Fred Chamberlin - Eugene/Springfield's #1 Experienced FHA Mortgage Consultant

So, what do we do when attempting to refinance a property and all of a sudden the value of the property comes in significantly lower than we expected???? Case in point, I am doing a rate and term refinance for a previous customer that purchased their home two years ago (during the height of real estate values for about $400,000. To accomplish an 80% refinance, I only need it to come in at $325,000 but the actual value comes in at $315,000, a huge drop in value and a loan to value of over 82%. So, what do I do? I go to a Fannie Mae DU Plus. This is all part of the Making Homes Affordable Program through Fannie Mae and Freddie Mac.

This program allows me to finance a rate and term for my clients at greater than 80% loan to value with no mortgage insurance. And, because they have excellent credit scores, there is no adjustment to the rate. A definite win-win situation. They get a lower rate with no mortgage insurance and I get to keep them happy.

Now, before everyone jumps up and says, “That is for me!” there are a few conditions. First of all, it has to be a Fannie Mae owned loan. You can find out if yours is here:

http://loanlookup.fanniemae.com/loanlookup/. Next, if there is currently mortgage insurance on your loan, it is probable that only the current servicer will be able to do the refinance. I know for a fact, that I can’t.

But, what if it is Freddie Mac owned? Basically, those loans have to go back to the current servicer. Now, if you have a Freddie Mac loan that is serviced by Wells Fargo, then I can help you with it, but it will be originated through Wells Fargo. Personally, I think I will get you a better deal if you go though me rather that direct to Wells Fargo, but that is my opinion, check it out for yourself.There is a definite possibility that we can also work with other servicing companies on Freddie Mac loans, but will have to check on each one individually. To find out if your loan is owed by Freddie Mac, check here: www.freddiemac.com/mymortgage.

The product is also available for investment property, which means you can get a lower rate on that rental also. You do need to be current on the mortgage and if you have a second, they will need to subordinate to get this product. So, after finding out if you have either a Fannie Mae or Freddie Mac loan, give me a call and let’s see what we can do to put you into better financial position. Every loan application is different. We are not in a cookie cutter business, let me tailor make your new loan.

The USDA Single Family Housing Guaranteed Program (long name) or SFHGP (short name), undergoes a change on Monday. This has been some time in the works but is finally firm. The maximum income limits to qualify for the program has changed from individual family member stepped program from 1 through 8 to a 1-4 and 5-8 family basis. This is the Rural Guaranteed program that provides 100% financing to people that income qualify for purchases outside of the urban growth boundaries of most metropolitan areas. In Lane County, that means almost anywhere outside of Eugene/Springfield.

The income limits, as of Monday, for Lane County are: $70,750 for a family up to 4 and $93,400 for a family of 5-8. 8% of the 4 person limit is added for each household member over 8. Additionally, all income for all members of the household is counted when determining the household income. There are some adjustments available and individual income calculations can be done here. To find out if a particular property is in or out of the urban growth boundary, you can check it here.

This map shows the area of Lane County (dark shading) that is not eligible for the program.

Please note: Existing manufactured homes are not eligible for this program. It is possible, but very difficult to place a new manufactured home on a property as part of this program. Mostly, the USDA program works most efficiently with a site built or "stick" built home.

One of the best aspects of this program is that it offers 100% financing (no money down) and no mortgage insurance. That makes homes a lot more affordable for those that don't have a lot of ready cash but can afford to make their house payment every month. Credit requirements are also quite liberal while rates are very competitive.

So, where can you purchase a home that qualifies for the USDA program? How about Creswell, Cottage Grove, Veneta, Junction City, Oakridge, Westfir, Swiss Home, Florence, Harrisburg, Halsey, and even some Springfield and Eugene addresses? The property currently listed at 8440 Thurston Rd, Springfield, comes back as eligible for this program. You can check out rural property addresses here. If you want more information about this program, please call or e-mail me.

I am not an attorney and I don't even play one on TV, however, I have concerns that there are people doing things that can get them in trouble. Not only will it get them in trouble, but it could have detrimental effects on other people too. This is the sale of a home on an owner carried contract when there is a mortgage on the property. My concern is twofold, first has to do with the legality of doing it in the first place. My second has to do with protection for both the buyer and the seller. I am hearing of this happening with people that owe more than they can sell their house for currently on the seller side, and buyer's that can't qualify (for whatever reason) or think they can't qualify for a loan on the buyer side.

First, the legality:

Standard Trust Deeds in Oregon have the following wording, "18. Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Property, including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is to transfer of title by Borrower at a future date to a purchaser.

"If all or any part of the Property or any Interest in the Property is sold or transferred (or ... is sold or transferred) without Lender's prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument...."

This is what is known as a "due on sale" clause. What it means is that if you sell your home, even on an owner carried contract, the underlying loan is due and payable and the lender can demand full payment. In the case of an owner carry contract where the purchaser has paid a deposit of $10,000 and the lender calls the note due and the $10,000 is already spent, it looks like everyone is going to be a loser, doesn't it?

Second, protection:

Let's take a fictitious example. Let's say I am selling you my home for $200,000 and in today's market it is worth $200,000 and I owe $200,000 but I can't afford to sell it on the market because of the commissions and closing costs. We enter into a contract where you give me $10,000 up front and make payments every month that doesn't quite cover what my payment is. After 6 months of paying each month, I decide I can't afford to put out the additional money each month. What are your options? At the same time, after 6 months, you decide to quit making your payments, what are my options? Think about what happens if I owe more than I am selling it to you for. What are the possible ramifications?

There are numerable scenarios where this can go wrong and only one where it can go right. If you are holding a contract for sale on your home, are you aware of how long it takes to get possession of the home if I stop making my payments? If you are buying my home, and I stop making the underlying payments, what can you do about it?

Don't be taken advantage of on either side of the equation. There is another way to do this that doesn't bring in the "due on sale" clause and that is a lease purchase agreement. There are also hazards with this a lot like the protection issues above. I just want to make everyone aware of the difficulties of selling a home when not using traditional means. A lease option may be the ideal way to go about handling your problem, however I strongly suggest you don't go with an owner carry contract if you have underlying financing on a standard trust deed. First time home buyers should be aware that they can be taken advantage of in this type of scenario. The first thing you should do as a first time home buyer, is find out what you can qualify for and if you actually will qualify for a loan. That is where you need to contact a mortgage professional like me. You can always reach me through either my office, 541-342-7576 or my e-mail eugeneloanguy@gmail.com.

Since most First Time Home Buyers are FHA borrowers I posted the answer to what the reasons are in my blog http://FHALoansORegon.com. This information can also be very valuable to anyone considering a VA loan that is a First Time Home Buyer and especially for someone looking to buy using the USDA Rural Guarantee since they have to be a First Time Home Buyer.

I have been asked, why should I become a home owner? I have been renting for 5 years and am perfectly happy with my situation. The short answer to that is, “maybe you shouldn’t.” Not everyone should buy a home and a lot of First Time Home Buyers were sold homes that they shouldn’t have bought because the financing was too easy. That had an effect on where we are today. However, that being said, there are a lot of great reasons to become a First Time Home Buyer in today’s more restrictive lending environment. Stealing a bit of David Letterman’s shtick, here are my top ten reasons to become a First Time Home Buyer in today’s Oregon real estate market. Click over to my blog.

FHA is changing the rules on “cash out” refinances on April 1, and no, it isn’t an April Fools Joke!. Up until then, we have been able to make loans to borrowers that qualified for FHA loans up to 95% loan to value for a cash out. A cash out refinance is when you get more money than is owed on your first mortgage and the closing costs to take the loan. Anything over that amount is considered “cash out” and will be limited to 85% loan to value on any loans registered with FHA after March 31.

If you would like the whole story, please follow this link to my blog and read all about it. There are other changes that are taking place at the same time. To be honest, these changes make sense in a falling value environment.