Kathleen Davis

The Truth About FHA Financing

There is a ton of misinformation and wrong perceptions about FHA financing among REALTORS^® and REO/Short-sale sellers. Unfortunately, these items are keeping deserving first-time homebuyers, who only have the capability of making small down payments from buying, and REO/Short-sale sellers from reducing their inventories of foreclosed homes as quickly as possible.

We can't speak for other lenders, but at Cherry Creek the following are the truths about FHA financing.

Misperception Number 1 - FHA loans take too long to close:

• TRUTH - At Cherry Creek we are closing FHA loans in 30 days or less barring unforeseen problems with a borrower's documentation or difficulties with the property value. FHA's are faster than most conventional loans. Why? Partly because we order our FHA appraisals directly, not through an Appraisal Management Company as many other lenders do. Our appraisers give us quick turnaround too

Misperception Number 2 - Termite clearances are always needed on FHA loans:

• TRUTH - New FHA Guidelines say that a termite inspection/clearance onlyrequired if there is something that affects the safety of the occupants or the soundness (structural integrity) of the property. Very few of our appraisals require a termite clearance.

Misperception Number 3 - Sellers costs are higher on FHA loans:

• TRUTH - The only mandatory seller's cost on an FHA loan is the tax service fee. Which is only $76.

Misperception Number 4 - FHA appraisals contain unnecessary repair conditions:

• TRUTH - FHA allows "AS-IS" appraisals except where something may affect the safety of the occupants or the structural integrity of the property.
• As far as Cherry Creek FHA appraisals are concerned, there are no unnecessary repair conditions. This may not be true from other lenders using AMC's, however.

Misperception Number 5 - Lenders don't know what they are doing on FHA loans:

• TRUTH - At Cherry Creek we have been doing FHA loans since 1986 and our processors, underwriters, closers and appraisers who each have 10-15 years FHA experience. We do know what we are doing.

Nobody has to be afraid of FHA financing if Cherry Creek is the lender!

What's Going on with Inflation and Interest Rates?

If you've seen the news lately, you know concerns about inflation are increasing. But what does it really mean to you?

The fact is, inflation is a very serious issue, and it will likely be on the rise as 2009 proceeds...and along with it, home loan rates will rise too.

To help you learn more about this important topic, I have attached a link to a short video, featuring the nation's foremost mortgage industry expert. In this video (you may need to hold cntrl key as you select the link), you'll learn how inflation impacts interest rates and what the outlook is for down the road.

Because home loan rates will be on the rise, if you or any of your family, friends, neighbors or co-workers have been considering a purchase or refinance, now's the time to act.

Please contact me today to discuss your specific situation, and feel free to forward this email and video link along to others that you think might benefit from it as well.

Watch the Video

Just keeping my fingers on the pulse of interest rates for you and that pulse is still volatile.....

As we all saw on May 17^th interest rates went up about .75% which fluctuated up and down about .125% until recently. At the end of June we saw rates come down about .25% and just in the last 24hrs we have seen them come down another .25%.

What's happening.....

The Treasury auctioned off 10 year Treasury notes which were received very favorably thus driving the price of Bonds up thus the yields of those bonds look better giving us a reduction in interest rates. China in the middle of June made a statement that they would continue to be purchasing our debt (stimulus debt in the form of bonds) giving Bonds another push up as well as Hedge Fund Paulson & Co stated they would continue to purchase distressed debt. Thus since June we have been in a somewhat float pattern on locking due to the favorable bond market, weak economic news, and those purchasing our debt.

However..... we are starting push at the upper resistance of the bond level of the 100 day moving average; this is a big resistance to break through. The flipside of the favorable auctions of bonds means that the bond market is starting to see the over bought position again (May) which could cause bonds to drop suddenly thus causing interest rates to go up again.

Will have to watch very carefully over the next days.

Do not wait volitality in interest rates as well as time is ticking on the Tax Credit. The final HUD1 statement has to be dated no later than 12/1/2009 in order for First Time Home Buyers to qualify for it. It's almost of the middle of July.... Not much time left.

Bonds slightly down but interest rates are holding but if you are in contract you might want to think about locking. The FED met today, the federal funds rate will remain the same at 0 to 1/4% as well as will continue to purchase up to $1.25 trillion in of mortgage back securities. This will help to keep interest rates down for a bit. If you are floating be careful and be in close contact with you mortgage professional! (me I hope)

Bond market ended yesterday day up slightly living rates unchanged but we are seeing them decline slightly this morning with rumors of what will come out of the FED meeting.

Today:

• FHA rates today 30 year fixed:
  • Remember! min 620 score, min 3.5% down, and NO reserves required; condo and single family home interest rates the same
    • < $417K on a 30 year fixed: 5.375%
    • > $471K to $729K FHA High Balance 30 year fixed; 5.5%
  • Remember FHA can close just as quickly as conventional and the inspections requirements are the same.
  • Agents are missing out on good buyers by not accepting FHA offers.
  • FHA buyers are taking advanatge of the low down payment option, low FHA interest rates, and not having to liquidate their savings to get into a home and the PMI is minimal. Why not take advantage of this program.
  • FHA does not require pest/termite inspection unless appraiser notes something in the appraisal that would require further inspection
• Conventional lending:
  • min 10% down on a single family home; condos 15%
  • < 20% down must have min credit score of 720 or in some cases 740 to get PMI
  • interest rates as credit score goes below 720 go up
    • Rates today for Conventional 30 year fixed
      • loan amount: < $417K; 20 % down
        • >=720 credit ; 5.375%
        • 700 - 719 credit score; 5.625%
        • 699 - 680 credit score: 5.875%
        • 679 - 620 credit score: 6.125%
      • > $417K; 20% down
        • >=720 credit ; 6.125%
        • 700 - 719 credit score; 6.625%
        • for credit scores below the pricing gets worse, why would you go conventiona! go FHA
      • 10% down 30 year fixed
        • < $417K; 5.375%
        • > $417K to $729K: 5.75%
      • 15% down condo
        • < $417K: 5.625%
        • < $417K to $729K; 6.375%

Talk with a loan professional (call me anytime) and talk about your options for buying a home.

It's been a Roller Coaster for Bonds the last few weeks so keep those arms up in the air and keep screaming the ride is not over yet....

First keep in mind rates are still GREAT!!! The lowest we have seen in a very long time with the average at around 5.5 to 5.75 today. That is still GREAT so keep that in mind. However just need to keep an eye on things to understand the volatility of the market and why it's not a time to sit on the fence. We all heard about 4.5% interest rates; all talk. Now is not a time to wait now is a time of action and opportunity.

$8K tax credit runs out on December 1, 2009. There is talk of it being extended as well as increased but there are no guarantees of that at this time, it's talk.

Other factors affecting interest rates:

• Over supply of mortgage back securities being sold on the market by Tresuries. Remember we had a big refinance boom so all those loans are being pushed into the bond market to be sold giving a over supply and pushing the price of bonds down thus interest rates have to go up.
• positive Jobs reports better than expectation
• other positive stock news

The next 2 days the FED meeting will take place. If some of the outcome of that meeting is that the FED will increase its buying of mortgage backed securities this could rally the Mortgage Bond Market giving us some relief in interest rates FOR A SHORT TIME.

Interest rates have to go up at some point as does inflation to pay for all this stimulus money. NOW is the TIME to take ADVANTAGE OF THESE GREAT INTEREST RATES!!!!

Here is what the volitality looks like in the Market:

On May 21^st rates for a loans:

• under $417K were around 4.75%
• High Balance conforming >$417K to $729K were at 5%.

Today....

• under $417K around 5.375%
• High Balance FHA conforming >$417K to $729K at around 5.625%
• High Balance Conventional conforming >$417K to $729K at around 5.75%

Here is the visual of the bond market over the last month. Bonds go down interest rates go up....