Arthur Buhrer, Senior Loan Officer, Washington State

In December I personally closed on four USDA purchases here in the Sequim and Port Angeles Area.

What makes the USDA loan so attractive to homebuyers?

1. This loan requires no down payment. Some may say that homeowners need to have a little skin in the game and don’t like Zero down loans. While I do agree with this point my experience is that for many people in our area 5-10% down payment is sometimes out of reach for them; especially folks starting out or going through major life changes.

2. Compared to the FHA mortgage, USDA loans do not require Mortgage Insurance. On a $200,000 purchase price that saves you $91/month on your mortgage payment.

3. Closing costs can be seller paid or if the home appraises for more than the purchase price they can be added onto the loan and financed.

4. USDA loans also allow you to finance up to $10,000 in repairs to the home. Maybe you can only afford a $150,000 home and everything in your price range requires some kind of work.

5. Lastly, strict income and debt to income requirements. USDA loans are made to help homebuyers succeed and become long term homeowners. Careful attention is giving to your payments and the amount you qualify for so as to make sure you are not getting in over your head.

Buying a home with USDA financing is one of the best ways to purchase a home and get the lowest monthly payment. This is a true ZERO down no money out of pocket loan. Many of our residents who were priced out of the market two years ago are finding homes more affordable. Buying a home right now with historically low interest rates, lower home values, and a great loan is the beginning of solid financial future.

I hope this helps. If you have any questions or desire further information about USDA loans please email arthur@sequimhomeloans.com

Initially the first time home buyer tax credit didn’t seem like a motivational factor for residents here in Sequim and Port Angeles. However, since August, once people began to see time winding down on the tax credit; purchases began to increase quickly. For many locals who have be patient are now finding lower home prices, lower interest rates, and all this with an $8,000 credit on the horizon.

3 POINTS about the new Home Buyer tax credit that has been extended as of November 6th.

1. First time home buyer purchases between Jan. 2009 and April 30th 2010 may be eligible. If under contract by or on April 30th you have until June 30th to close on your home purchase.

2. Move up buyers may also eligible for a tax credit up to $6,500. For this you must have resided in your current residence for five out of the last eight years.

3. See this link http://www.irs.gov/pub/irs-pdf/f5405.pdf for the 2008/2009 form. It can be used if you purchased your home before and after Nov. 6th 2009. See http://www.federalhousingtaxcredit.com/ for more information.

There are unique scenarios that will disqualify you for the credit like purchasing the home from your parents. The home buyer tax credit is having a significant impact on purchases in little Ol’ Sequim, Washington. 70% of the home loans that I am currently working on are eligible for the tax credit. 40% of those are USDA Zero down purchase loans. Let me know if you have any questions.

Thank you for your positive comments.

Mary’s husband passed away a couple of years ago and Mary’s life, as she had known it, suddenly changed. The household income was cut by more than half and her responsibility to maintain her life more than doubled. Mary struggled to make the mortgage payments with her single income for two years and even came up short on the property taxes over the last two years. When Mary and I meet she had about a month left before she was going to lose her home.

It was hard to believe but she was about to let her home go and was about to walk away from over $100,000 in equity. See owed $110,000 on her home that was worth about $230,000 and was going to just let the bank have it or file bankruptcy. Mary had just turned 62 which is the first requirement for a Reverse mortgage. She also had a lot of equity in her home, which is the second requirement. After her mandatory counseling session, appraisal, and a lot of behind the scenes processing, we were able to close her new reverse mortgage.

We paid off all the back taxes, 9 months of mortgage payments, late fees, attorney fees, loan fees, and Mary still walked away with $1,500 in cash. She received an FHA fixed reverse at 5.65%. When Mary called to thank me after signing loan documents I sensed tears when she could not describe in words the burden that had been lifted. She was able to keep her home and focus on her full time job of helping others.

1. Excessive Micro management of the appraisal industry. Now instead of sending a piece of paper directly to an appraiser; a third party company gets my order and sends it to an appraiser. This has increased turnaround times, cost, and quality of the appraisal. Appraisal Management Companies (AMC) are up charging for an appraisal without providing any real service.

2. Increased fees to borrowers. Did you know the fee for an appraisal has jumped from $400 to $525 overnight? How many borrowers have paid for 2-3 appraisals when 1 appraisal would have been sufficient? Every piece of legislation aims to decrease borrowing costs to homeowner and yet this is allowed to happen. A recent transaction of mine the borrower had to pay for 3 appraisals.

3. Dictatorship of the independent appraisal industry. How would you feel if someone began to dictate to you that you must wear certain clothing, carry an email capable device in the field, return calls within two hours, return emails within 1 hour, and then told you how much less you will receive for the work you previously charged more for? This is criminal what has happened to the appraisal industry.

None of this addresses the real issue: Responsibility. The entities who are selling pools of loans to investors should be responsible for the quality of the investment. If they are relying on another 3^rd party to tell them their collateral’s value then they have just created another degree of separation. Which is pretty smart if you thing about it. The next time the house of cards come down the banks will simply be able to point to the AMCs and blame them for their mistakes.

I offer two simple solutions.

1. Make banks, brokers, and correspondents use their own personal rolling appraisal lists. AND enforce it in audits.

2. Make banks read appraisals and review them internally.

That’s it. No extra cost to the buyer. No headache to brokers and real estate agents; just plane shifting of attention to what is important.

Why are lenders taking so long to underwrite and fund loans, or even return phone calls? In what used to take two weeks to 30 days tops, depending on appraisal, is now taking 30-60 even 90 days in some cases.

Let's start by adding a declining market, a recession, if you will. Next add corporate layoffs and mortgage industry downsizing to the mix. Stir in a heavy dose of credit guideline changes, almost on a daily bases. Fold in Federal lending rate cuts, dropping mortgage interest rates, and exponentially increasing refinancing (refi boom). Lastly, sprinkle Credit crunch on top with new regulations such as HVCC/HERA and what do you get?
A recipe for the perfect storm of delayed underwriting, increased fees and costs, and frustrated home buyers.

My experience has been pleasant with those refinancing but the home buyers, especially the first timers, have a hard time grasping what is taking so long. The anticipation of the new home seems to get the better of them.

Now, I do have avenues to close the loan quicker but those lenders don't always have all the programs available and their rates tend to be a tad higher.

The best solution I have found is to explain the situation in a way that doesn't add too much to cloud their mind and ensure them they are in good hands. It may take an extra few weeks to close the loan but we have great rates, and a lender that I know isn't going to throw me any wild curve balls. Ultimately the loan will close and the end result will be the same.

As, I finished writing this blog it does seem that most turn times have come back down to reality. Even so, we are just a few interest rate swings away from them going back up again.

Cheers,