Home Loan Wholesale

If you are looking to make the move from a rented apartment to a home of your own, you are not alone. The convergence of low home prices, still-low mortgage rates and appealing tax incentives makes 2009 a good time to buy a home for many people. If you are looking to buy, here is what you need to know:

Home prices are low. Home prices dropped at a record annual pace of 18.7% this past March. That means discerning buyers can find real bargains. Mortgage interest rates are still relatively low. While interest rates have risen from their historic lows earlier this year, they still are appealing. In mid-June, rates hovered around 5.70% for a 30-year fixed rate home loan.

Tax credits will help. 1^st time homebuyers can get money back from tax credits implemented as part of the 2009 American Recovery and Reinvestment Act. An $8,000 credit is available to 1st-time buyers for homes purchased before December 1, 2009. Home financing legislators are considering increasing the credit to $15,000 and expanding it to include other home buyers

Credit scores matter. While houses are widely available, home financing is limited to those with good credit. Credit scores range from 300 to 850, with the median U.S. credit score about 725. A score below 680 usually results in a higher interest rate or denial of credit. Check your credit score before you make any home buying decisions. If your score is lagging, wait a few months and work to improve the score by paying every bill on time, paying down as much debt as possible and disputing any erroneous information on your report. Note that it can pay to do your homework researching FHA mortgage rates and lenders — credit scores do not decline if multiple similar credit report requests are submitted within a close time period (usually a few weeks).

You must have savings. A down payment is essential today. Ideally, you can put down 20% of the purchase price (see #7 regarding PMI). If not, talk to your mortgage lender about your options.  Do not stretch too far. Standard underwriting guidelines call for keeping housing expenses below 35% of total income.

Understand private mortgage insurance (PMI). Home mortgages with less than 20% home equity (which means a 20% down payment for those purchasing a home) require PMI in case the owner defaults on the home loan. When the home owner pays a conventional home mortgage down to 80% or less of the home’s value, the home owner can request the home lender to cancel the PMI and then be able to stop paying the additional amount. Meanwhile, PMI is tax-deductible, at least through 2010.

Know the real costs of buying. The principal and interest on a mortgage payment are only the beginning of home-related costs. Escrow payments – the funds withdrawn to cover home insurance and taxes – and PMI can add a few hundred dollars per month to a mortgage payment. In addition, home owners must pay for repairs and maintenance. A rule of thumb is to budget 1% of the home’s purchase price per year for upkeep.

Know whether you can pay off early. If the mortgage loan has a prepayment penalty, borrowers face hefty charges if they pay it off early. This provision also can apply to future mortgage refinancing, so be forewarned. Review Truth in Lending disclosures to find out.  Read the full article online, > 10 Home Loan Tips for 1st-time Home Buyers

In a recent article, California mortgage broker, Jeff Morris, formerly with GMAC and Ditech estimated that one in ten of homeowners who visit him online are able to get approved for a conventional or FHA refinance.  Morris said, “People simply don’t qualify with the mortgage lenders tighter guidelines and lack of home equity.“ Borrowers seeking home refinancing, outside of California, Arizona and Nevada may have a better chance because fewer borrowers in the mid-west and south are under water with their mortgages being greater than their home’s value.  Even with mortgage lenders extending 97% FHA and 105% mortgage refinancing, California homeowners have little opportunities to be approved because home values have declined so significantly since they bought their properties years ago.   

The goal should be for homeowners to invest in a home that they can afford and if refinancing with a lower mortgage payment is an option, then borrowers would be foolish not to seize the savings opportunity. Morris added that “the demand for loan modifications has not waned and he sees an increase in loan workout requests for borrowers who are stuck in jumbo mortgage loans that have interest rates set to adjust.” The banks just aren’t handing out loan modification agreements to just anyone anymore.  Homeowners seeking foreclosure prevention alternatives from their mortgage lender must be able to document that they have the income to support the modified home loan payment. 

In Maui, Caleb Palmer, a broker, said “Consumers should stop whining about things they can’t control and focus the affordable home buying opportunities that have become available since the housing market crashed in 2006.” Palmer continued, “Mortgage rates were under 5% for thirty year fixed rate loans and inventories were beginning to open up in neighborhoods that haven’t been available for years.”  Palmer believes that 2010 will see more buying opportunities in Hawaii and California before the market shifts back to appreciation mode. 

In addition, if you’re older than 40, shortening your mortgage term now could help leave you mortgage-free in retirement, reducing the income you’ll need to generate from your battered 401(k).
But before you jump in, you should know that most single-family home loans today need to fall within Fannie Mae and Freddie Mac limits — up to $417,000 in most places, and up to $729,750 in certain high-cost cities such as San Francisco and New York. “Jumbo” mortgages, or those larger than those limits, are still very hard to find. Then you’ll need two crucial and tough-to-acquire bits of information: your credit score and your home’s current value. Those will determine whether you can refinance at all and how close you can get to the lowest rates available. Even then, you may find the process unusually long and unpleasant; some banks are taking up to 90 days to complete a refinancing.  If you got your current mortgage in the past few years, when less documentation was needed, you may be surprised by the financial colonoscopy that awaits you. You need pay stubs, bank statements, brokerage statements and maybe tax returns to convince the lender that you can and will repay the loan. If you’re self-employed, you may be asked for a profit-and-loss statement for this year; if you rely on bonus income, expect the lender to assume this year’s bonus will be a lot less than last year’s.

What is home equity? Having some equity in your house is essential to qualifying for a new mortgage loan. If your current mortgage is less than 80% of the value of your home or less than 75% of your condominium, you should have refinancing options as long as you don’t have late mortgage payments and bad credit scores.  Subprime refinancing and bad credit mortgage options have disappeared with the exception of VA and FHA loans.  VA home loans are only offered to military veterans and FHA mortgage guidelines require full income documentation and most bad credit home loan applicants need a stated income program.

If your mortgage is between 80% and 105% of your home value, you’re current on your payments and your loan was bought by Fannie Mae or Freddie Mac, you may be able to refinance under a two-month-old government program called “Making Home Affordable.” Some kinks are still being ironed out, and Fannie and Freddie have different requirements, so go to the program’s Web site at MakingHomeAffordable.gov or contact your mortgage servicer to see if you qualify.

Sometimes under this program, Fannie and Freddie will waive appraisals and other underwriting steps. And if you’re refinancing a Veterans Administration or Federal Housing Administration loan, a new appraisal isn’t needed. 

Mortgage brokers continue to report that FHA mortgage and VA home loans are the hottest products in the home financing sectors of the U.S.  The VA provides low mortgage rates for streamline programs to veterans who currently have a loan guaranteed by the U.S. Department of Veterans Affairs.  In addition to the VA streamline refinancing, Mortgage Related News reports that and VA loan officers are originating the Interest Rate Reduction Loan at a high volume than previous years because this VA loan has no “seasoning” requirement.

In the mortgage industry, this type of seasoning refers to borrowers who recently completed a mortgage refinance transaction.  In addition, these VA loans entail very little documentation and usually do not require an appraisal. In order to qualify, borrowers must have a VA home loan that is not delinquent. In a recent VA mortgage article, Tom Kelly highlights the opportunity that military veterans and their families have financing and refinancing with VA home mortgage loans.  He points out that one of the simplest ways for homeowners who have a VA mortgage is with the VA streamline refinance. 

 
VA mortgage lenders will assess that veteran borrowers meet basic program requirements including:

·         The new monthly mortgage loan payment must be for less than the original loan.

·         The VA mortgage rate must be for less than the original loan (unless refinancing from an adjustable interest rate).

·         The term cannot exceed thirty years or ten years more than the original mortgage term (up to a max of 360 months).

After 50 years of offering loans only to vets who served active duty, the VA changed its rules in 1992. Men and women who have completed six years in the Army, Navy, Air Force, Marine Corps or Coast Guard Reserves, or the Army National Guard or Air National Guard, are eligible for VA home loans, including programs with zero down required. >Read the complete VA home loan article online.