Sometimes loans don’t close when they are supposed to close. During this recent refinance boom, it’s not uncommon for a lender to be unable to give you a firm closing date. What exactly can cause your loan closing to be delayed?
It seems like the whole world is refinancing their mortgages right now. Well, not the whole world. I imagine other countries aren’t experiencing the same low rate phenomenon that we are right now. However, I can assure you the mortgage industry here at home is experiencing record numbers in volume due to the current market. It’s a great opportunity for a lot of people to save big bucks, and for long term. However, since everyone and their cousin is trying to refinance right now, it’s creating some logistical difficulties.
Think about it. It’s not just the lenders who are overwhelmed with business right now. So are all the vendors they do business with to get the loan closed. That means appraisals are taking longer to get done, and title companies are scrambling to coordinate title searches and loan closings. Even more obscure vendors, like credit reporting agencies, are behind. Say you want to update a customer’s credit report to remove some erroneous information. Guess what? It’s taking longer than ever to get it done.
Because of this huge glut, lock periods for loan rates are typically longer than usual. A lock period is the timeframe in which you must close your loan to secure that fabulous interest rate that got you to commit in the first place. Lenders are having to set realistic expectations for their customers. How can you possibly close a loan in five days if you don’t have the appraisal back? You see, some things are out of your lender’s control. Realtors are very aware of the limitations that lenders are facing these days. They are ensuring that they too set realistic deadlines when negotiating purchase contracts for buyers.
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. That means that you as a customer have certain responsibilities and obligations, as well. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very, very, very long line. Most people want their loans to close at the end of the month or in the first few days of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run. And if your loan closing date gets moved, take heart. It will close, eventually.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Showing posts with label FHA Loan Limit. Show all posts
Showing posts with label FHA Loan Limit. Show all posts
Saturday, February 21, 2009
Saturday, January 3, 2009
FHA 2009: More Money Out of Pocket
Buying a house in 2009 and thinking about an FHA loan? Be aware your out of pocket investment is going up…
We sure have seen a bunch of changes in the mortgage industry this year. FHA has had a few noted ones, such as raising the loan limit. However, new changes will be in effect beginning in January 2009. And for this area, most important is that more money is required from the borrower.
Effective the first day of the year, any property with a case number for FHA ordered will have the new minimum loan to value requirement of 96.5%. What’s a case number, you may ask? A case number is FHA’s way of identifying a property. When you order an appraisal, you must provide the appraiser with the official assigned case number. The lender obtains this number from FHA’s system. If you’re the borrower, and you switch lenders but still have the contract on the same house, the existing case number and the assignment have to get transferred in FHA’s system.
OK, so back to the cash investment required from a borrower. The old rule was you had to have 3% out of pocket to qualify for an FHA loan. And you could finance up to 97.75% of the loan. You could use the other .75% required left over toward your closing costs. Now, you have to put a down payment equal to 3.5%. To make it a little clearer, if you were buying an home via FHA in 2008 that cost $100,000, you could finance up to $97,750, and only pay $750 in closing costs if the seller were will to pay the rest. Now, you have to put $3500 down for a loan amount of $96,500, and you and the seller have to negotiate the rest of the closing costs. Closing costs now cannot be used to meet the 3.5% requirement.
If you think about it, this change will afford FHA a few things. Number one FHA now has more wiggle room to recoup some loss in the event of foreclosure. More money down means more equity. The other aspect is that a borrower now has to a bit more serious about saving for a home if they need FHA financing.
But what hasn’t changed is that the seller can still contribute 6% of the sales pricing to help out with closing costs. That’s more generous than most lending programs with the exception of a few. And your down payment can still be in the form of a gift from a qualifying donor (blood relative is always a safe bet). Thus, these nuances of the FHA loan that have been so beneficial to many aren’t going away.
The FHA program has always been a strong one because its foundations were based upon common sense lending. Income was always verified, assets were always checked out, and the program is only for primary residences. I think these new changes may make folks have to wait a bit longer before buying a house, but it’s a smart move to keep FHA lending healthy and out of the headlines. We’ve had enough mortgage headaches due to bad decisions by lending institutions and borrowers. These changes make sense, and that’s ok with me.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.
For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
We sure have seen a bunch of changes in the mortgage industry this year. FHA has had a few noted ones, such as raising the loan limit. However, new changes will be in effect beginning in January 2009. And for this area, most important is that more money is required from the borrower.
Effective the first day of the year, any property with a case number for FHA ordered will have the new minimum loan to value requirement of 96.5%. What’s a case number, you may ask? A case number is FHA’s way of identifying a property. When you order an appraisal, you must provide the appraiser with the official assigned case number. The lender obtains this number from FHA’s system. If you’re the borrower, and you switch lenders but still have the contract on the same house, the existing case number and the assignment have to get transferred in FHA’s system.
OK, so back to the cash investment required from a borrower. The old rule was you had to have 3% out of pocket to qualify for an FHA loan. And you could finance up to 97.75% of the loan. You could use the other .75% required left over toward your closing costs. Now, you have to put a down payment equal to 3.5%. To make it a little clearer, if you were buying an home via FHA in 2008 that cost $100,000, you could finance up to $97,750, and only pay $750 in closing costs if the seller were will to pay the rest. Now, you have to put $3500 down for a loan amount of $96,500, and you and the seller have to negotiate the rest of the closing costs. Closing costs now cannot be used to meet the 3.5% requirement.
If you think about it, this change will afford FHA a few things. Number one FHA now has more wiggle room to recoup some loss in the event of foreclosure. More money down means more equity. The other aspect is that a borrower now has to a bit more serious about saving for a home if they need FHA financing.
But what hasn’t changed is that the seller can still contribute 6% of the sales pricing to help out with closing costs. That’s more generous than most lending programs with the exception of a few. And your down payment can still be in the form of a gift from a qualifying donor (blood relative is always a safe bet). Thus, these nuances of the FHA loan that have been so beneficial to many aren’t going away.
The FHA program has always been a strong one because its foundations were based upon common sense lending. Income was always verified, assets were always checked out, and the program is only for primary residences. I think these new changes may make folks have to wait a bit longer before buying a house, but it’s a smart move to keep FHA lending healthy and out of the headlines. We’ve had enough mortgage headaches due to bad decisions by lending institutions and borrowers. These changes make sense, and that’s ok with me.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.
For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Monday, December 1, 2008
Getting a Mortgage? On What Term?
When exploring your options regarding a mortgage, people often overlook the most basic consideration. How long do you want to make payments?
Many people automatically obtain mortgage financing that amortizes over thirty years. Amortize, according to Wikipedia, “is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill.” Basically, applying it to a mortgage, it means the terms for killing off that huge debt to which you just obligated yourself. That’s a nice thought – killing your mortgage, right? Now, consider the basic question - how long are you going to be hacking away at this debt?
Typically, as aforementioned, the most common loan term is for 30 years. But also quite common is the 15 year mortgage. What’s the most obvious difference? In basic terms, it’s the payment itself. The loan that amortizes over 15 years costs you approximately 20% to 25% more out of pocket per month. That difference oftentimes is where the buck stops. It’s a matter of affordability.
However, if the numbers work for you, a 15 year mortgage has its added attractions. In a nutshell, you pay less interest over the period of the loan, so it’s less out of pocket at the end of the day (or mortgage, in this case). Over fifteen years, this time reduction can result in considerable savings.
There’s another solution to this dilemma. However, it requires personal discipline. You can obtain a 30 year mortgage, figure out what extra principal payments to make each month, and pay it off in 15 years. This situation works for a lot of people. For instance, if your monthly income is inconsistent, it’s a great plan. Say you consistently make $60,000 annually, but you get the majority of your income only two times a year. Obtaining a fifteen year loan, although affordable on paper for you, doesn’t pan out realistically. Yet, if you’re disciplined, you can plop down a big principal payment when the money is flowing those couple of times a year. That way, you’re not backed into a corner to always have to cough up the higher payment. This scenario works for some people quite well.
There are other loan terms besides 15 or 30 year mortgages. There are 10, 20 and 40 year mortgages, too. However, they are not as common. The reason they aren’t is because of the very fact that they are uncommon. You see, the secondary market wants to sell loans into pools of other loans similar in interest rate, type and amortization. Since there aren’t a lot of these “diffent’ type amortizing loans, the appetite to buy them isn’t as evident. And if no one is hungry for the item on the menu, you either don’t carry a lot of it, or you price it a bit higher for the rare, discriminating palate.
But again, you can always choose a 30 year mortgage, and pay it off on a shorter schedule to suit your own personal needs. What you choose to do need only make sense to you. You may qualify for a 15 year loan, but only be comfortable with a 30 year loan. Only you can say. However, if it is easily affordable, then the chance to build your equity more quickly may be a deciding factor.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Many people automatically obtain mortgage financing that amortizes over thirty years. Amortize, according to Wikipedia, “is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill.” Basically, applying it to a mortgage, it means the terms for killing off that huge debt to which you just obligated yourself. That’s a nice thought – killing your mortgage, right? Now, consider the basic question - how long are you going to be hacking away at this debt?
Typically, as aforementioned, the most common loan term is for 30 years. But also quite common is the 15 year mortgage. What’s the most obvious difference? In basic terms, it’s the payment itself. The loan that amortizes over 15 years costs you approximately 20% to 25% more out of pocket per month. That difference oftentimes is where the buck stops. It’s a matter of affordability.
However, if the numbers work for you, a 15 year mortgage has its added attractions. In a nutshell, you pay less interest over the period of the loan, so it’s less out of pocket at the end of the day (or mortgage, in this case). Over fifteen years, this time reduction can result in considerable savings.
There’s another solution to this dilemma. However, it requires personal discipline. You can obtain a 30 year mortgage, figure out what extra principal payments to make each month, and pay it off in 15 years. This situation works for a lot of people. For instance, if your monthly income is inconsistent, it’s a great plan. Say you consistently make $60,000 annually, but you get the majority of your income only two times a year. Obtaining a fifteen year loan, although affordable on paper for you, doesn’t pan out realistically. Yet, if you’re disciplined, you can plop down a big principal payment when the money is flowing those couple of times a year. That way, you’re not backed into a corner to always have to cough up the higher payment. This scenario works for some people quite well.
There are other loan terms besides 15 or 30 year mortgages. There are 10, 20 and 40 year mortgages, too. However, they are not as common. The reason they aren’t is because of the very fact that they are uncommon. You see, the secondary market wants to sell loans into pools of other loans similar in interest rate, type and amortization. Since there aren’t a lot of these “diffent’ type amortizing loans, the appetite to buy them isn’t as evident. And if no one is hungry for the item on the menu, you either don’t carry a lot of it, or you price it a bit higher for the rare, discriminating palate.
But again, you can always choose a 30 year mortgage, and pay it off on a shorter schedule to suit your own personal needs. What you choose to do need only make sense to you. You may qualify for a 15 year loan, but only be comfortable with a 30 year loan. Only you can say. However, if it is easily affordable, then the chance to build your equity more quickly may be a deciding factor.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
What’s the Low Down on Loan to Value?
When buying a home, most people only concern themselves with the interest rate and the type of loan they are getting. However, the loan to value may be another aspect to take into consideration.
It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan. In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance. But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!
What is loan to value? Well, it’s exactly what it says. The loan amount compared to the value of the home you are buying or refinancing. For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%. It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.
Different types of loans have different minimum requirements for LTV’s. With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009). A conventional loan can have as high as a 97% LTV (but more common is 95% LTV). VA and Rural Housing loans can have 100% LTV’s. People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance. Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI. Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV. And if you’re refinancing the home you live in? The whole grid of acceptable LTV’s changes for the most part, with a few exceptions. And furthermore, if you’re talking about investment properties, it’s another can of worms.
But when else does LTV mean something? Consider when a loan specialist prices your loan. Oftentimes there are pricing differentials based upon the loan to value. For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher). Or if your LTV is 60% or lower, you might also get a better interest rate. If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another. You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan.
And guess what else? A low loan to value may be the difference between loan approval and loan denial. Why is that? Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan. And if you do, it’s probably a last recourse. Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market. The lender is covered. So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan. In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance. But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!
What is loan to value? Well, it’s exactly what it says. The loan amount compared to the value of the home you are buying or refinancing. For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%. It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.
Different types of loans have different minimum requirements for LTV’s. With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009). A conventional loan can have as high as a 97% LTV (but more common is 95% LTV). VA and Rural Housing loans can have 100% LTV’s. People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance. Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI. Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV. And if you’re refinancing the home you live in? The whole grid of acceptable LTV’s changes for the most part, with a few exceptions. And furthermore, if you’re talking about investment properties, it’s another can of worms.
But when else does LTV mean something? Consider when a loan specialist prices your loan. Oftentimes there are pricing differentials based upon the loan to value. For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher). Or if your LTV is 60% or lower, you might also get a better interest rate. If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another. You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan.
And guess what else? A low loan to value may be the difference between loan approval and loan denial. Why is that? Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan. And if you do, it’s probably a last recourse. Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market. The lender is covered. So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Monday, August 11, 2008
Home Loans: Two Incomes Cut from the Same Cloth
Determining income is tricky when it comes to underwriting a home loan. Sometimes, it turns out you can make too much money. It just depends who’s looking at it.
Did you ever think you could make too much money? Or what if you potentially could make too much money? Now that sounds just plain old silly, doesn’t it? But believe it or not, different entities view your income in different ways. And depending on the situation, you might make too much moola.
Typically, an underwriter is going to be fair yet conservative when determining your income. If you make overtime and you want to count it, you’re going to have to show that you’ve received it for a decent amount of time and that it will continue. If you’ve only been on your job for a few months, you’re not going to be able to use anything but base income to qualify. Even if you’re in the same line of work. Even if it’s typical for the position and and you have a letter from your employer stating overtime will be available to you for the ten years. To an underwriter, in most cases, it’s all conjecture and forecasting. Not the kind of stuff you want to base lending $100,000 dollars against. The underwriter is going to stick with base salary. This rule of thumb applies to conventional, VA and FHA loans. There’s a little variance between agency guidelines, but not a ton.
Consider alimony. Maybe the court says you should get $300 a month, but your ex only pays you sporadically. You’re probably not going to be able to count it. It’s not fair that you can’t, but don’t bet on it. Most of the time you have to show where you have received the income for at least 3 months and more typically 6 months consecutively before you use that extra boost to your bottom line. You also have to show it’s going to continue for at least three years
Now here’s the funny part. If you are applying for a loan that has an income guideline or limitation, all bets are off. Some lenders will count potential income that you could start collecting. Others will average recent overtime into their equation. Typically, these type of loans go through two sets of underwriters (sometimes three!). The first underwriter will verify that the loan conforms to agency guidelines (Fannie, Freddie and Ginnie). When run through this gamut, you will see more traditionally conservative income guidelines applied. But say the lender is selling the loan to THDA (Tennessee Housing Development Agency). This agency has very strictly monitored income guidelines you must meet in order to qualify for the program. This entity will ensure you don’t make too much money as a first time homebuyer because its program is strictly for low to moderate income individuals or families. All of a sudden, your income looks different.
Here is an example of a loan I had recently. This loan was an FHA loan being sold to THDA. The wife on the loan had an ex-husband who should have been paying her court awarded child support in the amount of $320 per month. The ex had only sporadically paid her over the last 6 months, and when he did, it was only half of what he owed her. FHA would not include the income at all, yet THDA counted the full amount.
So which of the above underwriters was correct? Well actually, they both were. It just depends on what your objective is when determining the final figure. And that’s why you can get two incomes cut from the same cloth.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.
For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Did you ever think you could make too much money? Or what if you potentially could make too much money? Now that sounds just plain old silly, doesn’t it? But believe it or not, different entities view your income in different ways. And depending on the situation, you might make too much moola.
Typically, an underwriter is going to be fair yet conservative when determining your income. If you make overtime and you want to count it, you’re going to have to show that you’ve received it for a decent amount of time and that it will continue. If you’ve only been on your job for a few months, you’re not going to be able to use anything but base income to qualify. Even if you’re in the same line of work. Even if it’s typical for the position and and you have a letter from your employer stating overtime will be available to you for the ten years. To an underwriter, in most cases, it’s all conjecture and forecasting. Not the kind of stuff you want to base lending $100,000 dollars against. The underwriter is going to stick with base salary. This rule of thumb applies to conventional, VA and FHA loans. There’s a little variance between agency guidelines, but not a ton.
Consider alimony. Maybe the court says you should get $300 a month, but your ex only pays you sporadically. You’re probably not going to be able to count it. It’s not fair that you can’t, but don’t bet on it. Most of the time you have to show where you have received the income for at least 3 months and more typically 6 months consecutively before you use that extra boost to your bottom line. You also have to show it’s going to continue for at least three years
Now here’s the funny part. If you are applying for a loan that has an income guideline or limitation, all bets are off. Some lenders will count potential income that you could start collecting. Others will average recent overtime into their equation. Typically, these type of loans go through two sets of underwriters (sometimes three!). The first underwriter will verify that the loan conforms to agency guidelines (Fannie, Freddie and Ginnie). When run through this gamut, you will see more traditionally conservative income guidelines applied. But say the lender is selling the loan to THDA (Tennessee Housing Development Agency). This agency has very strictly monitored income guidelines you must meet in order to qualify for the program. This entity will ensure you don’t make too much money as a first time homebuyer because its program is strictly for low to moderate income individuals or families. All of a sudden, your income looks different.
Here is an example of a loan I had recently. This loan was an FHA loan being sold to THDA. The wife on the loan had an ex-husband who should have been paying her court awarded child support in the amount of $320 per month. The ex had only sporadically paid her over the last 6 months, and when he did, it was only half of what he owed her. FHA would not include the income at all, yet THDA counted the full amount.
So which of the above underwriters was correct? Well actually, they both were. It just depends on what your objective is when determining the final figure. And that’s why you can get two incomes cut from the same cloth.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.
For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Tuesday, July 22, 2008
Need Cash for a Home Closing? Consider a Gift
Coming up with a down payment or money for closing costs for a home loan can be a challenge these days. What extra money you were setting aside may all of sudden be going toward your gas tank or your grocery bill. To obtain your dream of homeownership, it may be time to accept that gift from Mom and Dad………
I saw a cartoon the other day that was pretty funny, but also pretty sad when you think about it. It showed a couple sitting across from a mortgage lender, and the caption read, “We’re here to apply for a tank of gas.” With increases in prices for just about everything, it gets more and more difficult to stash away a nest egg for a down payment. And pretty much every loan requires some part of down payment, even if you get a 100% financing loan. After all, you still are generally going to be required to put down some earnest money on your contract and in most cases, pay for an appraisal up front. You may have been trying to save it up on your own, but it may be time to accept some help from your family.
Most loan programs, be it Conventional, FHA, VA or Rural Housing, require the borrower to pay for something. In particular, FHA and Conventional home purchases want a minimum of 3% to come out of the borrower’s pocket. If you are doing a Conventional loan, you still can’t receive a gift for your 3% down payment, but you can use a gift to help with closing costs. However, FHA will allow your source of down payment to be a gift. So, if you find yourself a bit short on cash, you may need to ask someone to gift you the down payment or closing costs (or if your really lucky, and it’s allowed – both!).
All lenders are particular about just who can give you a gift for your down payment or closing costs. Pretty much across the board, the gift must be from a blood relative. You may have to prove that the gifter is a relative thru birth certificates, christening records, etc. Strange but true. Conventional loans will also allow an employer to give you a gift. But in any case, the most important factor is that whoever is giving the gift does not expect to be paid back. A certification to that effect will be required to be signed by the donor. Otherwise, it’s really a loan, now isn’t it? And as a responsible lender, we’re going to include that payment in your debt to income ratio, and we’ll probably want a bunch of documentation to prove the terms, etc. So, make sure it truly is a gift.
As of the date I’m writing this article, FHA will allow for down payment assistance programs, such as Nehemiah or Ameridream. Lenders view these products as “gifts” in a sense. They are basically seller concessions funneled through the down payment assistance channels. However, by the time this article is published, they may be null and void. It’s currently being reviewed and could go away. Or it may still be there, but just know it’s under review.
Lenders are very particular about how the gift funds reach the closing table. If you deposit the gift before closing, you have to show it coming out of the donor’s account and depositing into your account. It’s a lot of paper to collect. The easiest method is for Grandpa or your Great Aunt to just send a cashier’s check payable to you and your title company to the closing table. Smoother, quicker, simpler.
Gifts are a wonderful thing, and a gift of a down payment is a useful gift. After all, I think it’s safe to say that homeownership is one gift that keeps on giving, wouldn’t you?
Sunday, June 22, 2008
Call the Movers! You’re Closing Date is Extended!
Sometimes loans don’t close when they are supposed to close. It’s usually not your lender’s fault. What exactly can cause your loan closing to be delayed?
You’ve called the movers, you’re all packed, and it’s the eleventh hour before closing. Your phone rings and it’s your lender with bad news. Your loan’s not going to close tomorrow. Whatch you talking about, Willis? Everything’s ready, the utilities are being turned off tomorrow, and the movers are showing up! Why is this happening?
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very long line. Most people want their loans to close at the end of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
Also, don’t quit your job and expect to close because your approval depends on you receiving proven income. On the day of closing, a lender is going to make a call to ensure you’re still employed. Funny, but your ability to repay the loan is important when someone’s fronting you thousands of dollars. No job, no moola.
If you’re a seller, be sure you’re ready for that final walk through. If the buyers are expecting you to leave the bathroom mirrors and the curtains, then don’t pack them up. The house should be broom clean (unless otherwise noted in the contract) and there shouldn’t be any new damage or sudden repairs needed that previously didn’t exist.
Weird things can happen, too. I know of a loan that was delayed in closing because two days prior to the deadline the title company found out that the builder/seller had filed bankruptcy. It seems that he was not in a position to sell the home anymore, and he failed to tell anyone (however, the new owner who got the property in bankruptcy was happy to sell, but closing was delayed). Another odd tale was that of the seller who failed to disclose he had a $49,000 tax lien outstanding on a property. He didn’t feel it necessary to mention this situation to anyone. It was pretty much a deal killer, as you can imagine.
Another thing that can cause a hiccup is failure to alert anyone that that one of the parties (buyers or sellers) will be out of town for a closing. These situations aren’t insurmountable, but they require careful planning and coordination. Sometimes, the contract changes and the lender isn’t notified until after the loan is fully underwritten. Contract changes most usually require a loan to be shot back through underwriting. Remember, you get in the back of the line.
Another minor hitch that frequently occurs involves self employed borrowers. The lender takes a loan application over the phone and writes down the borrower’s income. When tax returns are collected, the lender comes to find out that what their borrowers earn isn’t exactly what they claim with Uncle Sam. A lender will almost always use the income you report to the government, not what shows on your bank statements. All of a sudden, the borrower is no longer income qualified to close the loan. Time to scramble.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep the him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
You’ve called the movers, you’re all packed, and it’s the eleventh hour before closing. Your phone rings and it’s your lender with bad news. Your loan’s not going to close tomorrow. Whatch you talking about, Willis? Everything’s ready, the utilities are being turned off tomorrow, and the movers are showing up! Why is this happening?
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very long line. Most people want their loans to close at the end of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
Also, don’t quit your job and expect to close because your approval depends on you receiving proven income. On the day of closing, a lender is going to make a call to ensure you’re still employed. Funny, but your ability to repay the loan is important when someone’s fronting you thousands of dollars. No job, no moola.
If you’re a seller, be sure you’re ready for that final walk through. If the buyers are expecting you to leave the bathroom mirrors and the curtains, then don’t pack them up. The house should be broom clean (unless otherwise noted in the contract) and there shouldn’t be any new damage or sudden repairs needed that previously didn’t exist.
Weird things can happen, too. I know of a loan that was delayed in closing because two days prior to the deadline the title company found out that the builder/seller had filed bankruptcy. It seems that he was not in a position to sell the home anymore, and he failed to tell anyone (however, the new owner who got the property in bankruptcy was happy to sell, but closing was delayed). Another odd tale was that of the seller who failed to disclose he had a $49,000 tax lien outstanding on a property. He didn’t feel it necessary to mention this situation to anyone. It was pretty much a deal killer, as you can imagine.
Another thing that can cause a hiccup is failure to alert anyone that that one of the parties (buyers or sellers) will be out of town for a closing. These situations aren’t insurmountable, but they require careful planning and coordination. Sometimes, the contract changes and the lender isn’t notified until after the loan is fully underwritten. Contract changes most usually require a loan to be shot back through underwriting. Remember, you get in the back of the line.
Another minor hitch that frequently occurs involves self employed borrowers. The lender takes a loan application over the phone and writes down the borrower’s income. When tax returns are collected, the lender comes to find out that what their borrowers earn isn’t exactly what they claim with Uncle Sam. A lender will almost always use the income you report to the government, not what shows on your bank statements. All of a sudden, the borrower is no longer income qualified to close the loan. Time to scramble.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep the him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Saturday, March 15, 2008
FHA Raises the Roof! New Loan Limits for Homebuyers
The FHA (Federal Housing Administration) has recently increased its loan limits for various areas. This announcement is great news for a lot of people. The FHA loan has become increasingly a very popular home loan solution for many folks. It is exciting news for homebuyers, realtors and the mortgage industry in general. And if you’re closing on a loan after March 21, 2008, you may want to take a look at the FHA loan.
You see, previously, FHA loans in the Knoxville and surrounding area were limited to $200,160 for the note amount. If you wanted to buy a $210,000 home, you had to pay the difference out of your own pocket. The new increase limit allows for a note amount of $271,050. That’s a remarkable leap. And that big jump means the FHA umbrella has widened. Again, great news.
What’s so fabulous about FHA? First and foremost, a FHA loan only requires a 3% contribution out of pocket from the buyer. And, FHA allows the seller to pay up to 6% of closing costs and pre-paid costs (“pre-paid costs” are the money held in reserves to pay for your taxes, insurance and per diem interest). Look at it this way. If you wanted to buy a $250,000 home now, you would only need to have $7500 into the deal if you could negotiate with the seller to pay the remainder of the closing costs and pre-paid items. On this particular example, that would mean the seller could pay up to $15,000 in closing costs for you. In reality, the closing costs/pre-paids would be more around $5,000-6,000, but you get the picture. It’s a very affordable program.
The other highlights of FHA? Flexibility from an underwriting stand point. Credit scores can be as low as 560 (with proper documentation) and medical collections accounts are ok. Judgments do have to have been satisfied. Also, there is no income limitation. You can make as much money as you want and still qualify for the program. And the monthly mortgage insurance that is required is at a reduced rate. An upfront mortgage insurance premium is collected, but it’s financed into the loan amount. The loans can only be for your primary residence, and you can get adjustable rate mortgages or buy downs (money collected upfront to make your payment less for the next year or so-usually seller paid) if you want, too. What else? No need to worry about a pre-payment penalty. They don’t apply to an FHA loan.
I’ve personally seen a huge increase for my customers in FHA loans lately. Where they previously may have qualified for conventional financing, they now prefer the FHA program. It better suits their goals and they qualify more easily for the program if they have minor credit challenges. Oftentimes, they are denied a conventional loan but obtain FHA underwriting approval.
Chrissi Rhea, President of Mortgage Investors Group, states, “We are so excited that these anticipated changes are now a reality for FHA borrowers. When we announced to our sales team that they could start taking applications for the higher loan limit beginning March 10, they were excited to communicate this information to their customers and realtors. It’s really going to open doors for many mortgage customers. It’s nice to see an underwriting limit expand when so many options have actually become extinct in the recent months.”
The new FHA loan limit should help many people in months to come. Also, look for the conventional conforming limit take a higher jump (it’s currently at $417K). That move will also allow more flexibility for purchasing and refinancing homes. I’ll write about that later. But right now, the FHA has raised the roof, so take advantage of it!
š
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.
You see, previously, FHA loans in the Knoxville and surrounding area were limited to $200,160 for the note amount. If you wanted to buy a $210,000 home, you had to pay the difference out of your own pocket. The new increase limit allows for a note amount of $271,050. That’s a remarkable leap. And that big jump means the FHA umbrella has widened. Again, great news.
What’s so fabulous about FHA? First and foremost, a FHA loan only requires a 3% contribution out of pocket from the buyer. And, FHA allows the seller to pay up to 6% of closing costs and pre-paid costs (“pre-paid costs” are the money held in reserves to pay for your taxes, insurance and per diem interest). Look at it this way. If you wanted to buy a $250,000 home now, you would only need to have $7500 into the deal if you could negotiate with the seller to pay the remainder of the closing costs and pre-paid items. On this particular example, that would mean the seller could pay up to $15,000 in closing costs for you. In reality, the closing costs/pre-paids would be more around $5,000-6,000, but you get the picture. It’s a very affordable program.
The other highlights of FHA? Flexibility from an underwriting stand point. Credit scores can be as low as 560 (with proper documentation) and medical collections accounts are ok. Judgments do have to have been satisfied. Also, there is no income limitation. You can make as much money as you want and still qualify for the program. And the monthly mortgage insurance that is required is at a reduced rate. An upfront mortgage insurance premium is collected, but it’s financed into the loan amount. The loans can only be for your primary residence, and you can get adjustable rate mortgages or buy downs (money collected upfront to make your payment less for the next year or so-usually seller paid) if you want, too. What else? No need to worry about a pre-payment penalty. They don’t apply to an FHA loan.
I’ve personally seen a huge increase for my customers in FHA loans lately. Where they previously may have qualified for conventional financing, they now prefer the FHA program. It better suits their goals and they qualify more easily for the program if they have minor credit challenges. Oftentimes, they are denied a conventional loan but obtain FHA underwriting approval.
Chrissi Rhea, President of Mortgage Investors Group, states, “We are so excited that these anticipated changes are now a reality for FHA borrowers. When we announced to our sales team that they could start taking applications for the higher loan limit beginning March 10, they were excited to communicate this information to their customers and realtors. It’s really going to open doors for many mortgage customers. It’s nice to see an underwriting limit expand when so many options have actually become extinct in the recent months.”
The new FHA loan limit should help many people in months to come. Also, look for the conventional conforming limit take a higher jump (it’s currently at $417K). That move will also allow more flexibility for purchasing and refinancing homes. I’ll write about that later. But right now, the FHA has raised the roof, so take advantage of it!
š
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.
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