Kyle Castle

As the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Longwood still working to get under contract. A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you. Mortgage guidelines have been in flux and your original lender letter may now be invalid. For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to: Maximum debt-to-income ratios Minimum allowable credit scores Calculation of “assets in reserve” For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny. Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May. Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract. Talk to your agent and your loan officer about your pre-qualification/pre-approval letter before you bid on a home.

This is my CRAAP Meter. It's an easy formula to help you decide if your current client is a trip to the title company, or a waste of your time....

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The media has been reporting that the numbers of foreclosed homes and homes that are being listed as a Short Sale are increasing.  There are many reasons why there are more foreclosed homes today than yester-year, and I won’t go into that now. However, fact remains that if you stop paying your mortgage payment, you will eventually be forced out of your home.  Thus the market is being flooded with homes that are being sold for less than their current value.  The question remains, how do we profit in this market.

First a little background about short sale and foreclosed homes.

Short Sale

When a borrower owes more on a home, then the home is worth they are upside down. For example, if my current loan balance is $200,000 and I have a REPC (Real Estate Purchase Contract) from a potential buyer for $150,000. I am upside down in my home. I owe more than what I can sell the home for.  I have contacted the bank and they have agreed to settle the loan for $150,000, releasing their lien on the property and allowing me to sell the home for less then I owe.   This is a short sale.

                Side note: Some banks require the borrower to sign an unsecured (not tied to a property) promissory note for the amount of the deficiency. In my example, they would require the borrower to pay back something less than $50,000. It all depends on the property, borrower’s financial condition and local market conditions.

Foreclosure

A home that is listed as a foreclosure means the bank forced the borrower out of the home because they stopped paying their mortgage. Typically, these homes are in worse condition then a short sale. In a short sale, the borrowers still have a vested interested in getting the most money out of the home. If they damaged the property before they sell it, the home will sell for less making the deficiency greater.  Conversely, with a foreclosure the borrower may have bitter feelings toward the bank, taking out their feelings and damaging the home.  Not always but very common.

One Man’s Loss…

If you are in the house hunting market, then you are in luck.  Many of the homes that are currently listed today are from a foreclosure or short sales that were originally purchased during the boom time of the real estate market; they are only 3-4 years old. Many were never occupied because the bank foreclosed on the builder.  A partially completed house sells for penny’s on the dollar.  Others may be in good condition and are ready for you to move in. There are homes available in every price range.  If you want a fixer –upper or a home that needs little to no work, it all depending on what type of property you are looking for, the options are endless.

Contact me and I will get you setup with the tools necessary to find a home that you can save big on.

www.KyleCastle.com

Freddie Mac is the largest purchaser of conforming loans in America. They were established by congress in 1970 and have published the annual average interest rates since 1971.

In 1971 the average 30 fixed rate mortgage was 7.55%. In 1972 it was 7.38%

If you average the annual conforming 30 year fixed interest rate each year you get 9.05%. This means, that for the last 39 years the average conforming mortgage is 9%. Wow!

Considering the average rate in January 2010 was 5.03% and February was 4.99%.

Bottom line: This is a great time to purchase a home or refinance your existing mortgage. Given our Nations current economic situation, the interest rates have been kept artificially low, to stimulate the economy. As our economy improves and as the unemployment rate decreases , mortgage interest rates are going to increase.

The proof is in the pudding:

Average for the last 30 year 9%

Current interest rates 5%

Historically interest rates have been much higher. If you are wondering whether to buy or refinance the time is now.

Kyle has been in the mortgage industry for the past 8 years helping clients get the best mortgage for their situation. To reach him, visit his website: www.KyleCastle.com or call 801-753-8886

Reference: Freddie Mac Statistics

Effective April 5, 2010 new FHA loans will cost the borrower more. There are two fee’s the FHA loans have the Up Front Mortgage Insurance Premium (UFMIP) and the month premium. The UFMIP will now be 2.25%, this is up from the 1.75% for purchases and refinances, and 1.50% for FHA streamlines. The monthly premium stays the same.

Let’s look and an example: If your loan amount is $200,000 you now pay $4,500 UFMIP at closing or financed into the loan and $85 every month as the monthly premium. The UFMIP is up $1,000 in this example.

Here is a link to the mortgagee letter from HUD.

The FHA Mortgage Insurance Premiums are charged by HUD to protect lenders against borrower’s defaults. HUD insurances the performance of every FHA loans, the premiums for these Upfront and Monthly fees are pooled into a fund that HUD uses to protect a percentage of the lenders investment. In return, FHA loans are easier for borrowers to qualify for loans that would not get with a conventional loan.

To learn more about FHA and Conventional loans available check out Kyle’s website.