lowest time - you missed it. Sorrym but as I always say be prepared - submit your loan NOW and wait to lock the rate when it is at it's lowest, then order an appraisal and bam you are done....DO NOT WAIT TO SUBMIT YOUR LOAN APPLICATION. If you do, you will not be ready to lock when it is time.
Thursday, June 3, 2010
USDA Back but not really
Update to my earlier post. Basically the guarantee fees and rules may have changed as big lenders are no longer allowing their correspondents to originate this product - so for the time being you are out of luck if you are looking for this product.
Tuesday, June 1, 2010
USDA Mortgages? I thought they graded my beef not my credit.
Yes, it is the same USDA that grades and approves our meat and many other components of our agriculture industry. But in fact, USDA also offers mortgages via guarantees made to lenders both large and small. One of the key departments within USDA is Rural Development, whose mission is to bring housing, modern telecommunications, safe drinking water and a bumper crop of benefits to our country’s rural communities.
Although our government and economy have been ravaged from the mortgages originated over the last many years, government agencies are in fact trying to stabilize our housing market by providing support for capital markets, guarantees for lenders, and through government subsidized programs such as these. One of the most popular programs is the USDA Guaranteed Rural Housing Mortgage.
So what is a USDA 502 Guaranteed Rural Housing (GRH) Mortgage like anyway? It happens to be one of the only true 100% No money down purchase products on the market today. The other 100% mortgage product is the VA mortgage. Some basic qualifying guidelines are, the borrower must occupy the property, is a citizen of the country or admitted for permanent residency, does not have non-occupying co-borrowers, and will sell their existing home, if one is owned.
Some program highlights are the property must be located in eligible rural area. These are normally any town with a population of 25,000 or less – and it cannot be adjacent to a large metropolitan area. There are no loan limits and sales price limits…Yep I said it, no limits. There is a one-time USDA Guaranteed fee – and yes, you guessed it that fee can be financed. You can even roll in all closing costs if the appraisal comes in higher than the sales price.
The USDA 502 program does not require monthly mortgage insurance. This is a significant advantage over FHA financing in that respect. This savings can be as much as .55% per year and most likely more if FHA raises their monthly mortgage insurance requirement. These purchase transactions can even include new construction.
USDA even allows refinance of an existing USDA GRH loan provided there is a financial benefit via rate reduction or payment reduction. This program ONLY allows 30 year fixed rate mortgages that are fully amortized. The program allows for condominiums and PUD’s along with the standard Single Family Residence.
If you have credit issues, this program may still be for you. Although 620 credit scores and higher are preferred, 580-619 are considered with compensating such as reserves, job stability and more. Less than 580 credit scores are regarded as a much higher risk and require more due diligence then most lenders are willing to commit to in today’s market.
So is this a great program, in a word yes. Clearly 100% I hard to find and without Mortgage Insurance, makes the USDA Guaranteed Rural Housing program represents the highest amount of leverage available for a primary residence purchase on the market today.
So where do you start? Find a lender that offers USDA financing. Mortgage Lenders, Banks and even mortgage brokers have access to this program. Finding an educated Loan Officer however may pose a challenge. Since the USDA Rural program is fairly small in the mortgage landscape, your typical mortgage call center loan officer is just not going to be familiar with this loan. So make sure to do your research and feel comfortable with the person originating your loan and always check references.
Although our government and economy have been ravaged from the mortgages originated over the last many years, government agencies are in fact trying to stabilize our housing market by providing support for capital markets, guarantees for lenders, and through government subsidized programs such as these. One of the most popular programs is the USDA Guaranteed Rural Housing Mortgage.
So what is a USDA 502 Guaranteed Rural Housing (GRH) Mortgage like anyway? It happens to be one of the only true 100% No money down purchase products on the market today. The other 100% mortgage product is the VA mortgage. Some basic qualifying guidelines are, the borrower must occupy the property, is a citizen of the country or admitted for permanent residency, does not have non-occupying co-borrowers, and will sell their existing home, if one is owned.
Some program highlights are the property must be located in eligible rural area. These are normally any town with a population of 25,000 or less – and it cannot be adjacent to a large metropolitan area. There are no loan limits and sales price limits…Yep I said it, no limits. There is a one-time USDA Guaranteed fee – and yes, you guessed it that fee can be financed. You can even roll in all closing costs if the appraisal comes in higher than the sales price.
The USDA 502 program does not require monthly mortgage insurance. This is a significant advantage over FHA financing in that respect. This savings can be as much as .55% per year and most likely more if FHA raises their monthly mortgage insurance requirement. These purchase transactions can even include new construction.
USDA even allows refinance of an existing USDA GRH loan provided there is a financial benefit via rate reduction or payment reduction. This program ONLY allows 30 year fixed rate mortgages that are fully amortized. The program allows for condominiums and PUD’s along with the standard Single Family Residence.
If you have credit issues, this program may still be for you. Although 620 credit scores and higher are preferred, 580-619 are considered with compensating such as reserves, job stability and more. Less than 580 credit scores are regarded as a much higher risk and require more due diligence then most lenders are willing to commit to in today’s market.
So is this a great program, in a word yes. Clearly 100% I hard to find and without Mortgage Insurance, makes the USDA Guaranteed Rural Housing program represents the highest amount of leverage available for a primary residence purchase on the market today.
So where do you start? Find a lender that offers USDA financing. Mortgage Lenders, Banks and even mortgage brokers have access to this program. Finding an educated Loan Officer however may pose a challenge. Since the USDA Rural program is fairly small in the mortgage landscape, your typical mortgage call center loan officer is just not going to be familiar with this loan. So make sure to do your research and feel comfortable with the person originating your loan and always check references.
Friday, May 28, 2010
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
Thursday, May 27, 2010
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
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.
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.
Tuesday, May 11, 2010
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.
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.
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