Archive for May, 2009

Picking the Right Lender

Monday, May 18th, 2009

So, you’ve decided to buy a house?

GREAT DECISION, especially now since rates are super low and you can walk into plenty properties with some decent equity.

Ok, step 1 complete.

Next step, picking the right lender.

I’ve written several articles on this previously, but I will summarize countless hours of explanation into ONE sentence:

YOU WILL CHOOSE WHOEVER YOU FEEL MOST COMFORTABLE WITH.

It’s not rocket science. To some consumers,  rates and fees are absolutely everything, and that is OK.

To others, discussing their loan parameters and figuring out WHY they should go on a 15 year mortgage vs. a 30 year makes more sense- a financial plan if you will. Ask most people why they went on the loan program that they did, and see what their response is.

Everyone is different. Remember, you are the one hiring the loan officer to do your loan. The questions that you need to ask yourself are:

1. “Why am I hiring this person?”
2. “What has he/she done for me so far?”
3. “What do you expect from him/her, and vice versa?”
4. “Has the loan officer asked what’s important to ME during the loan?”

Tommy’s 2 Cents:

Would you pay a CPA double what another CPA would charge if they saved you an additional $5,000 off your taxes?

Would you have a fresh-out-of-med school perform heart surgery on you to save a few thousand on the costs?

Would you hire ME or Johnny Cochran to represent you in a criminal trial?

Get the point?

In any profession, what you ultimately pay more for is knowledge.

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Should You Use Your $8,000 Tax Credit as Your Down Payment?

Saturday, May 16th, 2009

So there has been a lot of rumors regarding the $8000 first time home buyer tax credit and that it can be used as a down payment for a new home with an FHA loan.

At first, I thought it was just another “mortgage scam”. Trust you me, the real mortgage industry always leaves room for the next “million-dollar-idea”. If you pay close attention, you may even end up seeing your next door neighbor on the 6 o’clock news getting caught for selling “ARMS” from the back of his van in a dark alley.

After doing a little bit of research to see the legitimacy of this rumor, I ended up finding the official HUD Mortgagee Letter 2009-15.

Who Can Offer It

Let’s begin with who can offer this “loan” on a loan. (Is that a conundrum?)

According the letter, Federal, state, local governmental agencies, non-profit governmental subsidiaries, and FHA-Approved nonprofits will be able to offer this to home buyers.

How It Works?

Essentially, this is a bridge loan. You are borrowing this money for a short amount of time until you get your tax credit, and then it is paid back to these agencies.

What happens is you are taking out a second lien on your home, and that amount CANNOT be more than:

Down Payment + Closing Costs + Pre-Paid Expenses

Here is a list of some more facts on how this works:

1.) You cannot get any cash back at closing.
2.) You will have a deadline to pay this money back, and if you do not, principal and interest will begin automatically. (What a concept!)
3.) If payments are required, it will be calculated as a monthly liability when qualifying for the loan.
4.) If payments are deferred, it must be for at least 36 months and will not be used against you when qualifying.

I cannot stress to you enough -BE VERY CAUTIOUS with this type of transaction. It leaves so much room for deception, and if you end up in the wrong hands, you may kiss your $8k tax credit goodbye very fast!

While it may bring an influx of new potential buyers to Realtors and open a lot of doors to potential buyers, it is a double-edged sword and I do not particularly agree with it. In my opinion, it can do more bad than good and is basically bringing back “100% financing” and that is part of what has caused the “Mortgage Meltdown”.

I would suggest stopping and thinking as to why many down-payment assistance programs went bye-bye towards the end of 2008. It was simply because more buyers defaulted on those types of loans. The LAST THING we need is the Federal Housing Administration (FHA) getting into financial issues.

Tommy’s 2 Cents:

Use it IF you absolutely HAVE to. The $8,000 is yours one way or another.

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Identity-of-Interest Transaction Down Payments

Thursday, May 14th, 2009

An Identity-of-Interest transaction is where a sales transaction is made between parties with family/business relationships.

To break it down very simply, and this is USUALLY always the case, when a family member sells to ANOTHER family member, FHA looks at that as an Identity-of-Interest Transaction.

I get at least 1-2 calls per month with this scenario, and want to post it on my mortgage blog to educate YOU, the consumer.

So even though FHA has a minimum down payment requirement of 3.5%, in THIS case, you would have to put down 15% percent.

Here is ONE of the exceptions to this rule:

1. The family member has rented the property for at least 6 months predating the contract, in which case a rental agreement will be needed.

If you are in this type of  situation and do not have the 15% to put down, feel free to contact me for more info and some other tips that may help you out!

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Mortgage Applications Climb in Latest Week

Wednesday, May 13th, 2009

CHICAGO (MarketWatch) — The number of mortgage applications rose 2% in the week ending May 1, the Mortgage Bankers Association said Wednesday, with borrowers seeking both more refinance and home-purchase loans.

The MBA’s seasonally adjusted composite index of mortgage applications rose to 979.7 from 960.6 a week earlier. The refinance index was up 1.2% while the purchase index increased 5%.

The purchase-index number adds to signs of housing market stabilization, as low mortgage rates and falling home prices have energized bargain hunters. The National Association of Realtors said this week its index of pending home sales, a measure of signed contracts for sales which have yet to close, rose 3% in March.

The refinance share of mortgage activity decreased to 74.4% of total applications from 75.3 percent the previous week. The adjustable-rate mortgage share of activity remained unchanged at 2.1% of total applications.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.79% from 4.62%, with points increasing to 1.17 from 1.14 (including the origination fee) for 80 percent loan-to-value ratio loans. A point is 1% of the loan amount, charged as prepaid interest.

The survey covers approximately 50 percent of all U.S. retail residential mortgage applications and includes responses from mortgage bankers, commercial lenders and thrifts.

Source

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Delinquent Federal Debts

Tuesday, May 12th, 2009

When doing an FHA Loan, if you are delinquent, as revealed by any public records or HUD’s Credit Alert Interactive Voice Response System (CAIVRS), on any federal debt (e.g. VA-guaranteed mortgage, Title 1 loan, Federal Student Loan, SBA Loan, delinquent federal taxes) or you have a lien, including taxes, placed on your property for a debt owed to the U.S., you are NOT ELIGIBLE until this account is paid, brought current, otherwise satisfied, or a satisfactory repayment plan is made between you and the federal agency owed and is verified in writing.

Whew…that was a mouthful!

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