The Real Folsom Blog

Update on FHA’s 90-Day Flipping Rule

Today guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, covers a recent change to FHA's 90-day flipping rule. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com.

On June 9, 2008, FHA temporarily suspended the 90-day flipping rule that has been in place since 2003. The rule required 90 days of ownership seasoning before a property could be sold to a buyer using FHA financing. The rule was originally established to deter property flipping schemes that arose when the market was hot and investors were buying and flipping to make a quick profit. That was then. Now we have neighborhoods filled with bank-owned properties resulting from foreclosure and banks needing to get them sold as soon as possible. With FHA financing as a primary source for many home buyers today, this rule was causing many deals to blow up because banks often were on title for less than 90 days while ill-informed buyers came knocking on their door with a purchase offer in hand. So what does all this mean to you?

* FHA financing is NOW available to borrowers purchasing properties owned less than 90 days that were acquired by foreclosure by mortgagees (lenders).

* This waiver applies whether or not the mortgagee is state or federally chartered which was previously a restriction.

This rule is temporary and scheduled to revert back to the original rule in June of 2009. Happy Buying! Until the next time, take care! Barbara

Is an FHA 203(k) Loan Right For You?

Today guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, talks about a type of FHA loan in which you can get renovation costs included in the purchase loan. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com.

FHA loans have been around for years; in fact if you bought a home in the 1980s you probably had an FHA loan. With the onset of a hot housing market in early 2000, mortgage banks flush with money to lend coupled with relaxed lending practices gave birth to exotic loans. They became as popular as the high school quarterback and FHA loans were benched. As they say, what comes around goes around and mortgage financing has gone back to the basic with FHA in the spotlight. One particular FHA program is the 203(k) renovation loan. Not well known… but a wonderful financing option for buyers considering properties in need of a little fixing because renovation costs can be included in the purchase loan. In fact, the 203(k) program allows renovation costs (up to $35,000) to exceed FHA’s standard loan limit which is $580,000 in Sacramento County. Some highlights of the FHA 203(k) loan are:

1. For owner-occupied properties of 1-4 units existing for at least one year
2. Can be used for purchase or refinance
3. Same qualifying guidelines as a regular FHA loan
4. Up to $35,000 to be used for qualified repairs/improvements
5. ½ of funds disbursed at close of escrow and remaining funds paid upon completion of work.
6. Work must be completed within 6 months of close of escrow

To learn more about this unique loan product, send me an e-mail. Until we meet again, take care!  Barbara 

Jumbo Interest Rates Improve

Guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, has some good news for us about Jumbo Interest Rates. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com. 

In March we told you that HUD announced increased loan limits for conforming and governments back loans across the country. In Sacramento County, conforming, FHA and VA limits increased to $580,000. Those of us in the industry were expecting interest rates for these higher loan balances to find their way to our borrowers sooner than later but it has been painfully slow in coming. This week Fannie Mae and Freddie Mac announced they were lifting a premium for these new conforming Jumbo loans resulting in rates improving up to .500%. Regarding FHA Jumbo loans, not all lenders are currently offering these new loan limits. So a word of caution, if you are in need of financing a mortgage above $417,000 make sure you are working with a mortgage professional who has lenders offering BOTH the new conforming Jumbo loans and FHA Jumbo loans with the improved pricing. Until we meet again, take care. Barbara 

What the Feds Rate Cut Means To You

The Federal Reserve Bank cut the Fed Funds Rate this week. What does it mean for you as a homeowner? See what guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, has to say below. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com.

By now you’ve probably heard that the Federal Reserve Bank announced another reduction of the Fed Funds Rate by .250 percent on Wednesday, April 30th. That brings the FFR down to 2.00 percent. Although the FFR is used for bank to bank transactions, the lowering of this rate is good news for homeowners. Prime rate dropped by .250 and is now at 5.00 percent.  So if your HELOC (home equity line of credit) hasn’t been converted to a fixed rate, your monthly payment will be dropping. Another huge benefit is for consumers who have Adjustable Rate Mortgages or ARMs tied to the LIBOR index. The LIBOR index moves in the same direction as the Fed Funds Rate. To illustrate, the FFR was at 5.25 percent in August of 2007 and the 1-year LIBOR was at 5.21 percent.

Fast forward six months, a series of seven Federal Reserve cuts later and the 1-year LIBOR is now at 2.98 percent. So if you have an ARM tied to LIBOR and scheduled to “reset” soon, your new interest rate may reset lower.  You can figure this out by reviewing your mortgage “NOTE” to see which “INDEX” and “MARGIN” you have. The other option is to ask your mortgage professional to review your loan documents and help you understand how your ARM will perform. Until we meet again, take care.  Barbara

Improved Interest Rates on Conforming Jumbo Loans

This week, guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, gives us some good news about conforming jumbo loans. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com. 

One of the most significant steps the federal government has taken in its attempt to bring liquidity and stability back to the mortgage and credit markets was its March decision to expand the capacities of Fannie Mae and Freddie Mac (the GSEs), allowing them to significantly increase the amount of mortgage securities that they can purchase or guarantee and, importantly, raising the limit on “conforming” loans from $417,000 to as high as $729,750, depending upon the geographic region. Raising the jumbo limit was a key move because it will enable lenders to increase their lending in markets with high property values where many consumers were finding it difficult to get a loan due to the inability of lenders to subsequently sell that loan to an investor. Once these limits were raised, it took time for lenders to build the new loan limits into its systems, update their pricing for consumers and go live with loan programs under the new rules.

Over the past month, however, investor demand for these conforming jumbo loans has remained slow to develop, and interest rates remained high for borrowers. But in the past week, Fannie Mae and Freddie Mac signed agreements with lenders to purchase their jumbo loans under the new $729,750 limit at competitive terms, improving rates for borrowers by roughly .125% - .250% and making it easier for banks to make more loans, particularly in higher-priced areas.

As previously announced in this blog, the new limit for conforming jumbo loans in Sacramento County is $580,000.  Take advantage of these higher loan limits as they are set to expire on December 31, 2008. All the Best!  Barbara

Mortgage Lenders Impose New Restrictions

This week, guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, makes a strong case for buying a home now rather than waiting a few months. See why below." If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com.

Getting approved for a conforming home loan is now tougher than ever. Again. And it’s not just home loans. This week many lenders who fund college loans announced they were discontinuing the service.  A colleague in the automobile industry is finding lenders not only have raised the bar on minimum credit scores but are also scrutinizing the borrower’s mortgage performance. As home loan defaults mount, government-sponsored enterprise (GSE) Fannie Mae has improved new guidelines on what it will lend and to whom, highlighting the need for a strong credit profile and a down payment. In other words, Fannie Mae is outright declining mortgage applicants whose credit is weak and whose payment history show signs of trouble. But, it’s not just the “credit challenged” that are finding it harder to get a mortgage.

Buyers with strong credit profiles are being hit by new changes too. One such change says that owners of second homes must now have a 10 percent equity position in their homes; 15 percent if the property is in a “declining market.” This is up from 5 and 10 percent, respectively and represents a growing trend to make homeowners have a “stake” in their own homes. Down payment requirements are higher for all mortgage products in general.

Fannie Mae’s changes are the third set of restrictions imposed since December 2007 and more tightening is expected over the next few months.  That makes NOW a compelling time to buy a home as borrowing money will likely be more restrictive in the future. If you are actively shopping for homes and have not been pre-qualified in the last few weeks, contact your loan officer and get checked against the latest set of mortgage guidelines. It’s better to know today than after you make an offer.  All the Best!  Barbara

A Simple Explanation of "Credit Crunch"

It's good periodically to look at terms we use or hear almost daily to make sure we understand what they mean and how they may impact us. This week, guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, tackles "credit crunch." If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com.

Media sources like to use the term “credit crunch” in describing our overall economy, but they rarely define what a credit crunch is and what it means for Americans. A credit crunch is when the amount of available loans suddenly decreases over a very short period of time. Usually it follows a period of lending which, in hindsight, becomes known for its “easy money.” Sound familiar. The start of a credit crunch often coincides with consumer loans starting to go bad and lenders losses starting to mount.  The realization that more losses are ahead forces financial institutions to tighten their lending guidelines. 

Since the current credit crunch began in mid-2007, Americans looking for credit now face:

• Higher credit score requirements on auto loan applications
• Higher fees and interest rates on credit cards
• Larger down payment requirements on home loans

And now, the newest symptom of the credit crunch; the largest buyer of mortgage loans – Fannie Mae – has instituted a new minimum credit score of 580 for all mortgage applicants. As consumer delinquencies continue to mount and the economy continues to slow, getting access to credit will likely get tougher for everyone, good credit or bad. However, as history has shown us, the tightening of the reigns will eventually ease when confidence returns to the credit markets. All the Best! Barbara

Simple Real Estate Definitions: Discount Points

This week, guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, helps us understand some basic real estate definitions. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com. 

More commonly called “points,” discount points are up-front fees charges by mortgage lenders in exchange for lower mortgage rates. The cost of one point is one percent of the loan size and discount points appear on Line 800 of the HUD-1 Settlement Statement. As a general rule, each point paid lowers a mortgage lender’s offered interest rate by .250 percent. For example, a $200,000 home loan offered at 6 percent can be had for 5.750 if the borrower agrees to make an up-front payment of one percent or $2,000 in this case. 

In addition to lowering your interest rate, discount points are usually tax deductible too. Therefore, be sure to provide any settlement statement from the previous calendar year to your accountant during Tax Season. Lastly, discount points should not be confused with origination points, a one-time charge for the mortgage professional’s service and appearing on line 801 of the HUD-1 Settlement Statement. Origination points are not tax-deductible. All the Best! Barbara

Getting Your Pre-Approval Re-Approved

Guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, offers sound advice on how to deal with changes in lending guidelines so you can avoid nasty surprises down the road. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com. 

Since December 2007, mortgage lending guidelines have changed very quickly and often without notice.   Some of the more well known changes include:

* Broad restrictions on stated income loans
* Broad restrictions  and fewer lenders offering 100-percent financing
* Risked-based fees added for credit scores under 740

Some of the lesser known restrictions relate to property type and occupancy status as well as debt-to-income levels and mortgage payment histories. Because of the number of changes and their collective scope, homebuyers should be proactive and talk to their lender about getting re-approved for their home loan. The common procedure for obtaining a pre-approval for a buyer is to obtain a preliminary approval from Fannie Mae or Freddie Mac. These approvals are based on specific income, assets, credit, and other loan information submitted to these agencies for evaluation. When a preliminary approval is returned, it’s good for 120 days. The approval is based on your financial picture at a given point in time. Smart buyers get this type of approval prior to searching for a home. However, if your financial picture changes while searching for a home, your approval may no longer be valid. In addition, lenders may have changed their guidelines for a loan you thought you qualified for and now don’t or worse, is no longer available. 

The market really is that different. Talk to your loan professional about getting re-approved to eliminate surprises down the road. All the Best! Barbara

How Prepaid Items Can Make Your “Closing Costs” Look Inflated”

This week guest blogger Barbara Van Duyn, a mortgage planning specialist with First Priority Financial, takes the mystery out of closing costs. If you have any mortgage questions, you can reach her directly at Barbara@VanDuynGroup.com.

When buying a home, you pay for more than just the physical property at the closing table. You also pay a series of charges lumped under the heading of “closing costs.” Let’s take a closer look. Many charges on a HUD-1 Settlement Statement are “reserves” or monies “paid in advance.” These “prepaid items” include:

• Mortgage interest paid from the closing date to the end of the month.
• Real estate taxes paid into an escrow account.
• Homeowners insurance paid into an escrow account.

Prepaid items are payments related to the home itself and not costs charged by a third party for facilitating the transaction. The lender determines how many months of reserves they want to be paid in advance. Regardless of the amount, the benefit is to the borrower because prepaid items will be banked into an escrow account on behalf of the borrower to pay future charges.

Closing costs on the other hand are quite different as they are one-time costs associated with acquiring the loan. Closing costs can include lender fees, title fees, appraisal fees and government fees. Now when you look at closing costs or a settlement statement, you will understand the difference between the cost of obtaining a loan and paying in advance for items associated with maintaining your home. All the Best! Barbara