Joe Knows Mortgages

There are many new rules and stricter credit guidelines that continue to impact borrowers qualifications. While the borrower’s credit is pulled prior to application, many do not realize that the underwriter can, and in many cases, is re-pulling the credit of the applicant prior to closing.

So, your credit score at application is just as important as your credit score at closing. A change in credit score before closing could ruin or cause major problems or delays to your loan. Here are 8 of the most common items that could negatively impact your credit score during the loan process.

1) Do not apply for new credit
2) Do not pay off collections or charge offs
3) Do not max out or over charge your credit cards
4) Do not consolidate your debt
5) Do not close any credit accounts
6) Do not miss payments or pay late
7) Do not dispute any accounts on your credit report
Do not do ANYTHING having to do with your credit without first speaking with your mortgage professional!

Should you have any questions on credit, or on qualifications in general, please contact me today.
With rates as low as they are, and homes being priced so aggressively, please let everyone know that now is the time to buy a home.

Let’s say someone is currently looking at a $200,000 property. If they put 20% down and if interest rates are currently at 4.5%*, their principle and interest payment would be $810.70

If that same borrower told you that they were going to wait for prices to fall further, we know that interest rates have to go up, and even if the market slips another 10%, and rates go to 5.5% (still very low), your new payment would still be $817.62.

If rates go to 6.5% (which they did back in late 2008) then the payment would increase to $910.18 per month. The borrower would be paying $36,000 more for that house over the life of the loan verses what they would pay at 4.5%.

Since rates are at the lowest point ever, and we know that they have to go up, assuming that rates will rise, it may not make mathematical since to wait.

*please note that this is not an advertisement of interest rate. This is for comparison purposes only.

The Fourth of July holiday weekend is upon us. Please have a great holiday and be safe while Boating, BBQ’ing, and driving.

The Homebuyer Tax Credit Closing Deadline Finally Extended. While Obama still has to sign this into law, which he is expected to do, those who wrote contracts prior to April 30th, 2010 will have until September 30, 2010 to close on their home purchases and still be eligible for the Tax Credit.

Rates are still at historic lows. If you know of anyone who is thinking about refinancing their current homes, or taking advantage of the combination of low rates and low prices by buying a home, please tell them to give me a call. THank you and have a great holiday weekend!

95% LTV on Conventional Loans in Florida! 90% LTV on Second Homes!

It looks like we are starting to see some improved guidelines here in Florida.  Up until last week, borrowers could not get better than a 90% (primary residence) loan to value because of the lack of mortgage insurance in the state.  That has now officially changed.  I have attached the guidelines that are being used for those loans below.

While these are not the only guidelines for these loans, here is the short list:

Primary Residences max 95% LTV
Purchase/Rate and Term Refinances only
680 minimum credit score
1-unit only 
Up to $417,000 loan amount
41% max DTI
2 months PITI reserves
No condos or attached housing in Florida
Full interior/exterior appraisal required

Second Homes max 90% LTV!
Purchase/Rate and Term Refinances only
720 minimum credit score
Second Homes must be located in resort or vacation area
1-unit
Up to $417,000 loan amount
41% max DTI
2 months PITI reserves
No condos or attached housing in Florida
Full interior/exterior appraisal required

If you know of anyone who may be able to benefit from these new and improved guidelines, please let me know.  As always, if you know of anyone looking to buy or refinance their home, please have them give me a call for their free, no cost and no obligation consultation.  Thank you and I hope to hear from you.

Currently, there are very few ways to get 100% financing to purchase a home in Brevard County.  If you are a veteran with VA eligibility or you are purchasing a home in a USDA declared “rural” area, you may be eligible to purchase a home with 0% down.   However, for everyone else, mortgages require a down payment.

What do you do if you do not have the money necessary for a down payment, but you are an otherwise excellent candidate?  There are some other options out there;

• FHA loans require a 3.5% down payment, and the whole amount can come as a gift from an eligible source.

• On a conventional loan, you can get a gift from an eligible source too; however, if the gift is not for 20%, the buyer must have 5% of their own funds for closing costs.

• Brevard County has a first time homebuyer program through Brevard County’s
  First Time Home Buyer Program that will give qualified applicants money for down payment and closing costs.

Whether you are planning on getting gift funds, taking advantage of community or governmental funds, or selling your antique GI Joe collection, make sure to speak with your mortgage professional to assure that you are properly documenting the funds for the underwriter.  There are many rules and regulations surrounding gift funds and cash to close and improper use could spell disaster.  Please contact me anytime for further information.

Brevard County Mortgage and Brevard County Real Estate Market Data For February 2010

It is a great time to be involved in the Real Estate industry; home prices are great, interest rates are at historic lows, and there are still government incentives to purchase a home.  The government incentives are set to expire, and you will need an executed contract by the end of April to take advantage of the tax credit.  There is still time to get in on this once in a lifetime deal, so do not delay, act now!          

 The trend of lower price listings selling continues into February.  With almost 80% of the transactions in Brevard County under $200,000, there seem to be great deals out there, with buyers purchasing value.  These low prices are allowing those who were not able to purchase what they where looking for a few years ago, to get into the right home at the right price now. 

While 50% of homes are still being financed, this February 2010 we had 254 cash Transaction which accounted for 49% of the market.  With almost 50% of all homes in Brevard county being purchased with cash, following January’s trend, it appears as though Cash is still ruling the market.  This is a sign that people see no better place for their money than in real estate.  This is a true signal that we are at or near the bottom. 

While we have almost returned to a “normal” market, it has been shown that homes are selling.  If the home is priced right, it will sell in a reasonable amount of time.  New listings that are aggressively priced are quickly sniffed out by those looking to buy, and usually have offers in on them in a short amount of time.  If you find a home that you love, and it is priced right, then you have to act fast.  With interest rates as low as they are, government incentives still on the table, and homes aggressively priced – It is a great time to be a buyer.  If I can help you discover your purchasing power, or take a look at your financing options, please contact me today!

 Brevard County Mortgage and Real Estate Market Data For January 2010 

       Welcome to the first market data report for Brevard County Real Estate of 2010.  While 2009 turned out to be a good year for both the reduction in inventory, and sales of existing inventory, it also proved to be the year of lending changes, and bottoming out prices.  With 2009 in the distant past, we now get our first glimpse into the new decade for 2010. 

        Not too surprising, the vast majority of sales were under $200,000 with 76% of all residential transaction selling between $0 and $199,999.  This trend has been consistent over the past year as the first time homebuyers are greatly incentivized to come in and purchase.  However, we did see an increase in the average price sold of homes to $160,079 in January 2010 versus $148,474 in January 2009.  This data could be telling us that we have hit bottom, and are going up. 

        The biggest surprise for January is the sheer number of cash transactions that are taking place.  This January 2010 we had 252 cash Transaction which accounted for 52% of the market.  Again, Real Estate has historically been a decent investment, and with so few places to put your money right now, buyers are choosing to use their cash instead of financing.  When the cash on the sidelines starts coming into the game at this pace, that is a sign that we have hit bottom. 

        Whether or not the Brevard County market has hit its bottom or not, one thing is certain: it is an outstanding time to buy real estate.  If you are a first time homebuyer, the government is still offering the $8000 tax credit, however, there is an end date, so you better act soon to find your home and claim your government incentive.  Also, we know that the federal government will stop their Mortgage Backed Security purchase program which will almost instantly add to the increase of interest rates.  So, if you are on the fence, or if you know someone who is thinking about buying, now is the time to act.  If you have any questions, please contact me.

Everyone knows that when you refinance your current mortgage into a new one you can benefit in better terms, better interest rate, better payment, and you may skip a month of your mortgage payment, however, most people do not look at the opportunity cost of the money that it costs to do the refinance.  What rate of return is your money getting right now as it sits in the bank? A half a percent? A whole percent?  I doubt it is doing much better than that.

What if I told you that you could receive a guaranteed rate of return on your money of over 60% per year?  Would that interest you at all?  Of course it would; you are a rational, financially conscious human being.  Well, let me give you a scenario where that is not only true, but highly likely in today’s mortgage interest rate environment:

Let’s say that you have a mortgage of $300,000 at an interest rate of 6.25%.  Your monthly principle and interest payment would be $1847.  If you were able to take advantage of today’s interest rates, and refinance the $300,000 balance into a 4.75%* interest rate, you would then lessen your monthly payment to $1564 per month.  That is a monthly savings of $283, and a yearly savings of $3396.

As we all know, there is a cost to refinance; these costs are called closing costs.  You can either roll the closing costs into the loan, or you can pay them out of your pocket.  If the closing costs were around $5500, and you were saving $3396 per year because of the reduced payment, then that “investment” of $5500 will get a 61% annual rate of return, for as long as you have that loan.  If you had the loan 10 years, then you would have saved over $33,960 and achieved over a 600% rate of return on your investment.  How much would $5500 earn you at your bank right now?

While this scenario may not be exactly like the one that you are currently in, think about this:  what is my money doing for me right now?  Can I use that money that is gaining no interest in the bank for something that will give me a better rate of return with little or no risk?  Even if you have little to no equity in your home, you still may be eligible to refinance your home into a better interest rate.  There are several government sponsored programs that you may be eligible to take advantage of and put your money to work for you.  Please contact me today, before these interest rates and programs are gone.

*Author of this article makes no claims and is not advertising this rate.  This is a theoretical situation. For current interest rates and to have a professional go over your options with you, please contact Joe Harris at joe@joeknowsmortgages.com

Many Thousands of Americans have had to sell their house through a short sale in the past few years.  Who would have guessed a few years back that prices would plummet like they did?  Here in Brevard County, home prices in some areas have been more than cut in half. 

If you had to sell your house short, more than likely the credit report will show a mortgage settled for less than owed.  If you go to apply for a mortgage, there are new rules surrounding this type of derogatory credit.  The new rules  for Fannie Mae says that it must be 2 years from the completion of the short sale, with no exceptions.  This is fairly straightforward.  If you had a short sale in the last two years, you are ineligible for a loan which is bought by Fannie Mae (that is all conforming loans, or anything that is not government). 

US Department of Housing and Urban Development  (HUD), who determines the rules for FHA loans, has not made a ruling on short sales as of when this article was written.  While this may sound promising, the majority of the lenders are treating short sales on an FHA mortgage like they do on a conventional mortgage.  However, there are a few lenders out there that will entertain a short sale if there are extreme extenuating circumstances prior to two years.  Otherwise, like on a conventional loan, you must wait two years.

So here is the long and short of it:  if you have recently experienced a short sale, you will be ineligible for  a conventional loan for at least 2 years; you may be eligible for FHA financing, however, you will have to prove that there were extenuating circumstances.  These extenuating circumstances could include loss of job, death of a wage earner, hospitalization, or some of these sorts.  Additionally, you cannot have had any mortgage lates in the last year.  For a loan to be considered prior to 2 years, it must be strong.

There is life after short sales, however, it seems as though for loan qualification purposes, it starts after 2 years for most.  This is really not that long of a time, and there are probably some people who went through a short sale a few years back that are ready to buy again.  For more information, contact Joe Harris.

There is much new regulation coming down the pipe for the mortgage industry with Regulation Z changes, and RESPA changes; many of my peers are beside themselves and raving mad about the changes.  In the next years many of the rules that hold professionals in the mortgage industry accountable will become stricter.  This may sound crazy, however, I invite the changes with open arms.

 

Why are Mortgage Professionals any different than other professionals?  It is my job to be as exact as possible.  Wouldn’t you be upset if an engineer or architect got “close” to building the road or building correctly?  If you got in any legal trouble you’d be hoping your attorney got better than “close” on the facts.  Certainly if you were sick and needed an operation you would be looking forward to your surgeon being well prepared and informed in the profession he chose, and was exact on his procedure.  

 

Long gone will be the days that someone can make a living in this profession without knowing what they are doing.  Also, I truly hope that those who made boat loads of cash by misleading their clients have also left the industry.  To be a professional means that you study the trade, learn the rules, and know you business just like other professionals.   The public has requested more attention to detail in the mortgage profession and I for one think that’s what they should get.

 

While I am not a fan of rules, regulation, and government intervention, I also believe that the clients should be protected.  We have gone way to long with many making a bad name for few. I think it is time for those many un-professionals to play by the same rules that the true professionals have been playing by all along.  If these rules will weed out the un-professional, and protect the clients, than I welcome them with open arms.