Rates Remain Calm Post Fed Comments
The Federal Open Market Committee voted to keep the Fed Funds Rate static at this time. The vote was nearly unanimous with only one dissenting voter. In its press release, the Federal Reserve presented an improved outlook for the U.S. economy since its last meeting in September. There's new evidence that the economy "strengthened somewhat" in the third quarter, led by consumer and business spending. The economy remains hampered by a number of factors including :
- Continuing weakness in the labor market
- Weakness in commercial real estate
- A depressed housing market
The good news is that inflation remains stable which will help keep mortgage rates in check.
FHA Credit Score Changes Coming
In February we were still funding loans down to a 580 credit score, now its 620 with most lenders. Some lenders are taking score requirements up to 640 and 660. The lending process is moving back to its technical book procedures. The changes are good because those that are buying now shouldn't experience defaults, and bad because many buyers aren't prepared for the rapid changes.
Regarding verifying down payment - Important: Any underwriting unit can ask for bank statements and official verification of deposits in tandem for the last 60 days up and through closing. NOTE: Any large deposits going into the account will need to be fully sourced, even if its a large deposit going into a giftors account. Cash deposits are not allowed. WHY?...
Recently there has been a slew of sellers kicking back the down payment to buyers in order to off-load properties. This has caused a tightening of down payment verification. Please take a moment to read the link at
FHA : What are Origination and Discount Points?
Definition of a "Point": A "Point" is a financial term used in the mortgage business to represent a percentage of the loan amount. One Point would be 1% of the loan amount, two Points would be 2% of the loan amount, so on and so on.
Origination points: Points charged to originate a mortgage loan. FHA allows a maximum of 1 point to be charged on FHA insured transactions.
Discount points: Points charged by the broker or lender to obtain a specific rate. To "buydown" a rate from 5% to 5.25% may cost 1 discount point.
Origination and discount points are labelled as such and must segmented into their own categories on the Good Faith Estimate.
Discount points DO NOT count towards the minimum statutory committment amount.
Negative Home Equity? Fannie Mae 105% Refinance Coming Soon
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The new Fannie Mae refinance program will be offered to homeowners struggling with negative equity and high mortgage rates. Negative equity exists when a homeowners mortgage balance exceeds the property's current value. The program was developed to assist these "upside down" homeowners take advantage of today's historically low rates. Soon, tens of thousands of homeowners that couldn't refinance due to declining home values may be able to refinance as long as their loan is "held" by Fannie Mae.
This new refinance program may also be referred to as the Fannie Mae streamline refinance. -Full income documentation -Possibly no appraisal depending on area, credit scores, type of property, date of purchase, etc. -Must be a Fannie Mae loan -Borrower or lender must check to see if the loan is with Fannie Mae -Fico pricing adjustments still impact the borrowers loan fees
-2nd mortgages must be subordinated, so ask the 2nd mortgage lender approval before starting |
Mortgage Rates Now a-la-carte
Mortgage rates have gotten sliced and diced in very narrow catagories and credit score ranges. Last year we were able to pool 700 ficos with 650.. this doesn't hold true any longer. I've included the MAIN FANNIE MAE AND FREDDIE MAC matrix below for what we as mortgage lenders have to look at before we price a loan. There is also matrices for cash-out refinances, condo's, investment properties and 2nd homes.
Don't expect any of the mortgage rates you see in the paper or online to hold true. The mortgage rates you see online are "base" rates and are only offered to a very small percentage of the population with the highest credits scores and largest down payments.
With declining property values, high loan defaults and lower credit scores so common now you will be better served working with a mortgage person you can first trust and one that has access to many lenders. Access to many lenders will help you find the right rate and approval for your particular needs.
As you can see on the below matrix 720 credit scores with lots of equity home owners are getting the best rates. This matrix applies to conventional loans only not FHA or VA loans. FHA and VA loans offer there own risk based adjustments. Guideline changes have been almost non stop since the end of 2007 due to the disrupted nature of mortgage lending.
Below adjustments are strictly for addtional points added for risk based add-ons. 1 point equals 1% of the loan amount. EX: 1 point for a $100,000 loan is $1,000, 2 points for a $100,000 loan is $2,000, and so on.
A borrower that doesn't want to pay risk based 'points' can typically increase their rate to absorb points. It usually costs a .25% increase in rate to eliminate 1 point.
Example: .25% increase in rate may eliminate a 1 point charge, .50% in rate may eliminate a 2 point charge. A 5.0% rate may have a 2 point charge or the client may pay 5.5% rate with 0 points.
The below risk based point adds are national guidelines that apply to all conventional mortgage lenders. Some lenders can add on their own additional "regional" risk premiums.
Clients can choose to incur the below addtional points or a higher rate to offset any additional points that must be charged due to additional risk.
| Fanne Freddie Conventional Conforming Adjusters | Increase rates or charge borrower below points or a combination of point/rate | |||||||||
| LTV% | <=60% | 60.01-<=70% | 70.01-75% | 75.01-80% | 80.01-85% | 85.01-90% | 90.01-95% | 95.01-97% | ||
| LTV / FICO Adjusters: All Products w/Terms > 15 Yrs | ||||||||||
| >=740 | FIXED/ARM | (0.250) | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | n/a | |
| 720 - 739 | FIXED/ARM | (0.250) | 0.000 | 0.000 | 0.250 | 0.000 | 0.000 | 0.000 | n/a | |
| 700 - 719 | FIXED/ARM | (0.250) | 0.500 | 0.500 | 0.750 | n/a | n/a | n/a | n/a | |
| 680 - 699 | FIXED/ARM | 0.000 | 0.500 | 1.000 | 1.500 | n/a | n/a | n/a | n/a | |
| 660 - 679 | FIXED/ARM | 0.000 | 1.000 | 2.000 | 2.500 | n/a | n/a | n/a | n/a | |
| 640 - 659 | FIXED/ARM | 0.500 | 1.250 | 2.500 | 3.000 | n/a | n/a | n/a | n/a | |
| 620 - 639 | FIXED/ARM | 0.500 | 1.500 | 3.000 | 3.000 | n/a | n/a | n/a | n/a | |
| <620 | FIXED/ARM | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |
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ADDITIONAL CONVENTIONAL CONFORMING ADJUSTERS CHARGE A HIGHER RATE OR BORROWER MUST PAY ADDITIONAL BELOW POINTS |
|||||||
| LTV > 90% <= 95% | 0.250 | ||||||
| 15 -year FRM w/ 120-month term | 0.250 | ||||||
| Investment Property LTV <= 75% | 1.750 | ||||||
| Investment Property LTV >75% <= 80% | 3.000 | ||||||
| Investment Property LTV >80% <= 90% | n/a | ||||||
| 2 Unit Property | 1.000 | ||||||
| 2 Unit Second Home Cash-Out refi <= 75% | 0.500 | ||||||
| 3 & 4 Unit Property | 1.000 | ||||||
| Secondary Financing | |||||||
| 75/20/5 LTV>65%/CLTV>90<=95% & FICO>=720 | 0.250 | ||||||
| 75/20/5 LTV>65%/CLTV>90<=95% & FICO<720 | 0.500 | ||||||
| 80/10/10 | 0.250 | ||||||
| All Other LTV>75% & FICO>=720 | 0.250 | ||||||
| All Other LTV>75% & FICO<720 | 0.500 | ||||||
| Non-escrowed (except CA, IA, IL, MN, NJ, NY, OR) | 0.250 | ||||||
| Temporary buydowns >80% LTV w/no MI | 1.000 | ||||||
| Condo > 75% LTV | ALL PRODUCTS W/ TERMS > 15 YRS | 0.750 | |||||
| Low Loan Size Adjuster | |||||||
| $0 - $49,999 | 0.500 | ||||||
| $50,000 - $99,999 | 0.250 | ||||||
VA and USDA Zero Down Performing Very Well
Illinois Home Loans
1) Great things happen
2) VA and USDA zero down performing very well
3) Who would do better to own foreclosures?
4) Top producer postcard program
5) Inflation
1) The Greatest, Most Wonderful, Toughest Home Loan
Rick and Michelle Keeper (last name changed) didn't want to rent anymore. They
could have purchased a home of their own long ago but they chose to live in a
rental apartment because of their sons handicap. Rick Jr. has cerebral palsy.
The rental they lived in had an elevator and their apartment didn't have too
many steps or floors to contend with. Rick and Michelle had put off buying a
house since Rick Jr's birth so that they could keep their lives simple and
manage their sons handicap.
Recent home prices and interest rates were enough to make them reconsider
buying again. After looking with their first Agent for about eight months of
looking, the keepers got discouraged and gave up. The properties they were
being shown would have needed a lot of modification to accomidate Rick Jr.-
they simply didn't have the extra money to invest.
Their original Agent told them that they would probably need a down payment and
closing costs of about $12,000. The estimated handicap accomidations and other
upgrades to the home would be about $22,000 bringing the total cost of the
purchase close to $34,000. The Keepers didn't want to clear out their savings
so they stopped looking.
On a Sunday a few months later the Keepers were driving around thinking again
about the purchase. They drove by an open house near their apartment and
decided to stop in and have a look. The Agent at the open house took the time
to find out about their special needs and saw a genuine opportunity to help. He
called me while they were at the open house and we had a mini conference call
regarding the purchase.
To the agent this was an ideal opportunity for the purchase rehab/upgrade
program. The Keepers should not have been initially told they HAD to spend
$34,000 to buy and upgrade a home. With a properly structured contract, the
sellers help and the 'ks' loan we could keep their FINAL closing numbers to
around $5000.
Because of the sensitive nature of their situation and the detailed scope of
the loan, we all needed to sit down and talk process. After the Keepers sent me
their application package and I preapproved them, we all got together to
discuss the transaction in detail and to create a plan. The meeting was about
three hours long and we discussed almost every detail of the purchase process.
I wanted them to fully understand what they were getting into and to not
underestimate the process. The Keepers were amazing and once the expectations
were set, they were all in.
It took about 45 days to find the right home and another sixty days or so for
us to configure and close the loan. Few transactions are easy these days but
this one required me to log about 70 hours into the file but the home turned
out to be a perfect fit for their unique needs.
It was The Greatest, Most Wonderful, Toughest Home Loan I've done in years but
it was worth every minute.
2) VA and USDA loans, as you know, are zero down payment. Often times they are
zero down and zero closing costs.
The most current foreclosure numbers from the MBA show that these zero down
payment loans are peforming very well. The foreclosure numbers are only
slightly worse than prime and better that FHA with its 3.5% down. As I've
always said, its not the zero down, its the debt to income ratio's that
make the difference. Subcrime loans, which have abismal foreclosure
stats, relied heavily on high debt to income ratios to qualify their borrowers.
Remember, most of the subcrime loans were used for cash out refinances. VA and
USDA show that zero down loans works very well when prudently applied.
3) Who would do better to own foreclosure properties?: The taxpayer through
Fannie Mae and Freddie Mac or private buyers/investors with 20% down payments
and 740 fico scores with stated income loans?
If you believe the later you would be correct. The taxpayer is being bilked for
legal fees and management costs to the tune of billions a year in order to
manage Fannie and Freddie foreclosures. Default rates for 20% down high fico
stated income borrowers were historically very low prior to the subcrime
fiasco. The next time you see your Federal Representative, mention this fact.
20% down 740 fico stated income is not the same as 580 zero down stated income.
We should all tell them to stop using the axe to "adjust" lending guidelines
and stop killing the housing market with draconian regulations.
4) My office has incorporated a postcard mailing system into its marketing
efforts. Are you having a tough time staying in touch with your past clients
due to the lack of time or cost? Most agents miss repeat business because they
don't stay in touch. We've developed a solution for our tier one business
partners. Please call if you'd like some assistance with your marketing.
5) Did you like rates in the 4's? It appears we are at the tailend of 4's. Talk
of inflation has gotten heated in the last few weeks and we're seeing more
tightening around the world. It's safe to say we'll see inflationary
pressures here within the next year or sooner. What's that mean? Without a
doubt it will mean a jump in rates and no return. I'm beating the drum but I
hope you too will too with your clients. Use this opportunity to educate
potential buyers to get in and lock while the getting is good.
As always, staying ahead of the curve to keep you informed.
Gil Kerbashian
NMLS 197757
Residential Lending Since 1997
(847) 873-7295
Northwest Mortgage Services, Inc
7808 Virginia Road, Crystal Lake IL
Illinois Home Loans
I need to make a home loan application - help!
Home Loan Purchase Process Video:
"When discussing the loan process with homebuyers, I stress that they must be completely candid with their loan officer, be incredibly detailed and provide as much documention as they can. This is the new norm for home loan approvals". David Stevens -FHA
IMPORTANT OVERVIEW:
In the next few days or weeks you'll be looking at a handful of homes. One will catch your eye and you want to be completely prepared to make a strong offer. Most sellers give higher priority to buyers who have secured a full Home Loan Preapproval Letter over those other homebuyers that have only been "prequalified" over the phone. A full preapproval review with assets, income and liabilties verification is the highest level of preparedness. The application process below is oriented toward a successful full preapproval. How much of a committment would you ask for if you were lending someone $100,000, $300,000 or $500,000?
At the bottom of this letter you will find an internet link to a basic home loan application and credit authorization. Please click on it after you've read this overview. And please, always call if you have any questions while reading over and completing the forms or at any other time. I enjoy helping my customers and look forward to helping you, your friends, co-workers and family. Your referrals are always appreciated.
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PLEASE DO NOT MOVE ANY MONEY AROUND UNTIL YOUR LOAN CLOSES. If a bank verification shows a recent increase in your accounts an explanation of the increase will be required and may cause delays. No "cash, non-payroll or matress money" should be introduced into any part of the transaction without a prior discussion.
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Postpone ANY LARGE PURCHASES until after your loan closes. If a re-verification of credit JUST PRIOR TO CLOSE shows you have recently increased credit balances it could jeopardize your loan approval.
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Notify me immediately in the event of a job change.
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Don't take any Cash Advances on your credit card(s) or personal loans.
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Don't allow any additional inquiries (credit checks) on your credit report.
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Do not open or close any credit or bank accounts.
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Continue to make ALL of your payments as agreed.
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Quickly return all documents from the lender or closing company. You will be mailed papers from time to time, send all received documents that you receive in the mail regarding the loan to me for immediate review.
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Your loan will be underwritten to nationally accepted mortgage guidelines. The investor is lending a great deal of money, please don't "self-underwrite" your loan. Be prepared to offer all paperwork that is asked of you all the way to the day of close. A lot of money and trust is being conveyed to you- please don't take the loan or process for granted. Gathering paperwork is a good deal for all the funds you will be receiving.
- Once a contract has been accepted your mortgage rate and terms need to be locked. You must email or call me directly after the accepted contract to discuss where rates have settled on this day. If you don't call, I may lock your terms the day I receive the fully executed contract at then market rates.
- Please send me a copy of your purchase contract earnest money check front and back showing the check processed through the bank along with the official bank statements showing the earnest money deposit taken out as soon as it becomes available.
- PLEASE SEND OFFICIAL BANK STATEMENTS FOR ALL NUMBERED PAGES EVEN IF THE PAGES ARE BLANK. ANY ITEMS SUCH FAXED SHOULD BE LEGIBLE. PLEASE SEND ITEMS AS QUICKLY AS YOU CAN.
Be mindful that lenders conduct quality control checks -calling to verify your employment or savings. Are you receiving down payment assistance from an outside source? Please be prepared to document all non-payroll deposits. If the source is a gift from a close relation, you'll need: 1) Gift letter, 2) donors bank statement, 3) copy of the original gift check made out to you, 4) copy of deposit slip going into your account, 5) bank statement to show the deposit was captured to your account, 6) copy of the gift check post deposit front and back from donor showing it went through the bank processing center and 7) copy of the donors bank statement showing the gift check clearing. Different underwriters may differ in their requests, please be prepared to fully document non-payroll deposits, monitary gifts and outside downpayment funds. NO "cash/matress money" or loans for closing funds.
Two weeks prior to closing you will want to call your homeowners insurance agent if any insurance coverage is needed and pay for a full policy and have the insurance company fax the policy to me (cost credited to you at closing).
Stay flexible in your closing timeline in case closing is delayed.
Once the purchase contract is accepted by the seller we will need to order a property appraisal. Appraisals require payment directly to the appraisal company in advance. The cost of the appraisal will be credited to you at closing.
After all the above procedural stuff, what really matters is... The season to enjoy your own home is coming and what a wonderful time to make the transition!!!
Your referrals are valuable. Do you know any friends, family and co-workers that can also use my services now? Can you email this article?
Cordially Yours, Gil Kerbashian
(847) 873-7295
Fax: (847) 770-4850
The loan application has a very important list of items at the bottom that I will need to gather in order to issue strong preapproval. Always call if you have any questions. Once you print the application, you can complete it, fax it or we can meet quickly to go over it together and make sure you feel comfortable with the process.
One Page Loan Application: www.realestateloans.com/gilsapp.pdf
FHA AND CONVENTIONAL HOME LOAN Closing cost basics for Illinois: www.realestateloans.com/gfe.pdf
May House Prices Show Highest Increase Since 2006
House prices climbed 6.8% in May 2010 from last year, the largest yearly increase since July 2006, according to a report from real estate data provider Clear Capital.
In June 2009, Clear Capital reported a 19.3% drop in May house prices, a "far cry" from the increase shown in this report a year later, said Alex Villacorta, senior statistician at Clear Capital. The rolling quarter-over-quarter number, which measures houses prices against those three months ago showed a 1.8% decline, an improvement from the 5% drop in April.
"We continue to see sustained price growth throughout much of the country with yearly price gains reflecting the housing recovery off of last year's lows," Villacorta said. "The expiration of the tax credit at the end of April has certainly contributed to the growth of prices we are observing and as more sales close before the June 30 deadline we expect that markets across the country will continue to see strengthening of prices."
The amount of REO properties on the market seems to be dropping, too, according to Clear Capital. The national REO saturation rate dropped to 27.8%, down from 41.7% last year.
"This dramatic shift in price trends reflects the unprecedented volatility over the last couple of years and the delicate state of local real estate markets around the country," Villacorta said.
While quarterly prices in three of the four regions remained below levels from three months ago – the 0.3% increase in the West being the only exception – prices should maintain positive momentum heading into the summer, according to the report.
Prices in Dallas, Texas increased 3.4% from the end of 2009, the highest jump for all markets over the last quarter. The REO saturation rate dropped to 36.6% from 41.1% there as well, but the largest reduction in REO saturation came in San Jose, Calif. There, the amount of REO on the market fell to 19.6%, and helping prices gain 2% from the previous quarter and 20.2% from last year.
The worse performing market in May was Detroit. There, prices dropped 10.7% from the previous three months, but it's an improvement from the 14.4% drop seen in the previous month. The REO saturation rate in Detroit reached 48.9% in May.
Tips for First Time Home Buyers
Tips for First Time Home Buyers
Before first time buyers begin looking at properties, they need to make sure they can qualify for a mortgage. The first thing any soon to be homeowner should do is obtain a credit report. Once a credit report is in hand, analyze it and determine what the monthly expenditures are.
Most banks and lenders allow borrowers to have a total debt-to-income ratio up to 45% or higher with strong compensating factors (or 41% max with private mortgage insurance).
By taking the total liabilities and adding it to a monthly housing payment, then dividing that number by the monthly gross income a home buyer can come up with a debt to income ratio.
Let’s use the numbers for and example:
$10,000 monthly gross income
$1,500 total monthly liabilities
We know from the above example that total monthly payments can’t exceed $4,500 or 45% DTI based on $10,000 gross monthly income.
So if the home buyer already has $1,500 in total monthly liabilities, the buyer can add a housing payment of $3,000 a month. $1,500 plus $3,000 equals $4500 or 45% of income
There are a number of mortgage calculators out there that will give the buyers a better idea of what they can qualify for. They can google Freddie Mac mortgage calculator to find an easy to use payment calculator.
Now that the home buyer has their credit profile in check and they know what they can afford, they'll need to show or secure verifiable seasoned assets for at least the down payment.
Funds to close can be gifted to first-time homebuyers using the FHA or VA program. Make sure the homebuyer has an account with at least the down payment available- a seller can pay for closing costs in most cases. Also, make sure the money in the savings account has been there for at least two consecutive months to ensure that it is seasoned (NO UNSOURCED CASH SHOULD BE USED). Banks and mortgage lenders don’t give much weight to unseasoned or cash assets because any friend, relative, Realtor or loan officer can easily dump assets into the buyers account before they apply for a mortgage to boost their net worth.
With all this preparation done, the loan flow will be a comfortable process with few surprises. It might not be perfect, but if the home buyer follows these steps they will definitely save money and reduce stress!
Let’s review the tips for first time home buyers in a condensed format:
- Order a credit report
- Review credit and clear up any derogatory accounts
- Do NOT open any new credit accounts or make any large purchases
- Calculate total monthly liabilities
- Figure out DTI and what can be afforded
- Make sure the homebuyer has a seasoned asset account with at least the down payment (for FHA a gift can be utilized as long as it can be fully sourced)
- Find the dream home and secure the purchase
- Lock your interest rate
Freddie Mac Important Internet Links
Freddie Mac Email Subscriptions
http://www.freddiemac.com/news/alerts/newscenteremail.html
Choose the Freddie Mac Bulletins, Announcements
and Publications you would like to receive notifications
of via email
Freddie Mac Forms & Guide Access
http://www.freddiemac.com/sell/guide/
Access Freddie’s Single Family Selling & Servicing
Guides as well as forms
Freddie Mac Learning Center
http://www.freddiemac.com/learn/
This website includes links to Quick Reference
Summary Charts on LP, Condominiums, Residency
and Citizenship, Various products, LTV/CLTV/HLTVs,
Refinances, New Construction, Income/Assets,
Collateral., Credit, and Super Conforming- just to name
a few!
Single Family Mortgage Products Page
http://www.freddiemac.com/singlefamily/mortgages/
This website includes links to Product Summaries,
Overviews, Marketing Materials, Affordable Income &
Property Eligibility Lookup Tool, FAQs, Links to live
product training opportunities and much more!
Training Events Page
http://www.freddiemac.com/learn/edu/train/
This page provides links to Live and Web Training
Events on LP, Underwriting, Product, Selling, Servicing
and Delivery-Related topics.
Loan Prospector Main Page
http://www.loanprospector.com/
This is the home page for all things LP! Features,
Benefits, documentation requirements, products, credit
report vendors, LOS vendors, news & highlights, best
practices, as well as login access to LP itself!
Loan Prospector Functionality Page
http://www.freddiemac.com/learn/uw/
This page provides resources and training associated
with documentation and underwriting-related topics
Loan Prospector Helpful Tips & Best Practices
http://www.loanprospector.com/getthemost/bp.html
This page provides links to guides that are very
detailed and well-written for originators, processors,
underwriters and quality control functions within an
organization. These are great reads for everyone!
Loan Prospector Training Page
http://www.loanprospector.com/learn/index.html
This page provides links to recorded training sessions
divided out by topic and category. These short
sessions are excellent educational resources that new
and even experienced LP users can benefit from!
Fraud & Quality Control
http://www.freddiemac.com/learn/uw/qc.html
This page provides links to Quick References
regarding predatory lending, property flips, appraisal
underwriting, documenting citizenship and residency,
rental income, standard income, Freddie’s
Exclusionary List, and standard quality control best
practices
Freddie Mac Homebuyer/Homeownership Page
http://www.freddiemac.com/corporate/buying_and_owning.html
This page includes various resources, tools and
information for both homebuyers and homeowners
Freddie Mac Loan Look-Up
https://ww3.freddiemac.com/corporate/
Determine if Freddie Mac currently services your own
or your borrower’s existing mortgage
Freddie Mac Marketing Kits & Materials
http://www.freddiemac.com/singlefamily/kits.html
Freddie offers excellent marketing materials in the form
of fillable flyers, mailers, post cards, door hangers,
brochures, and stuffers and some are even offered in
languages in addition to English! These are some of
the most professional-looking materials out there! Very
easy to sign up for access and easy to use!
Understand Home Buyer Closing Costs
Processing Fee Estimate: $350
This fee is charged by us to pre-approve, pre-underwrite and make sure the home buyers loan fits program guidelines prior to us submitting the loan to an underwriting unit for full approval. We will review all documents, submit the package, insure compliance, attend closing and maintain support all the way to closing. Fee paid directly to us at closing. This fee also includes credit reports, approval certificates and document gathering expenses.
Discount Points to Buydown Rate:
Normally not charged unless a buyer requests or needs to buydown an interest rate in order to qualify for the loan.
Appraisal Fee Paid to Independent Appraisal Company Estimate: $275-$450 Upfront Cost
This fee is paid directly to an independent appraiser to determine the maket value of the property. The appraiser is chosen by a neutral third party and you must pay this fee at the start of the loan process once a property is determined.
Underwriting Fee Paid to Independent Undewriting Unit Estimate: $600-$800
This fee is paid by the home buyer directly to the loan underwriting entity at loan closing. Once we have pre-underwritten the loan and we have determined the best lender able to actually fund the loan, we submit it to them for review, approval, legal documents and funding.
Homeowners Insurance Paid to Your Insurance Company Estimate: $300-$600 Upfront Cost
The home buyer will contact their personal insurance provider two weeks prior to the closing date to determine the cost of a homeowners insurance policy. This will be paid in advance of closing directly by the home buyer to the company they have picked. A one year policy must be paid for in advance of closing. If the property is in a flood zone, the home buyer will also be required to get flood insurance also.
Mortgage Interest Payment at Closing Estimate: Depends on closing date.
Depending on the day of close, the home buyer will pay for the days of homeownership from the day of closing to the last day of the month. Example: if we close on the 15th of the month home buyer will pay from the 15th to the last day of the month for each day they own the home.
Homeowners Insurance Escrow Paid Directly to Lender Estimated: $60-$120
Like taxes above, lenders will want to pay for the homeowners insurance when it comes due. Most lenders will require a 2 month cushion placed into the escrow account at closing.
Fees Paid Directly to Providers Pre-Chosen by Others Estimate: $1500-$2500
These are standard fees required to purchase a home. Refinances are much lower. These fees are not chosen by us but rather chosen by the sellers attorney.
Home Purchase Transfer Tax Stamps Estimated: Call the city to see if buyers pay these
Most common in the city of Chicago and a few others. Not all cities or villages charge buyers a transfer stamp tax. Usually a sellers expense. Can be expensive for buyers if they are charged.
**** In a home purchase transaction the home buyer may have the Seller of the Property pay for some, most, or possibly all of the above expenses. This is called a "Seller Paid Closing Contribution". This is highly recommended if the home buyer is short on funds to close or currently only has the downpayment and no other funds available. Seller can pay up to 3% of the purchase price towards closing costs.
If the Seller picks up yclosing costs, any monies paid up front other than the home inspection (appraisal and homeowners insurance up front) will be applied to the downpayment commitment.
FHA FAQ's
FHA Foreclosures Rising
Rising FHA default rate foreshadows a crush of foreclosures
David H. Stevens (Andrew Harrer - Bloomberg)
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Tuesday, February 2, 2010
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.
Although the FHA's default rate has been climbing for months and eating into the agency's cash, the latest figures show that the FHA's woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA's cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses -- a first for the agency, which has always used the fees it charges borrowers to pay for its losses.
As these loans from 2007 and 2008 go bad and clear off of the FHA's books, agency officials said, losses are expected to taper off, aided by the housing market's anticipated recovery and an influx of more creditworthy borrowers, who have flocked to the FHA's home-buying program in the past year.
Agency officials said they have cracked down on poorly performing lenders and announced higher qualifying fees for borrowers. On Monday, the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would fatten the FHA's cash cushion, used to cover unexpected losses.
Cash / Mattress Money is a Deal Killer
- Cash / Mattress Money is a Deal Killer-
AHEAD OF THE CURVE ARTICLE BELOW
Below is a list of my top programs that should be in every agents resource
folder:
-FHA closed on time: [http://www.realestateloans.com/fhadonewell.pdf]
[http://www.realestateloans.com/fhadonewell.pdf]
www.realestateloans.com/fhadonewell.pdf
-100% Rural Development: [http://www.realestateloans.com/usda.pdf]
[http://www.realestateloans.com/usda.pdf] www.realestateloans.com/usda.pdf
-$100 down for HUD owned homes:
[http://www.realestateloans.com/100hudhome.pdf]
[http://www.realestateloans.com/100hudhome.pdf]
www.realestateloans.com/100hudhome.pdf
-Deferred maintenance homes:
[http://www.realestateloans.com/uglyhomes.pdf]
[http://www.realestateloans.com/uglyhomes.pdf]
www.realestateloans.com/uglyhomes.pdf
-100% pre-approval to closing ratio:
[http://www.realestateloans.com/concierge.pdf]
[http://www.realestateloans.com/concierge.pdf]
www.realestateloans.com/concierge.pdf
-VA 100% financing: [http://www.realestateloans.com/va.pdf]
www.realestateloans.com/va.pdf
-Home Buyer job protection mortgage:
[http://www.realestateloans.com/rainydays.pdf]
www.realestateloans.com/rainydays.pdf
CASH IS KILLING DEALS:
I recently had a borrower call me and state she deposited $6000 into her
bank account from an unsecured loan. Without telling the Realtor or myself
she used this money for the contract deposit. Some form of outside monies
has been interjected into four of the last ten deals I've done and the
borrowers did it after reading
[http://gilkerk.realestateloans.com/condominiums/2009/05/07/i-need-to-make-a-home-loan-application-help.html]
my home purchase introduction link which clearly states that cash and large
deposits should be avoided.
Why isn't cash allowed into a transaction? It's the borrowers money right?
Several obvious reasons: Patriot Act/Banking Laws, Drug Money, Cash
Laundering, Straw Buyer considerations, Under the Table Seller Concessions,
Realtor or Loan Office contribution, Unsecured/unreported loan, Gift from
an unacceptable source, etc..
Loan officers and Realtors should never allow or encourage customers to
deposit or use cash for ANY part of the transaction nor turn a blind eye if
they know a client is borrowing money from credit cards or personal loans.
This type of mistake will certainly cause problems and create needless
tension. Now more than ever, loan files are being looked at with a fine
tooth comb. More and more careful verifications are being done a day before
closing- be prepared and don't let your deal die for dumb reasons.
Remember, FHA case numbers follow these loans. If one underwriter declines
a loan, the disposition will follow that loan. Realtors and Loan Officers
must work closely to prevent problems from day one.
Please call me at (847) 873-7295 to discuss nuances. Here to help you get
homes financed.
Is your loan officer less responsive than you'd like? Cut yourself free
from bad service, poor communication and start enjoying incredible support
today.
Could your team use an updated presentation to get agents up-to-speed on
loan program changes? Lending is a huge part of transactional business,
consider scheduling my lunch and learn for your team.
Gil Kerbashian
Mortgage Lending Since 1997
Gil's Loan Answer Hotline: (847) 873-7295
