Last Friday FHA released a plethora of new Mortgagee Letters for FHA mortgage lenders like myself. These Letters spell out rule changes that go into effect in the near future. One of the Letters dealt with what are called Streamline Refinances where a FHA borrower can refinance quickly, easily, and cheaply into another FHA loan. It's been a HUGE benefit for decades for homeowners.
These were some of the benefits of a FHA Streamline Refinance Loan--
* No appraisal is required. If your home had dropped in value, it did NOT matter.
* No income or employment verification is required. Thus, you could be unemployed and
qualify for a new lower monthly payment.
* No credit check, except a mortgage payment review. Thus, you could be one day from
bankruptcy and that was ok.
* Lower closing costs for 2 reasons. First, there is no appraisal required and second, since
the loan required less work by me, I would charge fewer closing costs to my clients. I did
not have to make as much money on these loans because they were less work for me.
You Win!
But, come mid-November the Streamline Refinance program is going away. Here is how a FHA refinance will look like--
* A new appraisal is required if you want your new loan balance to increase to pay your
closing costs and prepaids. Who does NOT want that?
* We must verify that you are employed and receiving stable income.
* We must review your entire credit report.
* You can NOT refinance until you have made at least 6 payments on your new loan.
Beginning November 15th, refinancing your FHA loan will become more expensive and time consuming and less likely to happen. Plus, since I will have to work harder and longer to close your loan now, guess what? I am not so willing to help pay your closing costs now. Thus, YOU LOSE! You can thank our government in D.C. for that! You gotta love "change".
Wednesday, September 23, 2009
Monday, September 21, 2009
More Changes For FHA Loans Coming?
In order to keep FHA out of the red and maintain ample reserves I expect additional credit policy changes to come from FHA soon. Changes such as--
* Minimum credit score of 620-660--Currently, FHA has no minimum credit score requirement; but most lenders require at least a 620 fico score and some a 660 score. I expect FHA will set a minimum credit score requirement soon in the range of 620 to 660.
* We also might see FHA make changes on loans with gift money for the down payment. Currently, a family member or employer can provide gift money to the borrower. Possibly FHA might require that any borrower invest a certain amount of money or percentage of money into their home purchase or I could see FHA requiring a higher credit score on these loans.
* We might see FHA require first time home buyers to attend a class on homeownership.
* Maybe FHA will lower their debt to income ratio requirements. Currently on a manual underwritten loan FHA requires that your house payment not exceed 31% of your gross monthly income (housing ratio) or your total minimum monthly debt payments, including your house payment, to not exceed 43% of your gross montly income (total debt ratio). Currently, on a FHA loan underwritten on-line using FHA's Total Scorecard Underwriting Software will often approve loans with a total debt ratio of 51%. I expect this ratio will lower which means less buying power for you.
* Finally, I could see FHA raise the costs of borrowing by increasing the upfront Mortgage Insurance Premium and/or the Monthly Mortgage Insurance Premium; thus raising your monthly housing payments.
To take advantage of the more lenient FHA standards of today you need to act TODAY! Get pre-approved for a FHA loan with a FHA Expert and find your new home and write a contract as the rules are based on the date we order a FHA Case Number, which we can't order until you are under contract to buy a home.
* Minimum credit score of 620-660--Currently, FHA has no minimum credit score requirement; but most lenders require at least a 620 fico score and some a 660 score. I expect FHA will set a minimum credit score requirement soon in the range of 620 to 660.
* We also might see FHA make changes on loans with gift money for the down payment. Currently, a family member or employer can provide gift money to the borrower. Possibly FHA might require that any borrower invest a certain amount of money or percentage of money into their home purchase or I could see FHA requiring a higher credit score on these loans.
* We might see FHA require first time home buyers to attend a class on homeownership.
* Maybe FHA will lower their debt to income ratio requirements. Currently on a manual underwritten loan FHA requires that your house payment not exceed 31% of your gross monthly income (housing ratio) or your total minimum monthly debt payments, including your house payment, to not exceed 43% of your gross montly income (total debt ratio). Currently, on a FHA loan underwritten on-line using FHA's Total Scorecard Underwriting Software will often approve loans with a total debt ratio of 51%. I expect this ratio will lower which means less buying power for you.
* Finally, I could see FHA raise the costs of borrowing by increasing the upfront Mortgage Insurance Premium and/or the Monthly Mortgage Insurance Premium; thus raising your monthly housing payments.
To take advantage of the more lenient FHA standards of today you need to act TODAY! Get pre-approved for a FHA loan with a FHA Expert and find your new home and write a contract as the rules are based on the date we order a FHA Case Number, which we can't order until you are under contract to buy a home.
Is FHA In Danger?
It is widely expected that FHA's cash reserves will fall below the level required by Congress on September 30th. There is now talk that FHA may need a bailout like Fannie and Freddie received last year.
In response to this FHA last Friday issued 6 new Mortgageee Letters which is their "rule book" for us as mortgage lenders. I have never seen them release 6 Mortgagee Letters in a week, not to mention in one day.
Some of the changes are good as they will soon be requiring all mortgage banks or lenders to have a $1 Million net worth to close and fund a FHA loan in their name. This rule does not apply to mortgage brokers as they don't close or fund any loans in their company's name.
FHA issued new rules on appraisals primarily on the independence of appraisers from mortgage professionals like myself. Effective January 1, 2010 FHA will not allow me to order a FHA appraisal with an appraiser of my choosing. What does this mean for you as a borrower?
* First, I WILL be forced to collect a check from you for the appraisal of $400 upfront and it will be non-refundable if we don't use it.
* Second, I can't ask an appraiser for "comps" or an idea of value for a home. For example, I did this last week for a first time home buyer as I thought the home he was under contract to buy was over-priced and my appraiser said I was correct. Beginning in 2010 "Tony" would be "out" $400 for a home that did not appraise at sales price and he could not buy. Wasted money down the drain. How's that for progress?
* Third, I expect it will take longer to receive a completed appraisal.
As you can see none of these consequences are good; but the people setting the rules don't care.
Later this week I will blog on the future of more possible changes from FHA so that they don't need a taxpayer funded bailout.
In response to this FHA last Friday issued 6 new Mortgageee Letters which is their "rule book" for us as mortgage lenders. I have never seen them release 6 Mortgagee Letters in a week, not to mention in one day.
Some of the changes are good as they will soon be requiring all mortgage banks or lenders to have a $1 Million net worth to close and fund a FHA loan in their name. This rule does not apply to mortgage brokers as they don't close or fund any loans in their company's name.
FHA issued new rules on appraisals primarily on the independence of appraisers from mortgage professionals like myself. Effective January 1, 2010 FHA will not allow me to order a FHA appraisal with an appraiser of my choosing. What does this mean for you as a borrower?
* First, I WILL be forced to collect a check from you for the appraisal of $400 upfront and it will be non-refundable if we don't use it.
* Second, I can't ask an appraiser for "comps" or an idea of value for a home. For example, I did this last week for a first time home buyer as I thought the home he was under contract to buy was over-priced and my appraiser said I was correct. Beginning in 2010 "Tony" would be "out" $400 for a home that did not appraise at sales price and he could not buy. Wasted money down the drain. How's that for progress?
* Third, I expect it will take longer to receive a completed appraisal.
As you can see none of these consequences are good; but the people setting the rules don't care.
Later this week I will blog on the future of more possible changes from FHA so that they don't need a taxpayer funded bailout.
Tuesday, September 15, 2009
The Market HAS Shifted
In last Friday's Denver Business Journal was a great story about the sale of homes owned by banks or REO homes. Here are 4 AMAZING stats that you must know about--
· On REO homes they sold at a premium of 3% last month, meaning that they sold for on average 3% ABOVE list price.
· For REOs sold under $185,000, this premium increased to 10.7% and they sold in less than 5 days. WOW!
· Gary Bauer another analyst said that there is less than 3 DAYS supply of homes priced under $100k!
· Average sales price of the smallest homes (under 910 square feet) have increased 14% this year.
If you are just reading or watching the national news about real estate you are about to get a very rude awakening. The market for lower priced homes under $250k here in Denver is quickly recovering. The market has shifted in the last 6 months.
For example, from the 2nd statistic, a REO property listed for $165,000 sold for $182,655 on average in August! WOW!
What does this mean for you? If you are buying a home under $200,000 offering less than full price is foolish and a waste of your time. Second, if you need a down payment assistance loan, buying a home just got tougher because of their rules. Third, you must move quickly when finding a home. Fourth, act now and get pre-approved for your mortgage.
· On REO homes they sold at a premium of 3% last month, meaning that they sold for on average 3% ABOVE list price.
· For REOs sold under $185,000, this premium increased to 10.7% and they sold in less than 5 days. WOW!
· Gary Bauer another analyst said that there is less than 3 DAYS supply of homes priced under $100k!
· Average sales price of the smallest homes (under 910 square feet) have increased 14% this year.
If you are just reading or watching the national news about real estate you are about to get a very rude awakening. The market for lower priced homes under $250k here in Denver is quickly recovering. The market has shifted in the last 6 months.
For example, from the 2nd statistic, a REO property listed for $165,000 sold for $182,655 on average in August! WOW!
What does this mean for you? If you are buying a home under $200,000 offering less than full price is foolish and a waste of your time. Second, if you need a down payment assistance loan, buying a home just got tougher because of their rules. Third, you must move quickly when finding a home. Fourth, act now and get pre-approved for your mortgage.
Friday, September 4, 2009
2 Critical Reminders on HUD Owned Homes
Possibly the most desireable homes right now are HUD owned homes as every buyer is hoping to get a great deal on one of their homes. Plus, owner occupying buyers who buy a HUD owned home with a new FHA loan can receive 2 great benefits--
* Only $100 down
* FHA will pay 3% of the sales price towards your closing costs
However, to receive these 2 GREAT benefits you MUST offer full price for the house! If the house is listed for sale at $150,000 and you offer $140,000 you will have to put 3.50% down on the house and pay your own closing costs!
My second reminder is if you win the bidding on a house and your final bid is above the home's appraised value (which is often it's list price) you will have to put more than $100 down! What the *#@?! Why?
Because HUD/FHA requires you to use that appraisal if the appraisal is less than 6 months old. We can't use a new appraisal. PERIOD!
So, if a house is listed by HUD for sale at $150,000 and it appraised at $150,000 and you win the bidding at $160,000, you now MUST put down an EXTRA $10,000 to buy this home as our loan amount is based on the LESSER of the sales price or appraised value. It sucks! But, it is true.
* Only $100 down
* FHA will pay 3% of the sales price towards your closing costs
However, to receive these 2 GREAT benefits you MUST offer full price for the house! If the house is listed for sale at $150,000 and you offer $140,000 you will have to put 3.50% down on the house and pay your own closing costs!
My second reminder is if you win the bidding on a house and your final bid is above the home's appraised value (which is often it's list price) you will have to put more than $100 down! What the *#@?! Why?
Because HUD/FHA requires you to use that appraisal if the appraisal is less than 6 months old. We can't use a new appraisal. PERIOD!
So, if a house is listed by HUD for sale at $150,000 and it appraised at $150,000 and you win the bidding at $160,000, you now MUST put down an EXTRA $10,000 to buy this home as our loan amount is based on the LESSER of the sales price or appraised value. It sucks! But, it is true.
3 Buyers Wrote an Offer on the Same House
Some of the most sought after homes in Denver are bank owned homes and HUD owned homes. Why? Everyone is hoping to get a great deal and who can blame them. However, the great deals seem to be fading into history. Some great deals were available 6 months ago and many great deals were available in 2008 as I saw many of my clients take advantage of them.
Today is a different story. Last week I had two of my clients write an offer on the same HUD owned home in Lakewood and on Monday a new Realtor was referred to me by another Realtor and this agent had a client write an offer on this house too. I knew of 3 different buyers for this home. That is crazy!
Plus, it was not that great of a house in my opinion as it needed plumbing and roofing repairs and had lead based paint issues that needed to be resolved. The house appraised "as is" and was listed for sale at $156,000. It is under contract for $160,000!
To see this home for yourself, please click below
http://hud2.towerauction.net/cgi-bin/e7_select_sold.cgi
Many HUD owned homes are selling for above list price and "as is" value. This is even more true with bank owned homes as banks' strategy in selling their homes now appears to be: "list them low and create a bidding war". Their hope is that the bidding war will drive prices up and it appears to be working.
The moral of the story on bank owned and HUD owned homes: be prepared to bid full price and possibly more.
Today is a different story. Last week I had two of my clients write an offer on the same HUD owned home in Lakewood and on Monday a new Realtor was referred to me by another Realtor and this agent had a client write an offer on this house too. I knew of 3 different buyers for this home. That is crazy!
Plus, it was not that great of a house in my opinion as it needed plumbing and roofing repairs and had lead based paint issues that needed to be resolved. The house appraised "as is" and was listed for sale at $156,000. It is under contract for $160,000!
To see this home for yourself, please click below
http://hud2.towerauction.net/cgi-bin/e7_select_sold.cgi
Many HUD owned homes are selling for above list price and "as is" value. This is even more true with bank owned homes as banks' strategy in selling their homes now appears to be: "list them low and create a bidding war". Their hope is that the bidding war will drive prices up and it appears to be working.
The moral of the story on bank owned and HUD owned homes: be prepared to bid full price and possibly more.
Wednesday, September 2, 2009
Cash for Clunkers
A HUGE majority of home buyers fail to realize that there is money available in a "Cash for Clunkers" program. One of my clients called me last week about this home for sale in Lakewood at 5959 W. Bayaud. Here is the link--http://www.littletonbankhomes.com/fine/real/estate/home_view/783314
This house is THE POSTER CHILD for the "Cash for Clunkers" program for homes. Take a look at this kitchen--WOW!
To say that the kitchen and bathroom in this house needs to be remodeled is a HUGE understatement and I have the money to help with a "Cash for Clunkers" Mortgage.
Here is how it works: FHA offers a special loan program to a select few lenders called the 203k Streamline Renovation Loan. With this loan FHA provides a home buyer with money to buy the home and remodel it at the same time. In fact, FHA is willing to provide you with up to $35,000 to improve the house with this loan. It's a great federally insured loan with a fixed interest rate that is safe and secure.
For more details on the "Cash for Clunkers" mortgage please email me or call me. Or post a question or comment here on my blog.
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