Sue's News and Views - Mortgage Blog

Here is a video that gives some important information about this credit, information that I hadn't really thought about until recently. Because I know that I hadn't thought about it, I feel it very important to share this information with any and all potential buyers - they really don't have much time remaining!  If you, a friend, a client, a family member, or someone you work with is still on the fence about buying, you need to send this to them@

Click here to see the video and share with anybody you know that is contemplating on buying a home but is still undecided and hasn't yet put an offer on a house!!!!

I am being interviewed for a podcast that will be on iTunes this coming week and the subject is "What Makes a Loan Officer a Success".  Having pondered this, I have concluded that two traits are needed: knowledge and involvement.

While trying not to appear demeaning, all of us can market, learn to market, or hire someone to do our marketing for us.  However, unless and until we know what it is that we are marketing, even the best marketer will be scrambling to make their car payment or keep their cell phone on!

In these days of ever-changing guidelines, it is imperative that we, as loan officers, learn those guidelines, relearn those guidelines, study them and commit as much of them as possible to memory and then keep up on the changes as they happen.  Several months ago, I took a Friday, Saturday and Sunday and spent them holed up in a hotel room going over and over my investor's guidelines and the mortgage insurance guidelines (I'm in Florida, which is a market that has different rules than other states in many cases.)  Doing this, while somewhat boring at first, showed me so much more that we CAN do as opposed to what we can't do.  My object wasn't to find out anything other than what limitations the different investors we work with and the MI companies were placing on us but I found ways to get loans done that I didn't realize even existed!  It's amazing how many people will say that they are "loan officers" or "mortgage consultants, advisors, or experts" only to find out that they really don't know how to get a loan closed from beginning to end.  They may not know all of the correct documents that are needed for the underwriter and have to keep going to the client and asking for more, which is extremely unprofessional and frustrating to the client, they may not know the maximum loan to value or debt to income ratio or minimum credit score needed, and they may just throw answers out to appear knowledgeable that, in the end, makes them look as unknowledgeable as they really are.  It is better to respond to a question with either (a) the right answer that you know because you study your guidelines continuously or (b) an "I am not 100% sure but I will check on it and get right back to you" than it is to every try to appear that you "know your stuff" and throw out an incorrect answer!

The second trait needed is INVOLVEMENT.  All the knowledge in the world won't help unless and until you have someone to share it with.  As a loan officer, the best place to start spreading that knowledge is with Realtors®.  I have found that being involved in my local association through committees and sponsorships, being an active member of the local chapter of Women's Council of Realtors, and being involved in community and/or charitable organizations allows me to share my knowledge when questions are asked that tell the other party that I know what I am talking about.  If a Realtor® asks me a question and I just give an answer to "appear" knowledgeable and then it turns out that my answer is wrong, I wouldn't expect to do business with that Realtor® again, and rightfully so.  Even worse, they will probably tell other Realtors® and then your reputation will be sullied going forward.  When you are at functions for your Board or other organization functions, DO NOT MAKE IT ALL ABOUT YOU OR YOUR COMPANY!  Being involved means doing the task that is required of that committee or group and it isn't about self-promotion!  It is through these efforts, however, that you establish relationships and some of the other people in these groups may ask you questions and if you give the right answers, they may then refer you business.  Nobody "owes" any of us their business; it is up to us to "earn" it.

My creed is and always has been: "If I help you to grow your business, it will then, in turn, help me to grow mine".  The key to doing this is patience and making sure that in any and all answers in conversations you have with the Realtor, borrower, title company, etc. is one that you don't just make up to look like you're smart.   In my head, the "smart" person I picture is Einstein........if you prove you're no Einstein, you will also find you're no Trump or Gates, either!

On Monday, April 20, USDA Rural Housing income limits were increased.  Here are our local limits and, if you are located elsewhere, just email me and I can tell you the limits in your area. 

Okaloosa County: 

If there are 1-4 persons in the household, maximum income is $76,250 and if there are 5-8 persons in the household, maximum income is $100,650 

Escambia, Santa Rosa, Holmes, Bay and Walton Counties: 

If there are 1-4 persons in the household, maximum income is $73,600 and if there are 5-8 persons in the household, maximum income is $97,150. 

This is a great tool to allow prospects who were sitting on the fence to purchase now and close before December 1, 2009 and take advantage of the $8,000 tax credit.  How many buyers do you have that would love to finance 100% of the sales price PLUS ANY CLOSING COSTS THAT THE SELLER ISN'T PAYING AND/OR THEIR PREPAIDS??!! 

Did you know that the funding fee for the USDA loan is also tax deductible??  (It works on a VA and FHA loan, too!)

Don't hesitate to contact me - we can help you get to closing!!!

USDA Rural Development has confirmed that the proposed change in the income limit structure for the USDA Guranteed Rural Housing Program will be implemented as planned on April 20^th!  This will allow a lot more people to qualify for one of the only 100% financing programs left, and certainly one of the only ones that allows you to include closing costs in the mortgage (if supported by the appraisal)!

In summary, the current income limit structure that is based on household incomes will be restricted as follows: 

Okaloosa County:

Household of 1-4 persons in it: Max Gross Income of $72,650

Household of 5-8 persons in it: Max Gross Income of $95,900

Walton County/Bay County/Santa Rosa County/Escambia County:

Household of 1-4 persons in it: Max Gross Income of $70,750

Household of 5-8 persons in it: Max Gross Income of $93,400 

We cannot submit any loans with these increased income limits to USDA until April 20 but we can take applications and get the file processed prior to that date.  This should be a huge boost to our market as more people will be able to purchase with absolutely no money down!!!!!

Contact me and let's get you or your client prequalified and closed with NO MONEY DOWN!!

I attended a class the other day called "10 Things to Ask Your Buyers Before Taking Them House/Condo Hunting" and will be addressing those issues in an upcoming blog entry but wanted to put together a list of what can kill a deal for a buyer or a seller.  Please feel free to share this information with your buyers and sellers!

1. Skipping the Mortgage Preapproval Process: For buyers, getting preapproved for a mortgage gives them a clear idea of how much they can safely borrow, plus it addresses credit issues and kick-starts other financial paperwork.  What's more: it identifies them as a SERIOUS BUYER.  With mortgage guidelines changing almost daily these days, a buyer needs to be 100% sure that they can afford the down payment requirements and meet the credit score requirements of a particular property type.  Sellers with a hot property should demand nothing less than proof of preapproval from the potential buyer's lender (hopefully it's Northstar Mortgage!)  There is no sense in wasting time on time wasters!  I know most Realtors require their clients to get preapproved prior to ever showing them the first house but I also know Realtors who spend sometimes months showing prospective clients properties, taking them to lunch and/or dinner, searching the MLS for them and then find out that the client cannot get approved for a mortgage at all!  On top of having spent countless time with an unqualified prospect, the Realtor has also spent money on them.  IF A CLIENT IS UNWILLING TO GET PREAPPROVED, HOW SERIOUS CAN THEY POSSIBLY BE??

 

 

2. Not Knowing What a Condotel is: As Fannie Mae, Freddie Mac, FHA and VA tighten up their credit guidelines, they have basically choked the ability to do a fixed rate mortgage for a condo in a resort area.  If you have a client that is buying a condo and you can go on Google, put the name of the project and the city in, and find that you can rent a unit in the project for a day or for a week, chances are you seller will NOT be able to get a fixed rate mortgage to buy a unit in that project as it will be considered a "condotel" or "condohotel".  If the HOA has 10% - 15% (depending on the investor) or more of the units in the project as delinquent on their dues, it makes the financing in that project even that much more difficult.  If the project has the word "Resort" in the legal name of the project, it is a condotel.  Here in our local market in the Panhandle, one or all of these affects about 99.9% of the condo projects!  Before you show condo units to a prospective client, MAKE SURE THEY ARE AWARE THAT THE AVAILABILITY OF A FIXED RATE MORTGAGE IS ALMOST NON-EXISTENT!  While we are able to finance condotels with several investors utilizing adjustable rate mortgages, you would be very surprised at how many calls A DAY I get from clients who are at contract on a unit and then find out that they can't get a fixed rate mortgage.  You would be doubly surprised at how many of them end up not buying at all!  (It's currently noon as I am writing this and I have already had 5 of these calls today and in all cases: they were at contract and talking about not buying.) The investors we use do NOT require a condo checklist so it's sort of a "don't ask, don't tell" policy on the HOA dues.  If your client knows up front that they can get a mortgage and the type and terms of the mortgage, they are more apt to buy a unit as opposed to finding out after they find the perfect unit.  The prices and deals on condos right now are so incredibly good that some people don't care that they have to do an ARM but if they find out after the fact, it sours them and causes them to take pause and possibly not buy!

 

 

3. Not Understanding the Length of the Buying/Selling/Financing Process: I have no idea what the numbers are, but there is a high percentage of real estate being sold that is either a short sale and/or REO that have to be approved by the bank currently holding the note.  This process can take as little as 3 weeks or as long as 3 months (and even longer) and sometimes, buyers lose their enthusiasm.  Make sure your client knows going in that buying one of these properties (or selling one, if you are the listing agent) will not happen overnight.  If they know up front, it doesn't create a fear in the buyer or seller because it takes longer than they may have expected.  On the financing side: because rates have dropped to almost historical lows, most underwriters are taking more time to get files underwritten than what it used to take.  Talk to your loan officer and get a realistic idea of how long it may take (I have heard of some underwriters taking 5 to 6 WEEKS to underwrite files based only on the sheer magnitude of the number that they have received recently!!!)

 

 

4. Assuming the Appraisal Equals the Actual Value: In theory, appraisals are objective estimates of value.  But several different appraisals can yield several different numbers.  For example: an appraisal that's been done for a possible refinance may have been slightly inflated to encourage that refinance.  So make sure that, as sellers, when a house is put on the market the agent do a CMA to better indicate the home's worth.  As a buyer, get similar comps from your agent!  But realize that the TRUE VALUE of a property is what someone is willing to pay for it.  There is no emotional value added to an appraisal.

 

 

5. Exposing Your Hand During Negotiations: Buyers should never let their love for a house cloud their vision.  They need to try to contain their enthusiasm.  Otherwise, the sellers and/or their agent will know they've hooked a live one and assume you may forgive certain flaws because they think a particular property is right for them.  Also, I always suggest to my clients that when they make an offer on a home that they tell me the amount and I will send a preapproval for that exact amount.  If a client is preapproved for $200,000 but is offering $179,000 for a house that is listed at $190,000, they are giving the seller an unfair advantage in knowing that they can afford more!

 

 

6. Opting to Use An Agent That is a Friend of a Friend or a Family Member (aka: choosing the wrong agent):  Buyers and sellers should interview several agents from small and from large firms.  Get references and success stories.  Opting for a friend or family member who is a Realtor doesn't assure one of the best results in all cases and it could cause a rift.  Choosing an agent who suggests the highest list price is not a recipe for success and neither is opting for the agent who charges the lowest commission.  Remember that the following qualities in a Realtor will usually get the job done right: smart, empathetic, experienced, dedicated and one that pays attention to a buyer's list of wants and needs in a house!

 

 

7. Not Realizing The Other Costs Involved in Homeownership: If a client is preapproved for a mortgage with a lender, that preapproval is based on their gross, not net, income.  This means that they may can qualify for  a payment that is higher than they may want to spend.  Mortgage lenders do not take into consideration, unless it's a VA loan, the cost of lawn maintenance, utility bills, groceries, insurance, childcare, pool maintenance, entertainment, gas, auto repairs, etc.  Just because a client can afford $1,500 a month doesn't mean that they should buy a house that uses all of that to pay just the mortgage payment.  Because today's largest pool of buyer's are first time homebuyers, it is very important that the Realtor explain all of the other expenses that the client may not realize will be involved with owning a home!  Opting for a dream home that may otherwise create negative quality-of-life challenges (ie: longer commutes, higher taxes, bad schools) can cause buyers to question their decisions after a few months.  If a buyer purchases a home and finds that the other expenses involved causes them to lose that home or not be able to afford to do much else (house poor), how many referrals do you think they will give you??!!

 

 

8. Not Knowing What They're Signing: The sales contract is a legally-binding document.  Buyers and sellers should review it as if their legal well-being were at stake (because it is!).  It should address all concerns of both parties, such as who will pay what for closing costs and repairs.  A poorly written or incomplete contract can cost time, money and emotional energy and tie up a deal for weeks or months.  If there have been any oral commitments, they should be put in writing.  Also, realize that just because a house is being  sold "as is" per the contract, most lending programs will not let a property close that has certain repairs necessary if they are pointed out on the appraisal (ie: roof leak, exposed wiring, etc.)  Always address a dollar amount of repairs that a seller is willing to pay on the contract instead of leaving it blank to make sure that the house makes it to closing.

 

 

9. Not Paying Attention to The Good Faith Estimate: As mortgage lenders and brokers, we are all required to give a client an estimate of the costs involved in the closing of the property.  In fact, we are required, BY LAW, to give this to a client no later than 3 days after they make loan application.  As a Realtor, go over the estimates with your client!  There are unscrupulous lenders and brokers who will intentionally leave certain costs off (ie: escrows) or intentially underestimate the cost of other items (ie: taxes, insurance, title company fees) just so that a client will go with them and then the client finds out too late (at or immediately prior to closing) that they have to bring more money to closing than they initially thought.  What do you suppose happens if the client doesn't have the additional money to pay these fees??

 

 

10. Waiting for Prices to Go Down or For Interest Rates To Drop (aka: timing is everything, but maybe not in the sense you're thinking): Right now, mortgage interest rates are at or very close to historical lows.  Housing prices have decreased, as well.  I read an article that indicates that we are very close to reaching price stabilization.  Once that is reached, prices will start to increase.  Mortgage rates may go a bit lower, but there is always a chance that they will increase.  If a buyer is hoping that the price or rate will drop and either one goes the other way, it will end up costing them.  How do you know the bottom is reached until it is too late?  Buyers need to get the psychology of "what is my interest rate" out of their head and look at the monthly payment - that is what you write a check for every month!  Increasing rates and decreasing prices can cause a mortgage payment to be higher than what it may have been at a higher price!  If you have a client looking for to purchase real estate, find out what PAYMENT AMOUNT they feel comfortable with and work back from that instead of calling your lender to ask "what's the rate".  Rates these days are contingent on exact credit scores in most cases and while someone with a 740 credit score may be getting a rate of 5.25%, a client with a 650 credit score may end up with a rate that is 1-1.5% higher than that!  It's not about the rate - it's about the MONTHLY PAYMENT!

 

I hope that this list offers you some insight into those things that we see that make buyers and sellers upset and can cause them to change their mind about buying or selling real estate or referring their friends, family and coworkers to you in the future.

If you are working with any buyers in Florida, Alabama, Georgia, the Carolinas or Tennessee, we would love the opportunity to work with them and insure that your deal gets to closing and, if it's not doable, not hesitating to tell you up front!

I wanted to share the response I received from someone at USDA today on the increase in the income limits.  It still sounds very promising!

Here is my ‘canned' response sent to all inquirers.  If it happens (we're very optimistic), it will be incorporated at the same time as our regular annual income adjustment, late March, early April, maybe by March 20, depending on when we get data from HUD (for the regular increase).

________________________________

NO guarantee but optimistic.  Hopefully around March 20, maybe a little later.  It would use the 4-person limit for the 1-4 person households, and use the 8-person limit for the 5-8 person households.  Example, for your area, the limit for 1 person, 2 person, 3 person, or 4 person household would be $70,750.00.  Again, no guarantee this will happen.  They are waiting on final OK from the Obama team.

Please dispel the rumors.

Lenders successful with utilizing the Rural Development loan product have learned they can maintain a high volume by continuing business as usual.  The Guarantee will come through! The economic stimulus package contains more than double the allocation received last year. In addition, we will soon receive our regular annual allocation.

For an abundance of RD guaranteed residential product information, go to www.rurdev.usda.gov/fl/guarrhs.htm

Thank you for participating in the USDA, Rural Development guaranteed loan product. 

Imagine this: You, as a Realtor have a house listed for sale and a motivated seller.  This seller is willing to pay up to 4% to 6% or higher towards the buyers' closing costs and prepaids.  You have a prospective buyer that qualifies for a USDA Rural Housing Loan (the income limits starting January 20, 2009 are much higher than where they currently are).

Imagine now that you send your buyer to Northstar Mortgage Group for their financing.  They don't have a lot of cash to use towards closing and their credit score is a 580.  Imagine that they are told that they can get a 30 year fixed rate mortgage and that the rate the first year will be 3.25%, the second year will be 4.25% and that years 3 through 30 will only be at 5.25% AND that they have to bring NO MONEY WHATSOEVER to closing.  Could you sell that house?????

We are able to offer this program in a large number of areas of Florida, Alabama, Georgia, Tennessee, North Carolina and South Carolina.  Many prospective buyers are fearful to even consider trying to get financing because of all that they are hearing in the national media but this program IS available!

If you are a buyer, you need to know that you can get financing as long as you qualify for the payment.  If you recently started a new job and know that in a couple of years your income will be higher, this is perfect for you!  If you recently graduated from college and are just getting started in your field, it is an ideal solution for you.  If you recently got married or divorced, this program works for you!  If you have owned before or have never owned before, this is a great way to buy a new primary home now.  Why wait?  Rates and prices are low and may start to go up.  You can actually own your own home for less money that you currently pay in rent!  STOP PAYING YOUR LANDLORDS' MORTGAGES!

You can email me for additional information or make application at my website.  DON'T DELAY - the rates may never be this low again!

Currently, the investor we use for our USDA Rural Housing loans offers two rate lock extensions up to 60 days each, so that you can actually get 120 days extension.  They do charge for this and we have been told that, effective today, December 18, 2008, the price (charge) to extend is going up.  This price is charged as a one-time fee and is NOT an increase to your current rate.

Here are the new costs for extending a rate lock in:

1 day extension - No Charge, but can only do 1 free 1-day extension, not 2

7 day extension - .125% (this remained the same as it was)

15 day extension - .375% (was .25%)

30 day extension - .500% (was .375%)

45 day extension - .625% (was .500%)

60 day extension - 1.00% (was .75%)

We have to request a lock extension ON OR BEFORE the current rate lock expires.  Once it has expired, it can't be extended.  Loans may be extended a maximum of two times, which means that if a loan is extended for 1 day and then needs an additional 15 days, for example, the total cost will be .375% for 16 days.  The maximum extension time would be 120 days - can extend twice and 60 days is the max for each one.

If a lock expires, it has to be repriced subject to the higher of "worse case" pricing (were the rates higher on the day you locked or on the day you are repricing it - that is what the new pricing will be).  If expired less than 30 days, it will be locked at the existing locked price or the current market price, whichever is worse, PLUS THE COST OF AN EXTENSION FEE AS NOTED ABOVE for the number of days.  Obviously, it is a lot less costly to extend the loan rather than having to let it expire and relock it.

However, if the lock is expired for 30 days or more, it would be priced at the current market price with no extension fee.

Obviously, if you have a loan that is currently locked, it is very important that the borrower, the seller, the lender, the Realtor® and the title company all work together to try to get the loan closed prior to the rate expiring.  If that isn't possible, there will be fees associated with extending so it is important that a loan not be locked in too early!

Based on today's rates, a buyer can get a 30 year fixed rate mortgage on a 2/1 buydown (rate is bought down 2% the first year and 1% the second year) with a rate of 3.75% the first year, 4.75% the second year, and 5.75% years 3 through 30!  This gives you a better payment and cash out of pocket at closing than does a VA or an FHA loan!

There is a cost to do this of 2.1% of the loan amount and this can NOT be paid by the buyer - it can be paid by the Seller, the Realtor or the Lender, but NOT by the buyer.  The price to do this and the rates that will be given can and do change daily and this is the rate as of today, Tuesday, December 9.

If you are a Realtor® with a very motivated seller, this program may be the perfect way to get your listing sold!  If you are a seller looking to move fast, this may help you achieve that goal.  If you are a buyer, this is a great program that will allow you to get in to the home of your dreams at a lower than usual rate that will gradually increase but it does cap at 2% over the start rate, hence the term 2/1 buydown!

Please feel free to contact me to discuss this, and other programs!

As long as nobody complains, the proposed income limits will go into effect on January, 20 for the USDA Rural Housing mortgage program.  The tables below are for FLORIDA only; other states will have the increases, as well, but the amounts will vary.  This is for 100% financing that also allows a buyer to finance their closing costs!

CURRENT TABLE

PROPOSED TABLE

For each person over 8-persons, add 8% of the 4-person limit.

NOTE:  This is not an income increase for the 4-person and 8-person households. It simply removes the tiers for the 1-3 and 5-7 person households.  It does have the effect similar to an income increase for those families in the 1-3 and 5-7 groups.

Reminder: These are NOT gross income limits.  THE TOTAL ADULT HOUSEHOLD INCOME CAN BE MUCH HIGHER THAN THE "ADJUSTED" INCOME LIMITS IN THE TABLE.  Deductions are allowed for: child care (12 yr old or less) to allow employment of the adult; $480/annual for each non-applicant under age 18; $480/annual for full time student over age 18; and $400 if anyone is elderly or handicapped.  If the gross adult household income is less than the limit, you are good to go.  If the income is over the limits, use the adjustments. 

Contact me right away and let's get you or your clients into a new home by Christmas!!!!