The Real Folsom Blog

FICO Scores Are Increasing While DTI Ratio Is Dropping

Some valuable news from guest blogger Barbara Van Duyn. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.
 
Several lenders have announced the minimum FICO score for an FHA or VA loan is increasing to 640. They are also imposing an adjustment up to .375% to the rate if your qualifying FICO score is 660 or below. Does this mean you can't get a loan if your FICO is below 640? Not yet … there are lenders who accept lower credit scores but you can expect to pay a higher rate. Fannie’s minimum FICO is 620 but the price adjustments for scores between 620 and 719 will make your interest rate explode!

Along with minimum FICO scores increasing, the debt-to-income ratio (DTI) is decreasing.  Fannie Mae announced that beginning December 12, 2009, their underwriting guidelines will be revised to a max DTI at 45%. There can be exceptions for higher compensating factors. Your DTI ratio is calculated by taking the proposed housing costs (including property taxes, homeowners insurance and mortgage insurance if applicable) coupled with your minimum monthly payment on existing credit card and installment accounts compared to your gross monthly income. More reasons for you to get your credit scores and outstanding debts in order before applying for a mortgage. Until the next time, take care. Barbara

Interested in a Home Loan Larger Than $417,000?

Today guest blogger Barbara Van Duyn updates us on conforming loan limits. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.
 
They’re called Conforming Jumbo, Conforming High Balance, or even Agency Jumbo. All terms referring to a home loan between $417,001 and $729,750 in high-costs areas for a single-family residence. It can be confusing because there are permanent loan limits and temporary loan limits throughout the U.S. 

Fannie Mae and Freddie Mac raised their conforming loan limits in 2008 during the credit crunch to ensure liquidity for loans greater than $417,000 in high-costs real estate markets. These temporary high balance limits have been in place since 2008 but were scheduled to expire at the end of the year. Good news … there will be no change for 2010. If allowed to expire, the temporary ceiling of $729,750 would have been reduced to the permanent ceiling of $625,500. For Sacramento, Placer, and El Dorado counties, the temporary Conforming High Balance limit remains at $580,000 through 2010. The permanent limit is $474,950. For most counties in the Bay Area it’s $729,750. The permanent limit is $625,500.

The reason for all the hoopla is because interest rates on loans that meet Fannie or Freddie limits, whether they be Conforming or Conforming High Balance, are priced significantly better than a Jumbo loan. Bottom line … it’s good for the housing market. Until the next time, take care.  Barbara

Footnote: 
1)  Temporary high balance loan limit of $729,750 established in the Economic Stimulus Act of 2008

2)  Permanent high balance loan limit of $625,500 established in the Housing and Recovery Act of 2008  

Tax Credit for First -Time Home Buyers AND Repeat Buyers

I love getting good news like this from guest blogger Barbara Van Duyn. Read on! Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

It’s official. The home-buyer tax credit has been extended. Breathe in … breathe out … you now have until April 30, 2010, to get a purchase contract executed and qualify for the $8,000 first-time home buyer tax credit. If you’re already a homeowner (with some equity) and planning to buy up or downsize, you may qualify for the new $6,500 tax credit. In either case, your escrow must close no later than June 30, 2010. Since Congress didn’t stretch this out for all of 2010, I wouldn’t plan on another extension. One more thing … the qualifying income limits have been raised significantly.

No need for me to reinvent the wheel. For all the details about both programs you have to check out this Web site. It has an awesome Q & A section. Until the next time, take care. Barbara

An Extension of the Home Buyer Tax Credit is Closer

Some encouraging news from our guest blogger Barbara Van Duyn about the soon to be expiring home buyer tax credit. Read on! Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

As we approach the November 30th deadline, we have some encouraging news on the extension of the $8,000 home buyer tax credit. It’s not a done deal but the news is looking pretty good. Wednesday the Senate reached an agreement to extend the tax credit for first-time home buyers. In a new twist, they are including a $6,500 tax credit for home buyers who are not first timers. They also raised the qualifying income limits in a very meaningful way... singles were increased from $75,000 to $125,000 and joint taxpayers from $150,000 to $250,000. The qualifying period will be extended to purchase agreements executed by April 30, 2010, and allow buyers until June 30, 2010, to close their escrow.

The House and Senate now have to reconcile their versions of the tax credit and create a final bill to be voted on before the legislation will take effect. Both houses have different ideas of what the home buyer tax credit should include so it will be interesting to see what they decide on.   

Here's my take away from this news. Regardless of the provisions in the final bill, those of you who are actively making offers on homes now have some breathing room. If you’re motivated by the tax credit and have put off your home buying plans until next year, you’ll want to keep the April 30th deadline in mind. I’ll be back with another update once a final bill has been voted on and the details become available. Until the next time, take care. Barbara

Interest Rate Headlines … What They Don’t Tell You

Many of us love the idea of getting that killer deal but as guest blogger Barbara Van Duyn, points out it's good to still stay grounded in reality when making financial and home purchase decisions. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.
 
Are you a rate shopper? Have you gotten sucked into the radio ads touting 4.875% with an APR of 5.125% or something similar? How about the online offers that will quote you a rate if you just supply your name, address, phone number and email? Do you really want someone who buys your contact information to also manage your loan origination?

Here’s a brief list of variables that go into determining your interest rate whether it’s a purchase or refinance. 

Loan Amount – conforming, high balance conforming or jumbo
Property description - single family residence or something else
Occupancy – primary residence, second home or investment
Loan to value – more than 80% or less
Loan period – 30-year fixed, 15-year fixed or something else
Loan program – conventional or government
FICO score – qualifying FICO 720+ or below
Rate lock period – 15, 21, 30, or 45+ days
Paying Points or No Points

These are the biggies but there could be other items that affect the rate you qualify for. So which rate are you really interested in … the teaser rate or the rate you actually qualify for?  The next time you decide to shop for an interest rate, make sure your comparison includes the same criteria. Until the next time, take care. Barbara

A Preview of FHA Changes Headed Our Way

Today's post by guest blogger, Barbara Van Duyn, is a must read if you are close to buying a home and plan on using FHA financing. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

Most first-time home buyers choose FHA financing because of the lower down payment requirement and less than perfect credit history that allows more buyers to qualify these days. But make no mistake, as conventional underwriting guidelines continue to get tougher we have seen FHA raise the bar too. Most lenders have adopted a minimum qualifying FICO score of 620 and if your FICO is 660 or below, your interest rate will cost more. HUD recently announced FHA changes coming January 1, 2010, that home buyers need to know about.

FHA Appraisal Period. Currently an appraisal report is effective for a period of six months on existing homes and up to 12 months for those under construction. Come January 1, the time period is reduced to four months for all homes.

FHA Appraisal Transfer. New guidelines will allow a second appraisal to be ordered under certain circumstances when a borrower switches from one lender to another and restates the requirement that the first lender must transfer the appraisal to the second lender at the request of the borrower.

FHA Appraiser Certification. HUD is requiring appraisers to be State certified. In California, the two “certified” designations are AR which is the Certified Residential and the AG which is the Certified General designation. Appraisers already have to be licensed and certified in California so this becomes an additional certification.

FHA Appraiser Independence. A mortgage professional and their staff will be prohibited from ordering an appraisal. The lender will be responsible for making sure the appraisal process is independent. It sounds like HVCC appraisal rules governing conforming loans will be coming to FHA loans. Lenders have not announced how they plan to implement this new guideline so it will be interesting to see what form it takes.

Remember that lenders use HUD guidelines as a base and often add additional layers of qualifying that borrowers must meet. That’s why rules vary from one lender to another and a mortgage broker can pick and choose the best lender to meet your needs. Until the next time, take care. Barbara

If You Hesitate … It May Be Too Late

Today's post is from our guest blogger, Barbara Van Duyn. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

This isn’t a made-up story. It actually happened last week to a client and you can learn from the experience. The real estate agent involved has a habit of checking the daily Hot Sheet from the MLS first thing every morning for any properties meeting her client’s preferences. She found one that was perfect. The client was told about the property and advised they needed to see it “today.” The client listened to the agent, saw the property, and was ready to make an offer. As the offer was being prepared, the buyer’s agent called the listing agent to advise an offer was on the way and it only gave the seller 24 hours to respond. A day later, another offer came in from a different buyer and it was $25,000 higher. But that offer was too late!

Buyers pay attention … you have to choose a buyer’s agent who is “on top of it”.  Then listen to your agent’s advice and be ready to act quickly. This is not a market for lookie-loo’s.  Interesting … another realtor in the same office was going to show the property to her client but just hadn’t gotten around to it yet. A missed opportunity! All agents have many of the same tools to work with so the question is …. who makes the best use of them? Choose your buyer agent carefully.  If you would like to know more about Hot Sheets contact Anne. Until the next time, take care. Barbara

Another Buyer Beware Situation

As popular as bank-owned properties are with many buyers, they can involve some additional work, and expense, on your part. Read on as guest blogger, Barbara Van Duyn, explains what some of her mortgage clients have experienced recently. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

Thinking of making an offer on a bank-owned property? You need to be aware that some banks will make you jump through additional hoops before they will even consider your offer. One particular bank requires the buyer to be pre-approved by one of their mortgage bankers. This means you will have to fill out a new loan application, provide income documents and allow them to run your credit. It doesn’t matter that you have already done this with your own mortgage person and been pre-approved. This bank wants you to go through the approval process all over again with them and … wait a minute … it’s going to cost you $50 bucks too! All of this just to have the privilege of “making an offer” on one of their foreclosures.  The chance of your offer getting accepted isn’t any better. My borrowers are saying No Thank You!

Here’s what really bugs me. My personal business practice requires a borrower to pay a small charge for their credit report during the pre-approval process. On July 31, 2009, along comes a new Truth in Lending Act (TILA) by the federal government preventing mortgage brokers from charging a borrower anything other than a credit report fee during the pre-approval process. I have no problem with that. However, a bank like the one mentioned above doesn’t play by the same TILA rules. They can AND do charge hundreds of $$ for loan application fees or a loan approval fees. So who is being taken advantage of? Until the next time, take care. Barbara

Are Home Buyers Getting a Reprieve?

Guest blogger, Barbara Van Duyn, explains why the historic low interest rates we're seeing may not last. Read on. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

Yes! Home loan rates would have shot higher at year’s end if the Federal Reserve continued with plans to stop their semi-monthly buying of mortgage-backed securities (MBS) in December. Not good for a struggling housing market. Instead, after the September Federal Open Market Committee meeting, the Federal Reserve announced they would gradually wind down their purchase of MBS and stretch it out through the first quarter of 2010. This reprieve is good news for both home buyers and homeowners considering a refinance.  The bottom line ... once the Fed reaches their target spending of $1.25 trillion, the buying will stop and home loan rates will go up. They’re just hoping the housing market will be in better shape next year when it happens. 

You only need to look back to last year before the Fed stepped in to buy up mortgage bonds to see the positive impact this policy has had on rates. I pulled out a rate sheet from September 25, 2008, and found a 30-year fixed-rate conventional mortgage was costing 6.25% with NO Points. Today it’s 5.00%. Since the Fed began their purchase of MBS in January, home loan rates dropped to 4.50% initially. Since then they been running anywhere between 5.0% and 5.5%.  

If you're planning to buy and have no reason to wait, take advantage of these historic low rates while they are available. Until the next time, take care. Barbara

$75 billion Dollars Later… The MHA Report Card Is Out

Guest blogger, Barbara Van Duyn, sent in a long post today that's well worth reading if you are considering asking your lender for a loan modification. Read on. Barbara is a certified mortgage planner with First Priority Financial. If you have any mortgage questions, you can reach Barbara through her Web site, www.BarbaraVanDuyn.com.

Remember when our government was passing one housing rescue plan after another beginning in late 2007? Banks were “encouraged” to help struggling homeowners modify loans. That didn’t work as foreclosure continued to climb. After taking over Fannie Mae and Freddie Mac they imposed a six-month foreclosure moratorium that lasted from November 2008 through April 2009. It just delayed the inevitable. That brings us to the $75 billion Making Home Affordable plan.
 
Making Home Affordable: MHA was announced in February 2009 by the U.S. Treasury to help stabilize the housing market. Under this umbrella two separate programs with different objective were established. So let’s get you up to speed on HAMP (no ... I'm not blowing smoke) and HARP and see if there is any hope for you.

Home Affordable Modification Program: HAMP offers financial incentives to mortgage servicing companies for offering trial loan modifications to an estimated 2.7 million at-risk homeowners. To be considered for the program, a homeowner must be at least 60 days behind on their mortgage or already in foreclosure. According to a July 31 Treasury report card, $20 billion has been doled out to more than three dozen large and small servicing companies participating in HAMP with results showing 15 percent or 400,000 homeowners out of the 2.7 million eligible have been offered trial modifications that involved reducing the interest rate on a loan for several years and/or extending the term of the loan. Homeowners who have contacted their loan servicing company asking for a loan modification with little success may find better results by going back to their mortgage servicer and asking for help under the HAMP program. 

Home Affordable Refinance Program: HARP is designed to help responsible homeowners who pay their mortgages on time, be able to refinance out of a risky loan into a stable loan and lower their mortgage payment. With declining home values preventing a traditional refinance, HARP allows homeowners to refinance up to 125 percent of their home’s value. To give you an idea of what that would mean, assume a home value of $300,000 with a mortgage of $365,000. Applying 125 percent to $300,000 = $375,000. That’s well below the loan-to-value (LTV) ceiling. Other loan qualifying factors will apply. A key feature of this new 125 percent LTV refinance program is … the homeowner will not be required to get private mortgage insurance (PMI) if their original LTV ratio was 80 percent or less.

Up to this point, Fannie and Freddie had been allowing a HARP refinances up to 105 percent. To help more homeowners, Fannie and Freddie will increase their LTV requirement to 125 percent, effective September 19, 2009. It may take time for mortgage companies to begin offering the 125 percent LTV refinance program so be prepared. Follow these links to find out your mortgage is owned by Fannie Mae or Freddie Mac. You can also double check with your existing mortgage servicer to find out who owns your mortgage. Qualified homeowners have the option to apply for the 125 percent LTV refinance with their existing mortgage servicer or shop for a competitive rate with a new lender. Until the next time, take care. Barbara