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CNBC: Home Mortgage Lenders Easing up on Home Loans

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The new year may bring new opportunities for consumers hoping to get a home mortgage.  More lenders are reporting easing credit standards, according to Fannie Mae, and expect standards to ease rather than tighten in the near future.
This could help affordability in the housing market, which has been suffering under both tight credit and tight supply of homes for sale.
The share of lenders who expect to ease standards for government-backed loans rose to 16 percent, and the share expecting to tighten fell to 2 percent, according to a Fannie Mae survey. This is across all types of loan products.  A total of 213 senior executives completed the survey from Nov. 4 to 13, representing 194 lending institutions.
“These current practices and expectations toward easing among lenders compares to a historically relatively tight mortgage credit standard base,” said Doug Duncan, senior vice president and chief economist of Fannie Mae.  Duncan, however, points to several challenges to improvement in the housing market in 2016, affordability for first-time buyers topping the list. There are still very few starter homes on the market, and home price appreciation is lapping household income growth. “Lenders’ thoughtful easing of credit standards should help mitigate some of this affordability decline,” he said.
The potential for rising interest rates, which would narrow the field of customers for loans, may increase competition among lenders and force them to ease some of the extra safeguards they added after being sued by the government for billions of dollars over bad loans dating back to the last housing boom.
Government-sponsored enterprises Fannie Mae and Freddie Mac as well as the Federal Housing Administration have been clarifying lender liabilities for bad loans and have been pushing lenders to ease up as well.
Borrowers may also benefit from a new credit scoring model. Fannie Mae announced recently that it will start using so-called trended data in looking at mortgage applicants. This is a wider look at a borrower’s credit history, which could help boost some scores.  Using trended data, the percentage of consumers in the super-prime risk tier would increase from 12 percent of the population to 21 percent, according to a recent study by TransUnion. These consumers generally have the greatest access to new loans at the lowest pricing.
“We are a long way from returning to prerecession levels in terms of mortgage accounts, but changing consumer preferences for housing also may play a role in this slow recovery,” said Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit. “If the economy continues to perform well, we believe the net number of mortgages will increase over the next year.”  Despite the potential easing in credit, about two-thirds of consumers surveyed by the National Association of Realtors think it would be very or somewhat difficult to get a mortgage today.
Another survey by Berkshire Hathaway HomeServices, a network of real estate brokerages, polled 2,500 homeowners and potential buyers and found 67 percent of potential homebuyers thought mortgage rates today were either “average” or “high.” Today’s rates are actually very close to record lows.
courtesy of:  Diana Olick, CNBC and
IVAN SOLIS, JR.  / Sr. Sales Executive, Title 365 / Ivan.Solis@Title365.com  / (619) 804-9000

The Difference Between Traditional and FHA Mortgage Loans

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Before choosing potential lenders and processing mortgage applications, you need to have sufficient information about home loans first. By having adequate knowledge, you will succeed in finding loans that would meet your needs and interests as a borrower.

One important thing you should understand is the difference between traditional and FHA loans. You can understand this area easier by knowing the definition of the two.

After knowing their definitions, you can proceed to comparing their apparent differences and deciding which of them will become more beneficial to you.

What is a traditional loan?

A conventional loan is the most accepted mortgage form in the real estate market. Unlike other loan types, it is not issued by any recognized government agency. It requires borrowers to accomplish 20% down payments in order to gain approval from lenders. It is widely used by people who have good credit histories and abilities to accomplish required initial payments.

Borrowers who choose to avail this type are presented with the opportunity to choose between fixed and adjustable rate mortgages. In the former program, an individual is expected to pay fixed interest rates during the entire duration of the loan. Meanwhile, adjustable programs have fluctuating interest charges. Its rates are adjusted depending on suggestions of predefined conditions.

What is an FHA loan?

Now that you know what conventional loans are, you can easily understand the nature of an FHA loan. As it names suggests, the Federal Housing Administration actually issues it. The government subsidizes it in order to encourage more buyers and stimulate the real estate market. It has also succeeded in insuring lenders with guaranteed capital reimbursements while extending their help to troubled home buyers.

An FHA loan gives borrowers the chance to purchase properties that they cannot afford. It seems friendlier to most borrowers because it obliges them to pay for low down payments. Usually, required initial payments are 3.5% of the market value of a property. It does not also depend on credit scores when checking the credibility of a borrower. Those with bad credit scores are given the chance to prove their capabilities of repaying the amount of home loan they are requesting.

What makes them different?

Three things make FHA and conventional loans different from each other. The first one is the manner in which they are issued. FHA programs are backed by government agencies, while traditional mortgages do not have any relation with the government or other federal agencies. Their second difference lies on the way they approve loan applications. FHA loans are more lenient, hence increasing the probability of approving more applications. Meanwhile, conventional types rely on credit histories when screening potential candidates. This means that people who have bad credit scores have slimmer chances of gaining traditional loan approvals.

Lastly, FHA loans have smaller interest rates and required down payments. They carry fewer risks because of their comprehensive insurance policies. This is why first time home buyers with limited budgets are often advised to choose these tolerant programs. On the other hand, traditional mortgages have more expensive down payments and interest rates.

courtesy of:  http://areaofentrepreneurs.com/

Nine Reasons To Buy A House Right Now

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Buying a house is like having a baby: there’s no absolute perfect time to do either.

The down payment-interest rate-economic factors-qualification quadrangle can be so confusing. Rising rates, loosening requirements, down payment options, buyer’s markets, seller’s markets – what does it all mean to you if you want to buy a home? The truth is that while the banks might have a magical formula to determine your mortgage-worthiness, determining if the time is right really comes down to three main questions:

Do you want to buy a home?
Are you financially prepared?
Is your credit where it needs to be?

If yes, then go for it. Here are nine reasons to do it now.

1. Prices are good. According to the latest S&P/Case-Shiller report, home prices are still gaining, but have slowed. “The 10-City Composite gained 5.5% year-over-year and the 20-City 5.6%, both down from the 6.7% reported for July,” they said. “The National Index gained 5.1% annually in August compared to 5.6% in July.” This is good news if you were afraid that big price gains would put homeownership out of reach and also bodes well for your long-term equity once you purchase.

2. Rates are low. “Imagine paying over 18% interest on a 30-year fixed mortgage. It’s almost unthinkable. But that was the reality for home buyers in October 1981 — a year when the average rate was almost 17%,” said Yahoo Finance. “The average rate has been 5.18% since the start of this country’s history,” making today’s rates, which hover around historic lows at 4%, sound even better.

3. Loan requirements are softening. They’re not approaching the look-the-other-way-and-stamp-it-approved levels that led to the market crash, but the overly tough restrictions that followed have loosened. “Major lenders are making adjustments,” said The Street. “Wells Fargo has lowered the minimum FICO score for borrowers applying for loans insured by the Federal Housing Administration to 600 from 640.” They also count JPMorgan Chase’s lowered loan-to-value “standards in certain markets for both jumbos and conforming mortgages.” For buyers that can mean an easier road to loan approval, even without a ton of money upfront and perfect credit.

4. FHA loans make it even easier for first-time buyers. If your credit is less than stellar and you don’t have a large down payment, an FHA loan can get you in the door. Credit scores can be as low as 620 to qualify and only 3.5% down is required. Whether you’ve never bought before or have been out of the market for a few years, an FHA loan can be your answer.

5. Fewer buyers around the holidays means less competition for you and more negotiating power. “Sellers who are actively looking to sell their homes during the holiday months — namely, October through December — are serious about shedding the weight of their residences,” said US News. “This often works in favor of savvy buyers looking to get a deal on discounted homes. Having less competition on the buyer’s side can mean lower prices on homes, in addition to fewer counter-offers to compete against.”

6. Rates are predicted to rise. “The Mortgage Bankers Association expects the average rate on a 30-year, fixed rate mortgage to rise slowly to 5.1 percent by the end of 2015,” said the Washington Post. If you want to take advantage of low rates, now is the time.

7. Pent-up demand could zap affordability. “The housing market is about to get even more competitive,” said Yahoo. “The pent-up demand of younger professionals, who moved back in with their parents during the recession, is about to explode. This eager subset of buyers will create some steep competition for homes, especially if they have been saving up to make larger down payments or high ticket offers. If the current homes on the market have more potential buyers, bidding wars develop, and the purchase prices are driven up.

8. “Buying is cheaper than renting in most markets,” said Housingwire. With a little knowledge of loan options and low down payment programs, you can easily flip the switch from renter to homeowner.

9. Because you want to buy a home. There really is no more compelling reason than that. You want it. So make it happen.

courtesy of:  http://realtytimes.com/consumeradvice/buyersadvice1

How To Get a Mortgage Right Now, Even With Bad Credit

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HUD, FHA programs abound for those hit by the recession

In his interview with HousingWire, Mel Watt, the director of Federal Housing Finance Agency urges the opening of the mortgage credit box to less-than-optimal borrowers.

“We are getting lenders to reduce some of the credit overlays,” he said in the exclusive interview.

Furthermore, FICO scores will ignore debts that have been paid off or settled, and a lesser weight will be assigned to medical bill collections, which account for about half of all unpaid collections on consumers’ credit reports.

Nonetheless, the average FICOs have been going down steadily since 2006 and it’s not hard to see why, what with the housing crisis, the financial meltdown and the general recession and record unemployment and underemployment.

So what can those with a FICO that is under 620 do to get a mortgage?

1. Prepare to pay more

People with poor credit can still get a mortgage, but they will pay far more than even those with credit scores on the margin.

Guidelines from the U.S. Department of Housing and Urban Development and the GSEs, Fannie Mae and Freddie Mac, advise waiting at least two years after a short sale, so long as credit after the short sale is good.

Sellers should be advised to do their homework on the mortgage brokers they are working with – shady and dodgy operators are like bottom feeders, looking to prey on those who are more desperate and who aren’t financially savvy, which is how they see people with poor credit.

2. Refinance ASAP

A bad credit mortgage may seem like the borrower is signing away their life on a bad deal, but so long as the borrower maintains their credit after the mortgage is signed, they can be eligible to refinance for a much better deal within two years, and their credit will have improved.

In short, a bad credit mortgage is a short-term solution that gets them in a home. It’s important to bear in mind that bad credit needn’t follow the borrower longer than necessary.

3. Ask about options

The 30-year mortgage is a popular choice, but maybe not the right one if the borrower’s credit is weak. Adjustable rate mortgages are also a possibility, depending on the circumstance, during which time the borrower can work on repairing and maintaining their credit while paying at a lower interest rate than are offered on fixed-rate mortgages.

Many people who had their credit torn up in the recession were not the typical bill skippers. They were hard-working, responsible people whose world was upended through layoffs, downsizing, the loss of contract work, and a dozen other legitimate reasons.

4. Get a co-signer

Many have some other assets, or have family members who are responsible. These people may be willing to co-sign. Federal Housing Administration rules allow for a co-signer on loans.

Above all, check with HUD, FHA, the FHFA, Fannie Mae and Freddie Mac for information on pathways to homeownership for those who have damaged credit.

It is possible to get a mortgage with bad credit today. Possible, but still challenging. 

 

courtesy of:  http://www.housingwire.com/

What YOU SHOULD KNOW About Housing Affordability

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Is it the right time to buy a house?  Is it the right time to sell?  How do you know when to jump into the real estate market?  The answer is….it depends.  There’s no single answer that applies to everyone.  A host of factors come into play, including the economy in general, whether home prices are rising or falling, the inventory of available homes, and the state of your own financial outlook.  If you’re thinking about buying or selling a home, here are some factors to consider.

For Buyers:

Improving Economy, Rising Prices, and Eager Buyers:

The rebound in the economy means more competition for homes because people who have been renting or staying put in their homes are now jumping into the housing market. This translates into quick turnover on home sales, multiple bids, and sometimes, buyers bidding over the asking price. The boost in housing prices is also fueling competition from buyers who want to get into the market before prices get too high. Even though prices are rising, many still consider some homes underpriced since prices had dipped so low. And buyers are looking to make a move while houses are still relatively a good deal.
FHA Fee Changes:

Loans through the Federal Housing Administration (FHA) were historically the best bet for people with low to moderate incomes and not much money to put toward a down payment. Generally, private lenders require a 5% down payment, while FHA only requires 3.5%. However, with several changes to loan terms, FHA may no longer be the smartest option.
FHA loans require mortgage insurance, a fee tacked onto the loan that provides the lender some protection in case the borrower defaults on the loan. In the past, the borrower only needed to carry the insurance until the loan reached 78% of the original loan amount. Under the new rules, the borrower is required to carry the insurance for the life of the loan.
The cost of mortgage insurance on FHA loans has also been on the rise, almost tripling since 2008. In 2013, the fee rose to 1.35% of the balance of the loan. Additionally, FHA loans require borrowers to pay an upfront fee of 1.75% when getting the loan. Between the upfront fee and the required mortgage insurance, saving up more for a down payment and getting a private mortgage may make more financial sense.
Beyond FHA:

Buyers with a low down payment have other options to consider. Fannie Mae HomePath loans, available only on Fannie Mae-owned properties, offer low down payments and no mortgage insurance requirement. Periodically, Fannie Mae also offers special deals in which they cover the buyer’s closing costs. There also loans available to people in various special circumstances. Veterans, for example, can get VA Mortgages, which offer good terms, low down payments, and easier qualification requirements. The USDA offers attractive mortgage terms to moderate-income families buying property in rural or semi-rural areas.
Check Other Affordability Programs:

The Good Neighbor Next Door program offers discounts of homes in “revitalization” areas of up to 50% for qualified fire fighters, law enforcement officers, EMTs, and teachers. Check with state and local housing agencies to see what programs are available in your area. Check http://www.usa.gov for links and other home buying help and information.
Mind Your Debt:

Having a large amount of debt in relation to your income will lower your chances of getting a loan with favorable terms, or even getting a loan at all. Private lenders generally have more stringent rules for debt-to-income ratio (DTI). There are two kinds of DTI–how much personal debt you can carry in relation to your income (e.g. car loans, student loans, child care expenses) and income versus the amount you will be spending on housing debt (e.g. mortgage payments, property taxes, insurance and so forth.) Lenders take both into consideration. Would-be borrowers who want private financing generally need to have less than 45% of their income going towards personal debts, while FHA will finance borrowers who have up to about 56% of their income allocated for debt payment. Borrowers can qualify for an FHA loan with up to 47% of their income slated for housing costs, while conventional lenders generally allow only up to 38-40%.

For Sellers:

Rising Home Prices:

House prices are rebounding from the downturn, and 2014 is shaping up to be a seller’s market. Rising home prices are a boon to sellers who can expect faster sales, multiple full-price offers and even offers above their asking price.
Starter Homes in Demand:

If you have a starter home and are looking to upsize, the market is especially in your favor. Starter homes are in short supply because during the economic downturn, people were buying and selling less frequently. Now that the economy is improving, there’s a lot of pent-up demand, especially for people looking for inexpensive housing or a starter home.
Fewer Underwater Mortgages, More Equity:

The nationwide trend of rising home prices means other good news for sellers. The boost in prices is finally lifting many homeowners from their underwater mortgages and giving others more equity in their homes. More equity means more owners will have the money for a down payment and closing costs if they’d like to move up to something pricier.
Time to Refinance?:

Rising prices will also raise the appraised value of many homes, meaning it may be a good time for homeowners to refinance. Higher appraisals may help you get more favorable terms on a first mortgage or refinance the rolling of a second mortgage into one stable, fixed-rate mortgage.

courtesy of:  http://www.clientdirect.net/

 

Simple Mortgage Definition of Loan-To-Value (LTV)

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Simple Definition : Loan-To-Value (LTV)

In the world of mortgages, Loan-to-Value (LTV) is the amount of money you’re borrowing as a percentage of your home’s value.

Lenders use loan-to-value calculations on both purchase and refinance transactions. The math to determine your LTV may vary based on loan purpose, however.

With a refinance, the LTV is equal to your loan size divided by your home’s appraised value. For a purchase, LTV is based on the sales price of the home, unless the home appraises for less than its purchase price. When this happens, your home’s LTV is based on the lower appraised value — not the home’s purchase price.

Here are four simple examples to illustrate the concept of loan-to-value :

Buying a Home which appraises for more than its Purchase Price

  • House price: $100,000
  • Appraised value : $110,000
  • Downpayment: $20,000
  • Loan amount: $80,000
  • Loan-to-value (LTV) : 80%

Buying a Home which appraises for less than its Purchase Price

  • House price: $100,000
  • Appraised value : $90,000
  • Downpayment: $20,000
  • Loan amount: $80,000
  • Loan-to-value (LTV) : 89%

Refinancing a Home with no Second Mortgage

  • Home value: $100,000
  • Loan balance: $80,000
  • Equity: $20,000
  • Loan-to-value or LTV: 80%

Refinancing a Home with a Second Mortgage

  • Home value: $100,000
  • Loan balance: $80,000
  • Second loan balance : $10,000
  • Equity: $10,000
  • Loan-to-value or LTV: 90%

Whether you’re buying or refinancing, though, your loan’s loan-to-value is important because it helps to determine your mortgage rate and your loan eligibility.

High LTV Loans For Home Buyers

Loan-to-value is a key factor in your ability to get approved for a mortgage. In general, lenders prefer loans with low LTV because loans with low LTV represent less risk to the bank.

That said, there are a number of loan programs specifically geared toward homeowners with high LTVs. There are even some programs which ignore loan-to-value altogether.

Here is a brief review of the more common high-LTV loan types.

VA Loan : Up to 100% LTV allowed

VA loans are loans guaranteed by the U.S. Department of Veterans Affairs. VA loan guidelines allow for 100% LTV, which means that no downpayment is required for an VA loan. VA mortgages are available to certain active-duty military servicepersons, veterans, military spouses, members of the Selected Reserve or National Guard, cadets at the U.S. Military, Air Force or Coast Guard Academy members, midshipman at the U.S. Naval Academy, World War II merchant seamen, U.S. Public Health Service officers and National Oceanic & Atmospheric Administration officers, among other groups.

USDA Loan : Up to 100% LTV allowed

USDA loans are loans insured by the U.S. Department of Agriculture. USDA loans allow for 100% LTV — there is no downpayment required. USDA loans are sometimes known as Rural Housing Loans but it’s a misnomer, of sorts. USDA loans are available in rural parts of the country, but they’re available to many suburban homeowners, too.

FHA Loan : Up to 96.5% LTV allowed

FHA loans are loans insured by the Federal Housing Administration, an agency within the U.S. Department of Housing and Urban Development (HUD). FHA mortgage guidelines require a downpayment of at least 3.5 percent. Unlike VA and USDA loans, FHA loans are not limited by military background or location — there are no special eligibility requirements. FHA loans can be an especially good fit for home buyers with less-than-perfect credit scores.

Conventional Loan : Up to 95% LTV allowed

Conventional loans are loans guaranteed by Fannie Mae or Freddie Mac. Both groups offer 95% LTV purchase mortgages, which means you will need to make a downpayment of 5 percent to qualify. 95% loans are available via most mortgage lenders, and private mortgage insurance (PMI) is often required. As compared to an FHA loan, conventional loans to 95 percent LTV are advised for homeowners with high credit scores only. In most other cases, FHA loans are preferred.

High LTV Loans For Refinancing Households

High-LTV mortgages are simpler for refinance transactions as compared for purchase ones. Multiple federal agencies make “no appraisal” refinance programs available to U.S. homeowners which means that loan-to-value is a non-factor for eligibility.

A few of those programs are highlighted below.

The HARP 2.0 Program

The Home Affordable Refinance Program (HARP) was first launched late last decade. Also known as “The Obama Refi”, HARP is available to homeowners with existing mortgages backed by Fannie Mae or Freddie Mac. HARP was revamped in 2011 as “HARP 2.0” and the latest iteration allows for unlimited LTV. No matter how little equity you have in your home, you can be HARP-eligible.

FHA Streamline Refinance

The FHA Streamline Refinance is a special refinance program made available to homeowners with existing FHA mortgages. Official guidelines for the FHA Streamline Refinance waive appraisal requirements, which means that loans with unlimited LTV are allowed. Guidelines also state that income, employment and credit are not required to be verified.

VA Streamline Refinance

The VA Streamline Refinance is a special refinance program for homeowners with existing VA home loans. The official name of the VA Streamline Refinance is the Interest Rate Reduction Refinance Loan (IRRRL). It’s sometimes called the VA-to-VA loan. Similar to its FHA cousin, the VA Streamline Refinance does not require an appraisal, nor does it require the verification of income, employment or credit.

USDA Streamline Refinance

The USDA Streamline Refinance is available to homeowners with existing USDA mortgages only. Like the FHA and VA streamline programs, the USDA refinance waives the need for a home appraisal. The program is currently in pilot phase, and available in 19 states.

What Is Your Maximum Loan-to-Value?

Loan-to-value is the ratio of how much you’re borrowing to home much your home is worth. It’s a simple formula but the basis for most mortgage lending. If you can grasp how LTV works, you can better pick the mortgage that suits your needs best.

courtesy of:  http://themortgagereports.com/13598/loan-to-value-for-mortgages-explained-in-plain-english

Mortgage Rates Drop – Mortgage Standards Expand To Include Lower Credit Scores

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May 19, 2014

Mortgage lenders are lowering mortgage credit standards nationwide.

Effective immediately, home buyers and refinancing households can get approved for an FHA loan or a conventional loan with lower credit scores than during any time in the last five years.

Combined with mortgage rates today, which are at an 11-month low, it’s an excellent time to apply for mortgage.

Mortgage Credit Score Minimums Drop

It’s getting easier for borrowers to get approved for a mortgage. As the economy has improved, jobs growth has been ongoing; home values have climbed steadily; and the number of loans in default have dropped dramatically.

Lenders are taking fewer losses and realizing bigger returns. In response, they’re loosening loan guidelines in an effort to reach consumers who have been thus far locked out from the housing market rebound.

Earlier this year, U.S. lenders lowered minimum credit score requirements by 40 points for borrowers using FHA-backed financing, opening the low-downpayment program to a wide swath of underserved borrowers.

Lenders are making a similar move for conventional loans.

Lowering credit standards is a big deal in the U.S. housing market. Credit scores predict the probability of foreclosure with lower credit score correlating to high foreclosure probability.

During last decade’s housing market downturn, homes in foreclosure cost banks hundreds of millions of dollars. As more loans went bad, banks grew more risk-averse, tightening up what they would lend, and to whom.

This month’s loosening of loan standards suggests that fewer loans are defaulting nationwide, and that banks are willing to assume new risk given today’s strengthening economy.

For today’s buyers of homes and households wanting to refinance, this is good news.

You no longer need “perfect” credit to get access to Fannie Mae- and Freddie Mac-backed mortgages. A 620 FICO score now works just fine.

The Mortgage Approval “Triangle”

Because there are tens of available mortgage programs, there is no “one” formula for getting approved for a mortgage. However, mortgage approvals almost always focus on three key areas — your income, your equity, and your credit.

In this three-pronged approach, “income” is the amount of documented income you earn annually as compared to your monthly debts. In general, your debts must not exceed 45% of your documented income.

This ratio is known as your debt-to-income (DTI) ratio.

“Equity” is the amount of equity, in percentage terms, you hold in the home you’re mortgaging. For a home buyer, your equity is equal to your downpayment. For a refinancing mortgage applicant, your equity is your loan size divided by the home’s value, a ratio known as Loan-to-Value (LTV).

Loan-to-value requirements vary by program. For example, for borrowers with a FHA-backed loan, the maximum LTV on a home purchase transaction is 96.5%. On an FHA refinance, however, there are no LTV restrictions at all.

Or, for a military borrower using a VA loan for a purchase, the maximum LTV is 100%; there is no downpayment required whatsoever.

The third prong in mortgage underwriting is “credit”.

Your credit score is a based on a formula which determine the likelihood that you’ll go 90 days without making payment to your lender, which puts your loan into default. Credit scores are on a scale of 300-850 and are sometimes referred to as “FICO” scores, generically.

Credit scores of 740 or higher are considered excellent.

To get a mortgage approval, it’s not required for applicants be “excellent” in all three prongs of the mortgage approval triangle — you must only earn a “passing” grade.

With credit standards dropping, it’s easier for today’s borrowers to get approved.

Loan Programs For Borrowers With Average Credit Score

Mortgage lenders are loosening home loan standards. They’re lowering minimum credit score standards and granting more “exceptions” as compared to last decade.

If you were recently turned down for a mortgage because your credit score or income, it might make sense to re-apply — especially because of the number of home loans now available to borrowers with less-than-perfect credit scores.

One such program is the USDA Rural Housing Loan, which allows 100% financing for home buyers in rural and suburban neighborhoods. The USDA loan backed by the federal government, is available in all 50 states, and requires a minimum FICO score of 620.

Another available program is the VA loan, which also enforces a minimum FICO score of 620. VA loans are available to members of the military and require no downpayment whatsoever.

VA loans require no mortgage insurance and can be assumed by the future buyer of your home. This means that your 3.75% mortgage rate can be “sold” along with your home, so long as the buyer can be VA loan-approved.

Assumable loans add value to a home in a rising mortgage rate environment.

A third program for borrowers with less-than-perfect credit scores is the FHA home loan. Official FHA guidelines state that a 500 FICO score is required to get approved, but many lenders will underwrite to a minimum 580 FICO or better.

FHA loans are assumable, as well.

Low-credit-score borrowers can also use conventional mortgage financing. Conventional loans are loans which are backed by Fannie Mae or Freddie Mac.

Conventional loans are available with credit scores of 620 or higher, and can be the best choice for buyers with downpayments of 10% or more; or for refinancing homeowners with home equity of at least twenty percent.

Additionally, Fannie Mae or Freddie Mac can access the Home Affordable Refinance Program (HARP) program. Sometimes called the “Obama Refi”, HARP loans are for homeowners whose homes have lost equity since the date of purchase.

HARP is allowed with a 620 FICO score or better.

Get Today’s Live Mortgage Rates

As mortgage rates move to an 11-month low, mortgage lenders have opened their loan guidelines to a wider group of applicants. If you’ve been turned down for a mortgage in the recent past, consider applying again.

courtesy of:  http://themortgagereports.com/14951/mortgage-rates-fico-score-credit

Mortgage Lenders Begin Easing Rules for Home Buyers

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As a sign of mortgage lenders’ rising confidence in the housing market, restrictive lending standards are beginning to ease, and the credit freeze is starting to thaw. Lenders have started to accept lower credit scores and to reduce down-payment requirements.

Making sense of the story

  • Lenders recognize that refinancing old mortgages will no longer be a huge profit center for banks, so competing for borrowers will be needed for business and future profits. As a result, lenders will have to open up to borrowers who may not have perfect credit or large down payments.
  • For example, the lender TD Bank began accepting down payments as low as 3 percent through an initiative called “Right Step” for first-time buyers. A year ago, the program required at least a 5 percent down payment.
  • Mortgage originations are expected to reach $1.1 trillion this year, which is down from $1.8 trillion last year and $2 trillion in 2012 due to less refinancing.
  • While private lenders have shied away from low-down-payment mortgages in the past few years, in the past year, more than one in six loans made outside of the FHA included down payments of less than 10 percent.
  • Credit scores for borrowers seeking conventional mortgages also are easing, as scores on purchase mortgages stood at 755 in March, down from 761 a year earlier.
  • Smaller lenders are trying to appeal to first-time buyers while many larger lenders are gradually reducing down payments for jumbo loans in order to attract wealthy customers.

courtesy of:  http://online.wsj.com/

3 Major “Need to Know’s” About The 2014 Housing Market

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The following list was put together by a veteran housing economist, asked by HousingWire for his opinion on the near-term future of the markets we cover daily.

(David Berson is the chief economist at Nationwide. He leads a team of economic analysts delivering economic forecasts and analyses that are used to inform and strengthen the organization’s business strategies and operating plans. Prior to joining Nationwide, David served as the chief economist at The PMI Group and for Fannie Mae.)

Here’s David Berson’s take on the 3 things you need to know about housing in 2014.

No. 1: 2014 should prove to be the strongest year for housing activity since before the Great Recession.

Housing activity (home sales and housing starts) has increased modestly over the past several years, but is still at levels well-below sustainable trends. For both economic and demographic reasons, 2014 should be the year when activity reaches the highest level since 2006/2007.

Propelling home sales are job growth and housing affordability. The latter reflects the interplay of household income, mortgage rates and house prices. In 2013, while housing activity picked up, it was a year when job growth remained low and virtually unchanged from the previous year.  Moreover, affordability, while still high, fell sharply in the second half.

Most economists expect an improved job market in 2014, with employment growth accelerating and the unemployment rate continuing to decline. That jobless rate drop will reflect more of a pickup in employment than further declines in the labor force participation rate. This will be the key factor improving housing demand this year, even if mortgage rates rise and affordability declines. While the housing market tends to do especially well when the job market improves and mortgage rates decline simultaneously, that combination of events occurs only rarely.

More often, either job gains accelerate while mortgage rates rise, or job gains decline while mortgage rates drop. Typically, housing activity expands in the former case and contracts in the latter. People buy homes when their job and income prospects improve – even if it’s more expensive to do so – rather than buy when it is inexpensive to do so but they’re worried about keeping their jobs.

No. 2: Demographics should start to favor housing activity.

The demographic factor most affecting the housing market is household formations. Newly formed households may buy or rent, but they reside somewhere as an independent unit. On average, roughly 1.2 million households form every year in the United States and they each demand a housing unit. Household formations are affected by the job market, as people “double-up” when worried about their job and income-earning prospects. The Great Recession and the modest job recovery in the years following induced many people who might have lived independently to move in together. That’s most noticeable in the rise in the share of young adults living with their parents, primarily because of the weak job recovery.

Reflecting the slow pace of household formations, there is an increasing pent-up demand for households. After all, most of these young adults would prefer the freedom of being on their own (and their parents really don’t want them as full-time residents, either). We estimate the economy is short by more than three million households.

If the economy expands at a faster pace this year, bringing a more rapid rate of job creation, that should translate into more households, raising housing demand. We won’t see all three million missing households return to the housing market at once. (That wouldn’t be a good thing for the housing market anyway, since that would be on top of the 1.2 million households that normally would develop this year; such a surge would swamp the existing housing supply). Beginning in 2014, the pace of household formations should accelerate to an above-trend pace for several years, pushing up housing demand.

No. 3: Mortgage availability shouldn’t worsen and may improve.

Mortgage credit isn’t nearly as easy to get as it was during the housing boom, and it shouldn’t be.  Still, compared with recent years, mortgage availability has increased slightly. And reasons exist for mortgage availability to be no worse in 2014 than in the past few years. Actually, it may be somewhat easier to get a mortgage loan.

With the dislocations in mortgage lending since the housing bubble popped, Fannie Mae and Freddie Mac have increased their share of the mortgage market significantly. When combined with lending from the Federal Housing Administration and the Veteran’s Administration, the government or government-sponsored share of mortgage lending has climbed to more than 90 percent in recent years. That is an untenable situation in the long run, but is unlikely to change much this year.

The good news is that new Qualified Mortgage lending rules from the Consumer Financial Protection Bureau exempt home mortgages that qualify for purchase or securitization from Fannie and Freddie. As a result, mortgage lenders won’t have to tighten their mortgage-underwriting requirements in response to QM as long as they sell their loans to the GSEs.

Additionally, the rise in mortgage rates already has reduced mortgage origination volumes as refinance activity declines. If mortgage rates rise further this year, as expected, then refinance activity will fall still more. In response, mortgage lenders probably will ease lending standards to the extent possible under the QM rules to boost lending activity by increasing purchase originations. As a result, the increase in new households expected to be created this year, spurred by a stronger job market, should find that qualifying for a mortgage loan will be somewhat easier in 2014 than in prior years.

courtesy of:  http://www.housingwire.com/

Many Home Buyers Plan to Make a Move This Winter

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Home buyers who weren’t successful this summer at finding a home due to limited inventories and competition from all-cash offers are looking to retry their luck in the winter, according to realtor.com®’s Winter Home Buyer Report.

“This summer and spring, home-buying season was particularly challenging for buyers, especially first-time home buyers trying to compete with all-cash offers and bidding wars because of reduced inventory,” says Alison Schwartz, vice president of corporate communications at realtor.com®. “In fact, a quarter of the winter home buyers revealed they are in the market now because they were unable to find a home during this last home-buying season.”

But winter home buyers know they’ll face some challenges. Forty-five percent of those surveyed say they believe they will be up against inventory challenges again, with few homes for sale within the price range they desire. Twenty-nine percent also say that winter weather makes house-hunting unpleasant.

But they believe that the winter can be a good time to buy a home. Twenty-six percent say winter is a good time to buy because they feel sellers will be more motivated and willing to negotiate. Twenty-four percent also say they think home prices will be better.

Of those looking to buy this winter, 23 percent are planning to make a down payment of 10 to 20 percent, according to the realtor.com® survey. Twenty-two percent are planning to put down 21 to 99 percent in cash; 19 percent plan to put down 100 percent cash; and 13 percent are planning to make a down payment of 3.5 percent to qualify for a Federal Housing Administration loan.

courtesy of:  http://realtormag.realtor.org/

Easier To Get a Mortgage?

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Make no mistake: Mortgage credit is still very tight by historical standards, and only borrowers with the most pristine credit and healthy down payments can get the lowest rates. But there are signs that the noose is loosening, if only slightly, in response to lower mortgage volume.

Volume has fallen because rates are rising. Originations were down nearly 20 percent in the third quarter from the same period in 2012, according to Mortgage Daily.

Refinances are down more than 50 percent from a year ago because of higher rates, the Mortgage Bankers Association says.

The drop in volume has lenders looking for more business, however, and possibly easing up on some standards—or at least removing costly overlays on loans.

“New originations will be down, and nonprime borrowers will start to re-emerge,” said Tim Martin of TransUnion, which reported a 23 percent drop in borrowers’ making late payments in the third quarter versus a year earlier.

Since the recession began in 2008, the percentage of nonprime borrowers—or those with a Vantage Score lower than 700, according to Martin—has fallen from 12 percent of all originations to below 6 percent. That share is ticking up slightly.

“The origination volumes are starting to lower, so [banks say] let’s start easing up a little bit, take a little bit more risk and help some folks get some mortgages done,” Martin said.

After tightening in August and September, credit eased slightly in October, according to a monthly report from the Mortgage Bankers Association.

“Some investors reduced minimum credit scores on certain products,” the report said. “At the same time, other investors reduced the availability of cash-out refinances and limited other programs to primary residences in programs which previously allowed for second and investor homes. The net impact was a slight increase in the index for the month.”

That slight easing may again be just for the most creditworthy borrowers. Options for those with smaller down payments and lower scores are still limited.

D.R. Horton, the nation’s largest home builder, said the share of buyers using low-down-payment loans from the Federal Housing Administration is dropping, as the agency has raised its insurance premiums.

The entry-level builder, which reported fiscal fourth-quarter earnings Tuesday, said the share of first-time buyers dropped to 43 percent from 53 percent year over year. The average FICO score for a D.R. Horton buyer is 723—high by historical standards.

“We’ve not seen any significant changes in the underwriting standards to our customers” said Stacey Dwyer, executive vice president and treasurer of D.R. Horton. In terms of overall loosening, we’re not seeing anything significant,”

It is seeing effects from rising mortgage rates, however—a negative for home sales and refinances but a positive for credit availability as banks seek more business. Rising rates combined with rising home prices will sideline some buyers, especially first-timers.

It remains to be seen if the slight credit easing, though apparently not significant in the eyes of a major home builder, will help sales.

courtesy of:  http://www.cnbc.com/, Diana Olick.

Getting an FHA Loan Just Got Easier

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Homebuyers who lost their homes because of recession-induced employment cuts may be able to return to the housing market sooner than they previously thought.

In an Aug. 15 letter, the Federal Housing Administration (FHA) added economic events to its list of extenuating circumstances and reduced the waiting period between foreclosure and loan qualification from 36 months to 12 months.

“This will help consumers who went through housing hell — a foreclosure or short sale — to become homeowners again and take advantage of low interest rates and decent home prices in many parts of the country,” said Gerri Detweiler, Credit.com’s director of consumer education.

How FHA Loans Work

The FHA, part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages to allow lenders to give borrowers affordable loan, by way of easy credit qualifications, reduced down payments or lower closing costs.

To apply for an FHA loan under the shortened timeline, borrowers must meet certain criteria: The borrower must have experienced a period of six months or longer during which household income was reduced by at least a 20%, as a result of job loss or pay cuts beyond the borrower’s control; re-established his or her credit for at least a year; and completed housing counseling.

The letter outlines the requirements in greater detail. The adjustments to the loan program were effective immediately, through September 2016.

“The purpose is to assist those who faced an economic event ……. (read more —>) 

courtesy of:  http://finance.yahoo.com/news/bad-credit-getting-fha-loan-110045265.html

When Home Buyers Ask Mom and Dad for Cash

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Home buyers having trouble making a down payment can turn to their parents for help. But it’s best when financial aid is in the form of a gift—not a loan.

Having trouble making that down payment? Call your mother. Maybe she and dad can help.

Financial experts say that parental help is best when the money is a gift, with no expectation of repayment. That is because loans from family members can create extra hurdles when a home buyer applies for a mortgage.

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 Lenders typically view a family loan as another burden that could affect a borrower’s ability to make monthly payments, said Tom Wind, executive vice president of residential and commercial lending at national lender EverBank EVER +0.39%. In fact, a loan from a parent could raise a borrower’s debt-to-income ratio sufficiently to result in disqualification for a mortgage, he added.

Parental loans also fall under the category of unsecured debt, meaning that no asset is acting as collateral, which can pose a lending risk. Edward J. Achtner, Bank of America‘s BAC -0.28%senior vice president in north California and Oregon, said his company generally doesn’t allow unsecured debt—such as credit-card advances—as a funding source for a jumbo mortgage down payment, Mr. Achtner said. To be considered, a loan from a relative would have to be secured with collateral such as a traditional secondary mortgage, counted toward the maximum loan-to-value ratio, and included in the underwriting process, he said.

Gifts—with no strings attached—are a different matter. Even then, EverBank and other lenders typically like to see home buyers contribute at least 10% of the loan amount to the down payment. “We are looking for borrowers to have their own equity in the transaction because that’s an indication of their ability to manage their own finances,” Mr. Wind said. “If someone is coming to the closing with a down payment that is all gift money, we’d consider it, but only on a case-by-case basis.”

Bank of America generally requires borrowers provide at least 5% of the loan amount, Mr. Achtner said. And gift money is only acceptable for a down payment on a primary residence and not a second, vacation or investment home, he added.

In making a family gift, the key is for the borrower to have the right documentation, including a letter that clearly states the gift amount and that the gift-giver doesn’t expect repayment, Mr. Achtner said. In addition, lenders require written proof that the money has been transferred from the relative’s bank account to the borrower’s bank account or, alternatively, are given a copy of a certified or cashier’s check, he added.

“If one has prepared for the gift correctly, it really doesn’t impair the mortgage process at all,” Mr. Achtner said.

About one-fourth of all first-time home buyers receive some down-payment assistance from relatives, most commonly, parents, according to a National Association of Realtors survey of people who purchased homes from July 2011 to June 2012.

Buyers seeking jumbo mortgages—loans above $417,000 in most parts of the country and $625,500 in high-cost areas—may especially need the help. Not only is the loan amount higher, jumbos also typically have higher down-payment requirements—at least 20% of the loan amount.

Rising property values are also driving more parents to pitch in on down payments, especially in high-price home markets such as parts of California, Mr. Wind said. “Assuming the borrower can afford the monthly payment, it’s a way for a child to take responsibility but for parents to help out,” he added.

A few more considerations when seeking help making a down payment:

• Don’t forget tax rules.   An individual gift of $14,000 or less is tax-exempt, but gifts that exceed the $14,000 annual limit must be reported to the IRS. Each parent can give $14,000 to a child and his or her spouse, for a nontaxable sum of $56,000.

• Stick to close family members.   Lenders generally won’t allow down payment gifts from distant relatives or unrelated parties, such as a builder.

• Gift rules are looser with an FHA loan.  Federal Housing Administration mortgage limits go above regular jumbo limits in some high-price areas and allow borrowers to use a gift for the full down payment.

courtesy of:  http://online.wsj.com

San Diego Neighborhood Stabilization Program

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Home Buyer Assistance Programs

 

 

Neighborhood Stabilization Homeownership Program Funding now available

 

The pre-approval application process is now open for first-time home buyers seeking to purchase foreclosed properties in the City of San Diego through the San Diego Housing Commissions (SDHC) Neighborhood Stabilization Homeownership Program (NSHP).

 

NSHPs primary objective is to help a first-time home buyer from a low-moderate income

(Up to 120% Area Median Income) with good credit and the ability to make mortgage payments buy a foreclosed property within the City of San Diegos targeted areas in City Council Districts 3, 4, 7 and 8 from San Ysidro to Miramar. Click here for maps of the targeted areas.

 

A first-time home buyer is defined as an individual who has not owned a home in the last three years.

 

The financial assistance is made possible through a $9.4 million federal grant, (Housing and Recovery Act of 2008-H.R. 3221), which was awarded to the City of San Diego in January and is being administered by the San Diego Housing Commission.

 

Pre-Approval

 

San Diego Housing Commission (SDHC) is currently accepting pre-approval applications for NSHP. First-time home buyers who believe they meet the requirements for the program are encouraged to contact a certified NSHP lender to assist with the process; or the buyer can complete the pre-approval application on their own and deliver it to:

 

San Diego Housing Commission

Attn: Loan Management

1122 Broadway #300

San Diego, CA 92101

 

Upon receipt of the pre-approval application, SDHC will determine the buyers eligibility and issue a pre-approval letter that can be submitted with a purchase offer using the NSHP.

For questions regarding the NSHP pre-approval process, contact:

Vicki Monce 619.578.7491 or vickim@sdhc.org

 

Home Buyer Education

 

All potential buyers are required to attend an eight hour home buyer education class with a SDHC approved class provider. The buyer must attend the class before placing an offer on a property. The classes fill up quickly, so any buyer considering participating in NSHP should enroll in a class today!        

NSHP Deferred Payment Loan

 

SDHC will provide eligible buyers with a 0% interest deferred payment loan up to 17% of the sales price to assist in the purchase of the home. No payments are required for 30 years, unless the property is sold, refinanced or not owner occupied, at which time the loan must be repaid. A minimum of 3% down payment from the buyers personal funds is required. The first trust deed loan must have a 30-year fixed interest rate.

 

NSHP Closing Cost Assistance Grant

 

SDHC will provide eligible buyers with a closing cost assistance grant up to 3% of the sales price. The grant can ONLY be used to pay closing costs which are not covered by seller concessions or other subsidies. The grant is recoverable, and must be repaid plus 5% interest if the property is sold, refinanced, or not owner occupied within the first six years. After six years, the grant is forgiven.

 

NSHP Rehabilitation Loan

 

SDHC will provide eligible buyers with a 0% interest rehabilitation loan up to $50,000. The rehabilitation loan must be used for repairs related to health and safety, curb appeal, and energy efficiency. Loans up to $10,000 will be forgiven in 5 years; loans up to $30,000 will be forgiven in 10 years; loans up to $50,000 will be forgiven in 15 years. If the property is sold, refinanced, not owner occupied, or if the repairs have not been maintained within the term of the loan, the rehabilitation loan must be repaid plus 3% interest.

 

Related documents for home buyers

      Related documents for certified NSHP lenders        

via sdhc.org

Click this link for website and forms!
http://sdhc.org/NSP.shtml

HUD Waives 90 Day Flipping Rule Beginning Feb. 1, 2010

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HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS
Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON – In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

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HUD is the nation’s housing agency committed to sustaining homeownership; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development ad enforces the nation’s fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.

via us.mc637.mail.yahoo.com