Home Loan Information

18Oct/101

An Appraisal is not an Inspection

: Image via Wikipedia

While eating dinner with my wife at one of our favorite Mexican Cantinas, which also happens to be less than a mile from home, we overheard two other diners discussing something we know quite a bit about. What caught my ears was when one of the ladies said to the other, “So she pulls into my driveway in her Porsche and gets out in a tight black dress and heels and I think to myself, ‘this girl is not dressed to crawl around in my attic and crawl space’.”

At first I thought maybe she was talking about a real estate agent but she continued, “I mean what kind of appraisers are these banks sending out these days? I could just imagine her crawling up on the roof and on ladders – she didn’t even have a ladder.”

It was at that point I realized she, like countless others, likely does not know the difference between an appraisal and an inspection. Chances are more people do not know the difference than do. In fact I run into it regularly in my own work when people say things like, “the guy didn’t check the outlets or water pressure or anything”.

In an effort to help the reader better understand let’s start with saying what the lender wants in almost every case in an appraisal not an inspection. There are some cases where the lender may ask for an inspection but in almost every case it is an appraisal. The difference? The appraiser tells the lender what they believe the actual worth/value of the property to be. The inspector tells the future home owner if there may be issues with the property that need to be dealt with now or may present an issue in the future.

Inspectors are there to find things like water leaks, bare wiring, code violations, etc.

Appraisers are there to tell the lender their estimation of the value of the property.

Then you get very confusing terms from people who should know better like “appraisal inspection”. There is also something called a Broker Price Opinion (BPO) which is neither and has no value when a loan is being considered.

Home Inspection or Appraisal: What’s the Difference? ASHI Sets the Record Straight for Homeowners and Buyers (eon.businesswire.com)
Hvcc Update!!!! It Hurts the Consumers & Our Economy!!! (annarborundressed.com)
The Ten Reasons People Can’t Sell Their Homes (247wallst.com)
What is a BPO? (Broker Price Opinion) (findwell.com)
All You Need To Know About Appraisals (apartmenttherapy.com)
Home Seller and Buyer Liability for a Home Inspection (brighthub.com)

Tagged as: Appraisal, Appraiser, Loan, Real Estate, Real estate broker/agent 1 Comment

3Sep/100

FHA mortgage insurance changes official

HUD has issued Mortgagee Letter 2010-28 changing the Upfront and Annual Mortgage Insurance Premiums effective with case numbers assigned on or after October 4, 2010 as follows:

Upfront Premiums

Loan Type	Upfront Premium Requirement
Purchase & Full Credit Qualifying Refinances	100 BPS
Streamline Refinances (all types)	100 BPS

Annual Premiums

LTV	Annual Premiums for Terms >15 Years
= or <95%	85 BPS
>95%	90 BPS

LTV	Annual Premiums for Terms =or <15 Years
= or <90%	None
>90%	25 BPS

These premiums are effective with case numbers assigned on or after October 4, 2010.

Tagged as: fha, georgia, home loans, mip, mortgage insurance, refinance, UFMIP No Comments

10Aug/101

FHA insurance changes

: Image via Wikipedia

The cause for celebration over Federal Housing Administration lowering the upfront mortgage insurance premium is short lived. Concurrent to lowering the upfront fee is the increase of the monthly insurance premium fee.

Lowering the UFMIP from 2.25% to 1% will certainly decrease the amount of repayment. However, increasing the MIP from .55% to .90% (on loans with a down payment of 5% or less) will increase the cost of repayment significantly. The end result will be the FHA having more operating capital if the result is not a significant decrease in the number of sales due to borrowers not being able to qualify on debt-to-income ratios.

Currently, if you are purchasing a home at $200,000 (for example) with the FHA minimum down payment of 3.5% your base loan amount, prior to the UFMIP add back, is $193,000. Adding back the UFMIP, at the current rate of 2.25%, brings the loan amount to $197,343. The MIP cost per month, at the current rate of .55%, is $90.45 per month.

After October 4th 2010 the UFMIP will be only 1% meaning the loan amount including UFMIP will be $194,930 – a savings of $2413 on the purchase price. However with the new MIP rate of .90% the monthly MIP addition to the payment will be $130 – resulting in a payment approximately $40 per month higher. At that rate the savings on UFMIP ($1900) will be lost in about 4 years.

One plus is that, at least currently, MIP does have a tax benefit and the buyer should consult their tax preparer for detailed information on the tax benefits of a monthly mortgage insurance premium.

UPDATE 1-US FHA set to increase borrowing costs next month (reuters.com)
Senate approves higher government mortgage fees for new loans (usatoday.com)
Higher Government Mortgage Fees Approved By Senate (huffingtonpost.com)
US FHA set to increase borrowing costs next month (reuters.com)
FHA Insured Mortgages: A Disaster In The Making (businessinsider.com)

Tagged as: down payment, Federal Housing Administration, Loan, mortgage, mortgage insurance, UFMIP 1 Comment

23Jul/100

Four sins of mortgage qualification

: Image via Wikipedia

Soon will come the day in the lives of most readers when purchasing a new home will be a desire realized or a necessity placed on them by the demands of life. Even those who already own a home may be faced with the decision or necessity to refinance a current home loan. Sadly most home buyers and owners plan more for their next vacation or even a family picnic than they do an upcoming mortgage.

Mortgage planning really is a science because it is based on numbers instead of emotions. While the buying process itself may be driven by more than numbers the actual financing of that property, or even the decision to purchase with cash, is primarily a series of numeric calculations. As such there are ways for anyone to plan for their next mortgage in order to receive the best possible rate and terms available.

The four sins

Negative impacts on the applicant’s ability to borrow loans are not always of their own doing yet some are. Clearing one’s history of these three sins, if they exist, will greatly improve their likelihood of not only being approved for a home mortgage but getting the best rate and terms.

Tagged as: Business, Credit history, Debt, Foreclosure, Loan, mortgage Continue reading

16Jul/101

What fees are included in the APR (Annual Percentage Rate)?

: Image via Wikipedia

The Annual Percentage Rate (APR) is one of the most misunderstood numbers there is on the mortgage documentation. Additionally it is the most easily abused and even though it is supposed to exist to protect shoppers can be so misconstrued as to actually harm the shopper. Be that as it may here are fees that must be included in the calculations for APR in the state of Georgia.

APR FEES
Processing Fee	Allowed
Underwriting Fee	Allowed
Origination Fee to Lender	Allowed
Discount Points to Lender	Allowed
Broker Fees for Services Rendered	Allowed
Commitment Fee	Allowed
Lock Fee	Allowed
Closing/Escrow Fee to	Allowed
Attorney’s Fee to	Allowed
Disbursement/Funding Fee	Allowed
Wire Transfer Fee	Allowed
Warehouse Fee	Allowed
Assignment Fee	Allowed
Amortization Schedule Fee	Allowed
Copy Fee	Allowed
Fax Fee	Allowed
Document Review Fee to Lender	Allowed
Courier or Express Mail Fee to	Allowed

The APR is the total cost of the loan over the life of the loan averaged with the base interest rate. For example if you have an interest rate or 4.5% and closing costs of $5000 on a $100,000 loan the .5% APR qualified closing costs would result in an APR of 4.923% while $10,000 in APR qualified closing costs on the same loan would result in an APR of 5.333%

The way this can be abused or manipulated is by charging a higher base rate and shifting the rate commission to cover some of the closing costs. Not that this is necessarily a bad thing but it gives a hint as to how this figure can be manipulated.

Friday’s Mortgage Rates…Trending Lower (raincityguide.com)
How loan originators are compensated and why consumers should care. (raincityguide.com)
36% Annual Percentage Rate Is Not Enough Says Check ‘n Go (lockergnome.com)

Tagged as: annual percentage rate, Closing cost, georgia, Loan, mortgage, Points 1 Comment

15Jul/100

What is a buyer's market or seller's market?

: Image via Wikipedia

I can’t say it any better than my friend Jennifer Fivelsdal “Just a few years ago it was not uncommon to see a house assessed at $200,000 selling for $400,000 and this made home sellers happy. That was a market called a Seller’s Market, in other words more buyers and fewer properties. The well known rule of supply and demand dictates that a higher demand with a limited supply will result in higher prices. Today the scenario is so different. Very high inventory and few buyers makes this a Buyer’s Market. In this case buyers want to spend less and get much more for their money.”

We are very much, for almost every market, in a buyer’s market. More now than ever before many sellers are having to short sell their home or bring cash to closing to pay the difference between the sales price and the mortgage pay off. To be sure a home seller may want to have their home appraised independently. While that appraisal cannot be used by the buyer’s lender due to all sorts of rules and regulations it should still be a standard, Uniform Appraisal and the result should be within a few percentage points. If you are in the Atlanta area I can give you the names of a few Atlanta area Georgia licensed appraisers.

Home listings jump 20%, (financialpost.com)
Saratoga Housing Market Inventory Rises Seasonally as Sales Moderate (saratogavoice.com)
Sellers outweighing buyers in housing market (newstatesman.com)
4 Keys to Selling In a Buyer’s Market (entrepreneur.com)
Still a “Buyer’s Market” in Many Neighborhoods (seattlebubble.com)

Tagged as: atlanta, georgia, Market, mortgage, Real Estate, Sales, Supply and demand No Comments

14Jul/101

Bad credit home loans

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“Anyone can qualify regardless of credit”. “No application refused”. “No minimum credit score required”. The ads are still out there and mostly on Craigslist. Generally those ads are not from mortgage lenders or banks but from mortgage lead generation companies. Unlike mortgage companies lead generators are not required to be licensed, don’t offer home loan services and are not held to the strict standards of mortgage companies in advertising so they make a lot of outrageous claims hoping to get as many people to give them their information as possible.

The truth is there just aren’t any conventional home loans for people with “bad credit”. Not even FHA as is often misconstrued. FHA home loans, just like conventional home loans, actually require a relatively clean credit history although they do allow some negative reporting – even that is limited to scope and history.

Tagged as: Credit history, Credit score, Debt, Loan, mortgage Continue reading

14Jun/101

No flood insurance available to millions because …

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June 14, 2010 04:37 PM

Representative Thomas Price
U.S. House of Representatives
424 Cannon House Office Building
Washington, DC 20515-0001

Subject: Renew Critical Housing Programs: NFIP and RHS

Dear Representative Price,

Congress left for the Memorial Day recess, leaving two critical housing programs unauthorized or unfunded. On May 31, authority for the National Flood Insurance Program (NFIP) expired. Lenders have stopped accepting applications for the Section 502 rural housing program, which has exhausted its funding.

Tagged as: Insurance, National Flood Insurance Program, Real Estate Continue reading

8Jun/103

Short sales and new loan approval

: Image by futureatlas.com via Flickr

With the number of short sales, properties being sold for much less than payoff, the question becomes more and more popular and, unfortunately, more and more necessary.

“How long after a short sale can we qualify again?” It is a question often asked and until now the answer, with the exception of lender enhancements to Fannie Mae and Freddie Mac guidelines, has been much unchanged.

With the release of FNMA’s DU 8.1 comes some huge game changers.

“DU will be updated to incorporate the policy changes specified in Announcement SEL-2010-05, Underwriting Borrowers with a Prior Preforeclosure Sale or Deed-in-Lieu of Foreclosure, regarding prior deed-in-lieu of foreclosure actions. If a deed-in-lieu of foreclosure is reported within two years of the credit report date, the loan casefile will receive a Refer with Caution/IV recommendation.”

Translated into common language that means regardless of the amount of down-payment, debt-to-income ratio or credit scores the loan application will not receive the all cherished “Approve/Eligible” from the Fannie Mae automated Desktop Underwriter. Instead these files will all be subjected to manual underwriting and will result in longer underwriting times and closer examination.

Filed under: Uncategorized Continue reading

27May/100

Low rates, excess inventory, great time to buy?

: Image via Wikipedia

Blog posts are generally best when timeless but this one should serve as a reminder to those who waited … and waited too long. For several months it has been told, reported and spread that interest rates would approach or hit another all time low while housing prices continued to be low and inventory continued to be high.

That time is now.

The truth is it is always a “good time to buy” especially when you are moving to a new city, upsizing, downsizing, or simply upgrading. The deeper truth is some times are better times to buy than others. Take the strawberry for example.

A few days ago I stopped in the local market to pick up some bread and meat and in the entrance there was a large display of bright red strawberries. It looked to be quite literally millions of them. They were loose and prepackaged in containers of various sizes all the way up to a “banana box” carton. This is the first time I have ever seen that many strawberries in that particular market.

Not only were there so many strawberries but the people were all over them. It was like a fire sale at the dollar store with bags and buggies and moms, dads and others looking over the display and taking them away swiftly. In fact there was a stock cart also filled with them sitting just a few feet away presumably to restock as needed. It looked as if it would be needed soon!

Most interesting was the price – 3 pints for $4. Now I’m not sure if that is a good price in your area but in our area it’s normally $5 for 1 pint. Obviously, even if you are really bad with the math, this is a tremendous bargain. In fact so tremendous one would imagine a lot of those packages going home will not be consumed in time and some will even go to waste.

The housing market right now is like those strawberries.

There is a huge amount of inventory and many professionals speak regularly of “shadow inventory”. It is said there are as many as a million or more homes which are simply not on the market right now because it may be more profitable to wait until the market recovers to list and sell. Maybe so. If that is accurate it only means the inventory levels will be high a little longer.

Top the overstock inventory with the very real fact that interest rates are the lowest they have been and you have a win win situation for any buyer.

I can say this about every commodity: the best time to buy is when others are having a difficult time selling. Overstocks (harvest time) and cheap money could absolutely make this the best time to buy in our lifetimes.

Tagged as: interest rates, mortgage rates, Real Estate No Comments

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Live Desk

Daily Rates for Qualified Buyers

	Today	Last Week
30 Year Fixed	3.59%	3.65%
15 Year Fixed	2.91%	2.89%
5/1 ARM	2.81%	2.57%
See more mortgage rates at Zillow.com

(Note: These are the lowest rates possible offered through advertisers and lead buyers at the company providing the data. They may require discount points.)