When a consumer calls me for mortgage rates, 90% of the time they’re looking for a 30 year fixed mortgage. I can almost guess immediately what mortgage the customer is going to ask for before they finish their sentence.
Let me start off by saying that I do not have anything against 30 year fixed loans. They have a relatively low payment with little risk. However, I truly believe there is a better loan out there. It’s a loan that helps homeowners reach financial freedom faster. If it were the standard, more homeowners would be debt free, house values couldn’t be inflated too easily and we likely would not be in the recession we’re in. So, what is this magical loan that is so special? So special that I risk being ridiculed by every industry expert for going against the grain? Well, the answer is simpler than you may imagine…the 15 year fixed mortgage.
The answer to this question varies depending on the loan program a buyer is looking at, but most buyers who have past credit problems rely on FHA loans as their fastest track back to homeownership. This is due to FHA’s lenient credit guidelines compared to conventional loan programs.
It appears that more homeowners with little-to-no-equity are gaining an interest in refinancing. More importantly, they’re gaining confidence that there is an option. This is good news as it appears the Home Affordable Refinance Program (HARP) is gaining both momentum and attention.
This seems like the right time to give homeowners an extensive guide to HARP, including who it best benefits, how to give homeowners the best shot of getting approved as well as other options to low-equity refinancing.
The HARP program was designed to help homeowners who are looking to refinance but have lost some to all of their equity in their home. It only applies to homeowners who currently have a Fannie Mae or Freddie Mac owned loan, but that does not mean HARP is a homeowners only choice. In fact, there’s surprisingly several opti0ns available to homeowners that may not have considered, nor did their lender give as an option. In this post, I will cover who qualifies for a HARP refinance, who best benefits from HARP guidelines, which customers do not qualify for HARP and some alternatives to consider.
If an owner cannot afford to pay their Fannie Mae backed mortgage, they can deed the property to Fannie Mae and rent it back at market rate. The homeowner can obtain a lease up to 12 months and either sign a new lease or go month to month after the initial lease expires.
All in all, this isn’t a bad idea. This is a good alternative for homeowners who do not want to be kicked out of their house if they’re on the verge of foreclosure. However, it isn’t a permanent solution. Fannie Mae is not in the property management business. They will sell the property as soon as they can, which means the homeowner should be prepared to move when the initial lease is up.
For homeowners who have had extremely bad credit hits and will not be able to buy a home for several years (such as large liens or a recent bankruptcy), this program should only be used to buy time since Fannie Mae will be looking to obtain a buyer later. For homeowners who have only had a few late payments or a bankruptcy at least a year old, this could be a perfect solution. Homeowners could potentially use this as a “Lease-Option-to-Own” program on their own house. They rent the house at market rent rates and re-establish their credit. If they are capable of qualifying for a home purchase by the time the lease is up, they can try to buy the house back from Fannie Mae. If the market price for the home is less than what they previously owed, they may even end up owing less on the house than they did when they were the original owner.
It also gives Fannie Mae time to prepare the house for sale and keep it from going to the foreclosure auction. This will keep the house from selling for below market price and in turn help boost the real estate market from further declines.
Any homeowner who does not obtain a loan modification should consider this option if it’s available and if they can qualify for a purchase loan by the end of the lease. You will want to work closely with a mortgage consultant and draw a plan to save for a down payment (if necessary) and build credit during the lease so you’ll qualify, just like consumers who choose to do a lease-option-to-own.
In the mortgage industry, lenders are required to send clients educational booklets relative to their loan application. I’ve always found it odd that there isn’t a centralized place for all of these booklets, so I thought I’d post them all here.
The changes took effect on November 7th, 2009 which was the day after President Obama signed the bill into law. This means that any transaction closed AFTER November 7th, 2009 will include all of the changes. This includes the provisions for Move-Up Buyers and the income limits which were raised from $75,000 single/ $150,000 married to $125,000 single/ $225,000 married.
It’s official. President Barack Obama signed the bill that includes an extension and expansion of the popular First-Time-Home-Buyer tax credit. which will now include some move up buyers.
In the coming days, I will be discussing all of the details. In the mean time, here are the details I currently have.
The extension will continue until the end of April to have a COMPLETED CONTRACT. This means you do not have to close by the end of April, but at least have a mutually accepted contract between the buyer and seller.
After the transaction has been mutually agreed upon by all parties, the transaction must be closed and finished by the end of June.
The tax credit will remain at $8,000 for First-Time-Home-Buyers
The income limits for the tax credit have been raised to $125,000 for single and $225,000 for married couples, expanding the credit to higher income buyers
The bill also includes a $6,500 tax credit for Move-Up-Buyers, which I believe includes a provision that the Move-Up-Buyer have lived in their current resident for at least 5 of the last 8 years (I will confirm this later)
I’m announcing an move in my career. Effective today, I’m officially working at Cobalt Mortgage. This is a move I’ve put thought and consideration into for many months. Cobalt is a company where I feel I can service my clients with the best array of products and service. I will have the ability broker loans as I have in the past but will have a very strong mortgage banking operation to support my clients needs. What this means to my clients is more options, faster responses from underwriting and better service.
This was a very difficult decision to make as I have worked with the staff at America One Finance and Loan Network for many years. Many have become very close friends of mine and I’m sad we won’t be working together. A special thanks to Matt Simmons, who has been the best boss I could ever ask for.
I want to let all the clients who I’m currently working with know I’ve done all the preparations to make sure your loan will close as planned. As many of you know, my office manager Marissa is fantastic to work with and she will wait until all loans that are scheduled to close are finished before she moves to Cobalt with me. I will remain available to answer any questions regarding your loan closing. The process should be no different than what you are already accustomed to. All of my contact information will stay the same.
I want to take a moment and thank the staff at Cobalt for making my transition as smooth as possible. I wanted to give thanks to Mark Everts for answering all my questions, Steven Marshall for believing in my future, Keith Tibbles and Ernie Gehre for the opportunity, and most of all, Janelle Steinberg for for being a guide, a friend and proof that there are good people in our industry.
The temporary high-balance loan limits for Conforming GSE (Government Sponsored Entities) and FHA loans have been extended through 2010.
This means the current loan limits set to expire this year will continue through next year. This will help keep the real estate market on track for recovery. According to a related blog on Zillow, the bill only needs President Obama’s signature which should happen in the next few days. No word as to whether the VA plans on extending their high-balance loan limits through 2010. This is typical for the VA as their guidelines usually change shortly after changes have been made to conforming and FHA loans.
Here are the links to search for your loan limits by area:
CNBC reported on October 28th that the $8,000 First-Time Home Buyer Tax credit will be extended through April 30th, 2010 and will include a credit for “Move Up” buyers.
The reports were given by Senate Majority Leader- Harry Reid’s office to CNBC.
Earlier this week, negotiations of the credit included multiple variations of an extension as mentioned in a related blog post. The new bill is different than any of the previously mentioned bills.
The new bill also includes a $6,500 credit to “move-up buyers”. This is designed to motivate existing homeowners to sell and buy new homes. Spencer Rascoff, COO of Zillow.com, talked in his interview on Bloomberg about how approximately One-Third of all home-owners would consider selling under the right circumstances. These homes are what he called “Pent Up Supply.” Giving a tax credit to move-up buyers may help boost the market further.
The current plan is to include the tax extension in the Unemployment Extension Benefits Bill scheduled to be voted on in the next few days.
UPDATE
The bill has already been voted on and has passed through the senate. The details of the bill are finalized and I expect the bill will be signed by President Obama in the upcoming weeks.
When a consumer calls me for mortgage rates, 90% of the time they’re looking for a 30 year fixed mortgage. I can almost guess immediately what mortgage the customer is going to ask for before they finish their sentence.
