Mortgage Discussion for the Panhandle area

What a difference a week makes. Interest rates are moving and not in our favor. This may seem like some bad news but I truly do not think rates have anything to do with our current market. Rates were up and the housing market slowed. Rates came down and the slow market continued. Rates do not sell houses, people do.

First let's look to why rates are moving up. Gas prices, need I say more? I wrote an article last year explaining rates move in accordance with gas prices and why that is so. Gas prices are a major economic factor and with $4.00 gas prices across the nation the cost of goods go up and that leads to inflation. Inflation is cured by strengthening our U.S. Dollar against foreign currency and that is done by raising interest rates. That is a simple version.

What does all this mean? Nothing in my opinion. People are scared to buy real estate by the media keeping a dark cloud over our industry. Those of us who can divert our efforts to educating the consumer that real estate is a great buy right now will win the prize. The normal customer has misconceptions that they no longer qualify for a loan and will be turn down. Others think with all they have heard on TV and in the paper that they will need $20,000.00 in cash to buy a home. All of this simply is not true and it is up to us to get the message out.

FHA rates are still below 6.5% and a customer still can buy a house for little or no money out of pocket. We do not have the minimum credit score requirements some realtors are having issues getting approved. Life is good in a troubled market for those who know how to get the positive word out that qualifying is easy and home prices have never been better.

Again I think the time has come for me to dispel some rumors about financing and create opportunities for home sales. While we see business start to pick up so do the nay sayers about financing. Let us take a look at the newest remarks I have heard and see if you have any possibilities that may have fell between the cracks.

The first big discussion is FHA and the new minimum credit score requirements. This is all false information. While the "Big Name" banks and lenders have instituted somewhere between 580 and 620 minimum credit scores, FHA has not changed guidelines and we close these deals weekly. Being a smaller lender I have the ability closing any FHA loan that can be approved regardless of the credit score. Please do not let a deal fall through due to bad information. We need every closing we can get.

The next big rumor is the Down payment assistance programs and FHA's new minimum credit scores around these. I can assure you this too is false. Using SHIPP, Nehemiah or AmeriDream is not a problem no matter the score. Just like above if the file can be approved where the down payment arrives from does not matter. FHA is trying to help people buy houses in this market and has not made the process more difficult. Just some banks and lenders who made bad decisions in the past are so tight now they cannot approve a good loan. We do not have this problem and my blog is the only way to get this information out so you do not loose a deal because of misinformation.

Rural Development has never and still does not have minimum credit scores. I know I am repeating myself but some "Big Name" banks and lenders have decided to restrict lending in this area. The good news is this is not industry wide. We can close these loans if the loan is approvable no matter the score.

The end result is plenty of mortgage loans still close with little or no money down. Using Rural Development, VA or FHA with down payment assistance. We strive to approve any customer who wants and deserves a home no matter what credit score they may show. Do you clients a service and make sure they cannot be approved before you decide not to write a contract.

Another month into 2008 and a lot of movement in the financial industry. I will try and break some of the recent developments down so we all get a since of what is happening.

Let us start with the flood of FHA loans in the market. You may have noticed Government loans taking longer in underwriting over the past 60 days. That is because the market has changed from mostly conforming loans (Fannie Mae and Freddie Mac) to FHA, VA and U.S.D.A (Rural Development). That put a major squeeze on government underwriters and caused delays in loan closings across the nation. Now for the good news. All major banks and mortgage companies have also noticed the issue and staffed up to keep this from being a long term problem. We have seen underwriting turn times move from 17+ days to about four. Your future loans should all close on time, customer permitting. 

Great news from Fannie Mae! Fannie Mae has issued a new letter withdrawing the declining markets policy. That means no reduction in loan to value far any area in the nation. That is good news! I will however give you the whole truth. While Fannie Mae has lifted the declining markets policy the MI companies (Mortgage Insurance) have not. This means for the short term we may not see any difference in approveable loans. In the long term I believe you will see the MI companies withdraw the policy as well. This is the trend of loosing we are seeing so get ready for real estate to take off again.

More good news for qualifying a Rural Development loan. We know RD has income restrictions. You may not be aware that the government is looking at ways of loosening this program as well. This is not final but RD is trying to cut some of the tiers for income to make the program less complicated. I will use an example from Escambia County to try and explain. Currently the income limits are based on number of people in the household. A single person household is limited to $49,550.00 in yearly income. a two person household is limited to $56,600.00, 3 person $63,700.00 and four $70,750.00. Rural Development is looking at making the 1-2 person house hold limit at $56,600.00, the 3 or 4 person household at $70,750.00 and so on with the new limits. This will open up some more opportunities for home sales in our area.

I wrote all this to give you an idea of what is happening behind the front lines of financing. Hopefully you will agree with me that some positive moves are being made by the mortgage industry to allow more homes to sale. I hope you find this information good news and useful. If you need any help on FHA or any government loan please give me a call.

Yes, spring is here and homes are selling. We are closing a good many "no money down" deals as they seem to still be the market place. I was asked by a realtor this week what type of loans I closed and I responded with "A paper; FHA, VA and USDA". Thinking I was somewhat clever I went on to explain we are still finding buyers with little or no money to spare for a large down payment. The realtor asked me how I closed these loans when we have no 100% loans anymore. It was that comment that made me realize I was not so clever. A realtor who knows me is believing in wrong information. We have many ways of closing mortgages with little to no money down by a buyer. V.A. is 100% and still strong. USDA or Rural Development is 100% and stronger than ever. FHA is 97.75% but with down payment assistance a buyer stills have no down payment. The other big help is all these loans are self insured. That means you need not pay attention to the hype about MI (Mortgage Insurance) companies. There is no MI on an "A" loan (FHA, VA, USDA) in fact only FHA has MIP with is an FHA self insurance guaranteed by our government.

Your worst enemy in closing sales today are the media. Between the radio, TV, newspaper and other outlets buyers are scared and do not know they can still buy. It is all of our jobs to educate the public and give them the opportunity of home ownership.

It has never been more obvious to me that government loans are the way to not only survive but thrive in a less than perfect market. With the 100% opportunities still available with VA and USDA (Rural Development) these loans are the best choice for those customers that will fit the guidelines. Those that do not, FHA is still the leader in the market. Between SHIPP ( if qualified) and the DAP (Down Payment Assistance Programs such as Nehemiah and Ameridream) plenty of prospective home buyers still have opportunities to buy a home with less than perfect credit and no cash for down payment. Spring is here and Summer is fast approaching. Buyers are looking and with the FHA new limits at $271,050.00 more buying power exist to make 2008 a good year. Here are some quick facts that may help you decide what a customer can buy and how:

FHA

1. Loan limits are $271,050.00
2. Nonoccupying co-borrower can be used for credit, income or assets
3. Less than 580 credit score is considered with good history in the past 12 months
4. 97.75% loan to value loans with SHIPP or DAP helping the downstroke
5. Collections generally do not need to be paid if not affecting title
6. Previous chapter 7 Bankruptcy or foreclosures are OK over 2 years
7. Current chapter 13 bankruptcy is OK with 1 year pay history 
8. Lack of credit or no credit will close as well
9. 1 year self employed borrowers can close if they have a 2 year history in the same field of work
10. Cash to close can come from gift, DAP, SHIPP, sweat equity, even cash kept at home will be considered

VA

1. Over $417,000.00 can be considered
2. Reasonable credit accepted
3. 100% Loans
4. Seller can pay all closing cost + up to 4% of loan for other buyers needs
5. Higher debt loads are always considered
6. No mortgage insurance saving money in monthly payment

USDA

1. Lend off appraised value not purchase price
2. 102% Loan to value
3. Can lend over purchase price for closing cost, pre-paids or other credit needs
4. Less than perfect credit is OK with good past 12 months
5. 620 score credit is approved no questions asked
6. Less than 620 is acceptable with explanations (closed a 535 this week)
7. Must be in USDA area and meet income restrictions
8. No assets needed if no cash at closing
9. No mortgage insurance = lower monthly payments

All 3 have rates hovering around 6% so no subprime here. Hope this helps.

This is huge. The new loan limits came out today officially today and the new maxium loan for our area is now $271,050.00 up from yesterday's limit of $200,150.00. This will open up a new market for homes in the mid $200K range. Also did you know the rates for FHA are lower than those for Fannie at this time? Also the mortgage insurance for FHA is lower as well. There is no reason homes should not be flying off the market.

Other news for the week is HUGE also. You may be aware the "Down Payment Assistance Programs" (Nehemiah, AmeriDream and others) were in a court battle with HUD (Dept. of Housing and Urban Development) to stop them from helping home buyers. That battle is over and the Down Payment Assistance is here to stay. HUD lost the battle and we have these great programs to help potential home buyers who have no money for down payment.

This week gives us GREAT news on two fronts. Sell a home today FHA and use down payment assistance to give your customers the money down. Call me if you want more information.

HIP HIP HOORAY!

Well after the economic stimulus package was signed on Feb. 13th, we finally have some news about new loan limits. Though this information is not final and has not been released in full, here is what we have.

Good news for all FHA loans as it seems the new maximum loan for all FHA properties will be raised to $271,050 from the current $200,150. This is a huge improvement and will open up a good many homes for FHA lending. This should be very good news to everyone and help move some houses. The FHA letter is to be released the first week of March. We know this is happening so I feel comfortable taking your loan applications today.

In other news, the limits for all Fannie Mae and Freddie Mac will not change. This was nothing but rumor to start with and, as you remember I put out a blog stating this limit will not be affected in our area. The limit will remain at $417,000. Considering the market is really an FHA market now anyway, I do not believe this will have any bearing on our market at all. We will just shift some loans to FHA in the middle $200K range.

The end result will be more homes sold and financed with little or no money down through the FHA product. Call me with any questions or just have your customers call for their FHA approval today.

Home buyers are seemingly getting antsy starting to show up looking for houses again. I am sure is good news for all but the questions remains why now? There is no good answer but I am sure some positive press about interest rates have helped a good deal. What ever gets buyers moving is good news for our market.

Let us look at interest rates for this week. The rates for today are about 5.375% down from last week of 5.5%. Many question, why are rates are moving down so slowly? The simple answer is greed and profit buy the major banks and mortgage lenders. We all know the horror stories played out in the news everyday about mortgage lenders loosing money. When we have so much of a dramatic drop in rates the secondary market (those who decide rates on a daily basis) tend to take some profits and let the free market determine when rates will fall. The Federal Reserve controls short term rates and not the long term mortgage rates so the effect of a rate drop is slower to meet the consumer. I think we will see rates drop a little for a while and I am still looking for that 5% 30 year fixed rate we had for a couple of hours two weeks ago.

One last note for this blog. I hear rumors that Fannie Mae, Freddie Mac and FHA will raise the loan limits. The loan limits for Fannie and Freddie is currently $417,000.00 and FHA just over $200,000.00 depending on the county. The rumors have the loan limits being raised to $600,000.00+. Believe me rumors always seem to go too far and I think this one has as well. There is legislation to raise the limits temporarily in 2008 only but the raise is based on average home prices in an area or county. The new limits will be based on 125% of the median home price of any given area. This does not tell us anything for one good reason. HUD (Housing and Urban Development) has not ever released this information. We do not know what the median home price is so we cannot know what to expect. What I can tell you is unless the median home price is over $333,600 in your area you will not see and changes to the limit. some experts I have spoke with say our area of Escambia and Santa Rosa counties in Florida will have no increase to an increase to about $436,000.00 which will mean very little to those of us in the market. I do not want to be negative but I do want you to know the truth.

Be safe let us hear from you.

As I said WOW, last week was quite a ride. Hold on for another week and we will see where we end up. The markets flipped all over the place last week with rates at 5.75% on Monday, 5% on Wednesday and 5.5% by Friday. Expect another week of the fun ride. With a load of economic data and a Federal Reserve meeting rates will move daily. I believe the end result will be very positive.

Good news of the week has to be buyers. Buyers are showing up and looking at houses. I am not sure if the rates are helping or the time has just come for some real estate movement but alas good news is good news.

From a mortgage stand point we are starting to see some refinances. This too is good news as people start to get rid of the adjustable rate mortgages and lock in on a more stable fixed option. The more refinances we see nation wide will soften the concerns of future foreclosures. This will eventually lead to freeing up some credit policies. This too is good news.

100% money is still flowing at a blistering pace. Closings for low or no down payment deals are still the most sought after loans and the money is readily available.

We all stand together in an ever changing market with good news happening everywhere around us. It is up to the professionals in the real estate field to shout the good news from roof tops as the media tends to focus on every morsel of bad news it can find. Money is flowing and home prices are marked to sell. A great combination.