California Home Loans - Hans Bruhner

My industry has seen more changes in the last 20 months than I have seen in the last 20 years. I just take all of the changes that come down the pike and I roll them into my business and move on. I usually have a pretty sunny disposition but sometimes it just gets to me....

A big question these days is what loan to use and why. There is a basic rule of thumb here that if you want to put less than 10% down, then FHA is a better loan for you and if you want to put 10% down or more, than a conventional loan is a better deal. Rules of thumb are guidelines and I find myself feeling like a ping pong ball sometimes in conversations with clients. In order to avoid this feeling, I try and gather as much information as I can before giving advice. Here are some subtle differences:

FHA is an insurance program; if you meet the criteria then your loan is approved and able to be insured by FHA. This means that you pay an upfront Mortgage Insurance Premium (UFMIP) and monthly MIP as well. FHA loans allow you to have lower credit scores, lower down payment, higher debt ratios and one set of guidelines and one underwriter on your loan. A special FHA loan even allows you to finance the fix up costs on that home that the Realtors advertise as "Needs TLC" or "Contractor Special".

Conventional loans are stricter on debt ratios, credit scores and down payment. If you put between 10% and 20% down then you will have Private Mortgage Insurance (PMI) and that is managed by another company with their own stricter guidelines than the loan itself. This makes sense because PMI insures the lender against losses just like FHA but they are a private company and they decide what they will and won't accept. Many times we are able to approve a conventional loan but not able to obtain a PMI approval and so we either have to have the client put 20% down and avoid PMI altogether or switch to FHA. Are you feeling like a ping pong ball yet?

As a mortgage professional I need to analyze my client's needs and qualifications and match them to the right loan program. If I don't choose the right mortgage program from the outset, we may lose a lot of time and money. If we get a conventional appraisal and we have to switch to an FHA loan, somebody ends up buying two appraisals. Of course, I don't' want to charge clients for appraisals they don't need at $400 a pop but I also don't want to pay for unnecessary appraisals myself (it's just bad business).

So when a client calls me and asks me "What is your rate?" and I tell them that is the wrong question to ask, usually the next question is "What is the right question?" and the answer changes depending on what I have been dealing with that day and my general mood but usually the answer is something along the lines of; " Can you help guide and educate me through the loan process in this day and age?" or "How many purchase transactions have you closed in the last 90 days?". The bottom line is that you want someone who is a full time professional who is closing loans in this market and someone who comes highly recommended by real estate agents and someone that you feel has your best interest at heart and is working from a place of honesty and integrity.

So to find the right home, it is always Location, location, location and to find the right home loan it is always question, question, question.

Happy House Hunting.

Please email or call me with any real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.

Historically, Sebastopol and most of the north bay home prices have been too high for FHA to make sense. Today, we have incredibly low rates combined with low home prices and the FHA loan limits is $662,500 in Sonoma County. The limit is as high as $729,750 in Marin and many other bay area counties.

Remember kids, this is a loan that has been around since 1938, this is not a new program. FHA loans are guaranteed by the Department of Housing and Urban Development (HUD) and it is one of the few remaining loan programs allowing a very small down payment-specifically, 3½% of the purchase price.

FHA loans have opened the door to home ownership to millions of deserving people since being introduced and I have been closing them for over 17 years.

FACT: FHA loans are exempt from the requirements of the Home Valuation Code of Conduct (HVCC). We use certified, dependable and trustworthy appraisers, professionals we have known and worked with for years. We avoid the risks and uncertainty associated with unknown, possibly inexperienced appraisers from the HVCC "pool."

FACT: The requirements for the property are reasonable. An FHA-certified appraiser performs an expanded inspection of the property, but only for obvious health and safety issues. A termite clearance is required only if the appraiser notes specific evidence of termite damage, or if there is special notice of termite work in the purchase contract.

FACT: FHA underwriters tend to be more experienced than their conventional counterparts. They operate under common-sense guidelines and issue approvals with fewer loan conditions

We are a nationwide FHA Full Eagle direct lender, we can close on time. If you have any questions or concerns, please email or call me for more information.

Some of my fondest memories are when I get to wander down a country lane to a friends house and just hang out, listen to music, have nice conversations while eating and drinking and looking at some really great art. Today was even more fun because I got to do this over and over and we did not even know half of the people we dropped in on and we were welcomed like old friends.

I am talking of course about Art Trails which just wrapped it's 24th year. I am sorry to say that it is over, today was the last day but you should put it on your calendar for next year because it is a lot of fun and a great way to get next to some great art and some great artists right in your own back yard.

You can get all of the information you need at http://www.sonomaarts.com/artrails/ so you can plan for next year.

We live in an amazing place and I feel quite blessed to be a part of this wonderful west county community.

What are you looking down here for? The answer is in the title. Interest rates are UP! Just a few short weeks ago, we were locking loans at 4.75%, I even had a client buy down and lock in a rate of 4.375% for a 30 year fixed rate mortgage. It has been a good year for refinances for many people. The market has shifted to closer to 5.5% for a 30 year fixed and about 5% for a 15 year fixed currently. You can go to www.BankRate.com and on the top right of the page it will tell you the overnight averages that people are actually locking in and is a pretty true snapshot of the market at this moment. The funny part to me is that a little farther down the page you have a company advertising that they can get you 4.625% for a 30 year fixed rate...... LIARS!

Folks, the market changes every day, every hour and nobody knows exactly where interest rates will be tomorrow. I study Mortgage Backed Securities and FNMA and GNMA in real time every day so I can have an educated guess and offer my client's decent advice when obtaining a new mortgage. Some of my clients locked in because the rates offered at the time worked for them and some of my clients waiting for the market to improve may have to wait a little longer or may have missed the boat completely.

This recent bump in rates may have left some people out in the cold as far as refinancing goes and it may come back in the next few weeks. The reason that rates went up so much recently is that the economy seems to be rebounding a bit and the first sign of an economic recovery with regards to interest rates is short term volatility followed by higher rates. It is hard to tell if this is the first sign of an economic recovery or simply a short term trend.

We have to remember that the government is buying mortgage backed securities in an effort to keep rates low. It has been working fairly well all year and let's face it, rates are still low. The problem is that other investors are not so excited about investing in mortgages if they can get a better return in the stock market or even other bonds. All of this leads me to believe....

What if the Hokey Pokey IS what it's all about?

So, what does this mean to the average consumer and what is going to happen to interest rates? Remember I said we would start with volatility..... they may be swinging back down if investors start to worry about the economy and put their money back into Mortgage Backed Securities. If you are looking to refinance, it is just a math problem - it either makes sense or it doesn't. If you are looking to buy a home, this recent bump in rates may force you to look at a less expensive home to keep your payments down or it may simply mean that your payment won't be quite as nice as you had hoped.

For someone looking to buy a $400,000 home with 10% down, The principal & interest payment at 4.75% would be $1,848 and if you change the rate to 5.5% the payment would be $2,012 so it can make a big difference in your monthly budget.

I welcome questions about home loans and the real estate market in general. Please let me know what you want to hear about in future articles.

Hans Bruhner, CMPS is the branch manager for Benchmark Mortgage. If you have a question, please contact Hans at (866) 385-1650 or hans@hansblog.com or stop by www.AskTheLoanMan.com .

One little recurring theme in my articles over the last 14 months has been that FHA loans have become increasingly more useful in this market. In the last round of stimulus rules, FHA went back to 2008 loan limits.

That means that in Sonoma County, the conventional loan limit is $520,950 but you can borrow up to $662,500 with FHA. In Marin County you can go to $729,750 on an FHA and you are limited to $625,500 on a conventional loan. FHA did not work well in the north bay for decades and now it is almost the loan of choice and I happen to be an FHA expert - woo hoo!

In many parts of the San Francisco Bay Area, the FHA loan limits are $729,750 where conventional limits are limited to $625,500. Those are the highest limits out there folks and we see this all over California. To look up the actual limits in your area, you can do so directly at:

https://entp.hud.gov/idapp/html/hicostlook.cfm

Realtors and home buyers have not had much experience with FHA in the San Francisco Bay area. I started my career in Sacramento and 65% of my business used to be FHA. From 1995 through 2007 after moving to Sonoma County I did a whopping total of 2 FHA loans. In 2008, I did a ton of them and I realized that I am an expert on these loans and I rather enjoy FHA.

One of the things I love best is destroying myths about FHA. Here are a few:

1. You have to get a pest clearance - WRONG!

2. They are very strict - WRONG!

3. There are certain fees the seller has to pay - WRONG!

4. You have to be a first time home buyer - WRONG!

Stop by my web site and look at the video titled FHA for Realtors. This is good for agents and home buyers and it can be found here:

https://www.thinkbigworksmall.com/public/showArchiveVideo/161/2411

FHA loans are great loans and one more little tidbit that conventional lending should follow. If you keep your payments up, you can do streamline refinance without an appraisal or verification of income or employment. That means that if you pay your mortgage on time and you can get a better rate, you are approved. This would really help a lot of upside down homeowners today if this was applied to FNMA and FHLMC.

Remember to Ask the Loan Man!

Hans Bruhner, CMPS is licensed in CA & HI. If you have a question, please contact Hans at (707) 887-1275 or hans@hansblog.com or stop by www.AskTheLoanMan.com . First Priority Financial, Inc. is licensed by the CA DRE #00654852.