Today we will examine the impact of credit on a 1st time home buyer. As has been posted, a credit score of 580 is pretty much considered the minimum score available for financing or down payment assistance.
It is recommended that potential home buyers have their credit pulled ahead of time and for the report to be examined by a professional; a mortgage professional or a non-profit that specializes in educating 1st time home buyers. Fixing credit issues ahead of time, as you know from previous “risk based pricing” blogs, WILL save your customers money in the long run.
What if they don’t have credit, you may be asking. Do not consider this a deal killer as many lenders accept what is called “non-traditional” credit. For those without sufficient open and/or closed accounts, the ability to use rent, utility bills etc. as an alternative is possible. The payment history on those accounts over the previous 12 -24 months is what the underwriter will analyze.
Please make sure you are working with those professionals that understand the market today for 1st time home buyers. Thanks once again to Susan Gould at Hope for a Homeowners. Her website if you have any questions at www.Hopeforahome1.com.
Tuesday, January 27, 2009
Wednesday, January 21, 2009
What is a 1st Time Home Buyer
Seeing as every other question I get at my seminars is about loan opportunities for 1st time home buyers, now is a perfect time to get a better understanding on this subject. This will be the first in a series of blogs; today focusing on what IS a 1st time home buyer.
A definition of a 1st time home buyer is someone that has:
• Never owned a home OR been on title to any home in the last three years
As you know from my blogs or seminars, I make it a point that all real estate professionals should ask a series of questions when first meeting with a potential buyer.
The question of previous home ownership is imperative, especially considering many assistance programs, tax credits and the like have the previous home ownership guideline in place. The more you find out up front, the less “headaches” you will have going forward!
Our next blog will cover credit and the 1st time home buyer; how big of a factor it is in today’s market.
To help me in putting this information out there on 1st time home buyers is Susan Gould. She owns a non-profit company in Boca Raton, FL that specializes in assisting, counseling and educating 1st time home buyers.
You can give me a call should you have any questions or contact Susan directly at the number below.
Hope For A Home, Inc.
Susan Gould, Director
(561) 372-1260
A definition of a 1st time home buyer is someone that has:
• Never owned a home OR been on title to any home in the last three years
As you know from my blogs or seminars, I make it a point that all real estate professionals should ask a series of questions when first meeting with a potential buyer.
The question of previous home ownership is imperative, especially considering many assistance programs, tax credits and the like have the previous home ownership guideline in place. The more you find out up front, the less “headaches” you will have going forward!
Our next blog will cover credit and the 1st time home buyer; how big of a factor it is in today’s market.
To help me in putting this information out there on 1st time home buyers is Susan Gould. She owns a non-profit company in Boca Raton, FL that specializes in assisting, counseling and educating 1st time home buyers.
You can give me a call should you have any questions or contact Susan directly at the number below.
Hope For A Home, Inc.
Susan Gould, Director
(561) 372-1260
Sunday, January 18, 2009
Should I Refinance Now?
The more I read, the more the message keeps hitting me over the head; refinance now, rates are at historic lows! Sure, it sounds good but is now really the time.
Well, the fact is you may have no choice but to refinance sooner rather than later.
Let’s say you bought a home in 2003 for $400,000 and since you put 30% down, you would assume there is plenty of equity to refinance. Before you pull the trigger on a refinancing you stumble upon an article which states interest rates will continue to go lower. So you figure, I’ll just wait and see how much lower they can go.
Problem is, depending upon what part of the country you live in, home values may decrease another 15% or more in 2009. Choosing to refinance now might be your only option because you may not have enough equity to make it worthwhile in the future.
As you recall in our earlier blog, http://kotarnews.com/2009/01/do-they-qualify-for-lower-interest.html, banks/lenders have implemented “risk based pricing”. In a nutshell, it states the interest rate you have with 20% equity WILL be higher than one if you have 40% equity.
From my point of view, if you are dropping from a 30 year fixed to a 15 year fixed and you can afford it, then do it. If you are trying to lower your 30 year rate from “x” to “y”, look at the time it takes to pay back the difference in your monthly mortgage payment vs how much you paid in closing costs.
Huh you say? If you lower your monthly mortgage payment by $200 and the closing costs = $5,000, you would divide $5,000 by $200 = 25 months. That means you will notice the difference in payment after your 25th month.
If you do not intend to live in the home that long, refinancing may not be for you.
Well, the fact is you may have no choice but to refinance sooner rather than later.
Let’s say you bought a home in 2003 for $400,000 and since you put 30% down, you would assume there is plenty of equity to refinance. Before you pull the trigger on a refinancing you stumble upon an article which states interest rates will continue to go lower. So you figure, I’ll just wait and see how much lower they can go.
Problem is, depending upon what part of the country you live in, home values may decrease another 15% or more in 2009. Choosing to refinance now might be your only option because you may not have enough equity to make it worthwhile in the future.
As you recall in our earlier blog, http://kotarnews.com/2009/01/do-they-qualify-for-lower-interest.html, banks/lenders have implemented “risk based pricing”. In a nutshell, it states the interest rate you have with 20% equity WILL be higher than one if you have 40% equity.
From my point of view, if you are dropping from a 30 year fixed to a 15 year fixed and you can afford it, then do it. If you are trying to lower your 30 year rate from “x” to “y”, look at the time it takes to pay back the difference in your monthly mortgage payment vs how much you paid in closing costs.
Huh you say? If you lower your monthly mortgage payment by $200 and the closing costs = $5,000, you would divide $5,000 by $200 = 25 months. That means you will notice the difference in payment after your 25th month.
If you do not intend to live in the home that long, refinancing may not be for you.
Tuesday, January 13, 2009
Are Mortgage Brokers Being Squeezed Out?
The mortgage industry changes are coming so fast and furious that I am unable to take my eyes off my computer screen for fear I might miss the next big announcement. Well, the news that has come out today will put more of a strain on the mortgage brokers across the United States.
It appears JPMorgan Chase will exit wholesale lending, focusing efforts on their retail mortgage division. Sounds eerily familiar to a blog I posted in July 2008 regarding another big bank:
http://kotarnews.com/2008/07/ever-changing-landscape.html
As is discussed at my seminars, please make sure you keep up to date with your mortgage professionals so you know where to turn when your buyer and/or seller needs advice.
It appears JPMorgan Chase will exit wholesale lending, focusing efforts on their retail mortgage division. Sounds eerily familiar to a blog I posted in July 2008 regarding another big bank:
http://kotarnews.com/2008/07/ever-changing-landscape.html
As is discussed at my seminars, please make sure you keep up to date with your mortgage professionals so you know where to turn when your buyer and/or seller needs advice.
Friday, January 9, 2009
Do They Qualify for Lower Interest Rates?
The good news is interest rates keep on falling, opening up opportunities for those looking to purchase or refinance. The bad news is that qualifying buyers for these lower interest rate loans is becoming increasingly more difficult.
As we introduced to you in an article back in March of 2008, banks/lenders started implementing “risk based pricing”; which states the lower the credit score and lower the down payment/equity in the property, the higher your interest rate.
http://rismedia.com/wp/2008-02-29/fannie-and-freddie-fan-the-flames/
Since this article was published, banks/lenders have tightened the screws even more. In order to qualify for the premium interest rates, the credit score needs to be in the 720 range along with 25%-30% down payment/equity in the transaction.
Make your life easier; have the buyer’s credit pulled early enough so as to help mitigate any qualifying issues further along in the process.
As we introduced to you in an article back in March of 2008, banks/lenders started implementing “risk based pricing”; which states the lower the credit score and lower the down payment/equity in the property, the higher your interest rate.
http://rismedia.com/wp/2008-02-29/fannie-and-freddie-fan-the-flames/
Since this article was published, banks/lenders have tightened the screws even more. In order to qualify for the premium interest rates, the credit score needs to be in the 720 range along with 25%-30% down payment/equity in the transaction.
Make your life easier; have the buyer’s credit pulled early enough so as to help mitigate any qualifying issues further along in the process.
Wednesday, January 7, 2009
Fannie/Freddie Appraisal Changes
In December 2008, Fannie Mae and Freddie Mac announced their Home Valuation Code of Conduct for any loans sold to them, effective May 1, 2009. Let’s just get the bad news out first; this announcement does NOTHING to help us understand why one bank/lender views an appraisal differently from the next.
With home values still declining in parts of the United States, the issue is risk and how much these institutions are willing to take going forward.
What these new guidelines do is establish some kind of independence between the bank/lender/mortgage broker and the appraiser.
This new policy has brought on an increase of Appraisal Management Companies (AMC), which act as a buffer between the lender and the appraiser. “Since the appraiser won't be able to deal directly with the lender/mortgage broker anymore, virtually all bank appraisal work will come through an AMC (or the bank's own reorganized appraisal dept),” said Keith Eaton, president of Eaton Appraisal and Research in Port St. Lucie, FL.
As for how your local bank/lender will implement this policy, it is best to ask them what their role is with regards to appraisal independence.
Seeing as the policy was just announced, it is fair to say there will be more written about this topic in the weeks to come. As always, I will stay on top of these changes.
In the mean time, do not hesitate to contact me should you have any questions or comments.
With home values still declining in parts of the United States, the issue is risk and how much these institutions are willing to take going forward.
What these new guidelines do is establish some kind of independence between the bank/lender/mortgage broker and the appraiser.
This new policy has brought on an increase of Appraisal Management Companies (AMC), which act as a buffer between the lender and the appraiser. “Since the appraiser won't be able to deal directly with the lender/mortgage broker anymore, virtually all bank appraisal work will come through an AMC (or the bank's own reorganized appraisal dept),” said Keith Eaton, president of Eaton Appraisal and Research in Port St. Lucie, FL.
As for how your local bank/lender will implement this policy, it is best to ask them what their role is with regards to appraisal independence.
Seeing as the policy was just announced, it is fair to say there will be more written about this topic in the weeks to come. As always, I will stay on top of these changes.
In the mean time, do not hesitate to contact me should you have any questions or comments.
Friday, January 2, 2009
Reverse Mortgages
Much has been made about the resurgence of the 1st time home buyer, how they will stimulate the housing market through the use of government loan programs – FHA, VA, etc. What about those older home owners, above 62 years of age, who have paid their homes off or have a ton of equity – what options do they have?
With over 20 million seniors owing homes, Reverse Mortgages are growing in popularity.
The main benefit of a Reverse Mortgage is the senior borrows against the equity in their home; in the form of a lump sum, a monthly fixed amount, a line of equity or a combination of. The amount of the mortgage is dependent upon the age of the senior, the equity in their property and the current interest rates.
There is no verification or proof of income and assets to qualify for a Reverse Mortgage.
One key benefit about Reverse Mortgages – the senior or their family will never be responsible for more than what their home is worth. There is no repayment unless the home is sold or the senior is no longer living in the home.
As with any loan program, consult a “trained” loan expert that will advise your family member, friend or client of their best options.
With over 20 million seniors owing homes, Reverse Mortgages are growing in popularity.
The main benefit of a Reverse Mortgage is the senior borrows against the equity in their home; in the form of a lump sum, a monthly fixed amount, a line of equity or a combination of. The amount of the mortgage is dependent upon the age of the senior, the equity in their property and the current interest rates.
There is no verification or proof of income and assets to qualify for a Reverse Mortgage.
One key benefit about Reverse Mortgages – the senior or their family will never be responsible for more than what their home is worth. There is no repayment unless the home is sold or the senior is no longer living in the home.
As with any loan program, consult a “trained” loan expert that will advise your family member, friend or client of their best options.
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