Homeowners in Spokane need to pay close attention to the upcoming changes announced by President Obama in the Making Home Affordable Re
finance Program (HARP 2.0). These changes will provide relief for the 245,000 homeowners in Washington who are upside down on their mortgage.
Under previous HARP guidelines low mortgage rates were not made available to Washington homeowners because their loan balances exceeded 125% of appraised value (LTV). HARP 2.0 guidelines make it advantageous for homeowners to check their eligibility for this enhanced program to see if they qualify to lower their rate and payment.
SHOULD I REFINANCE WITH HARP 2.0?
DO I QUALIFY FOR HARP?
STEPS TO TAKE RIGHT NOW!
Lenders are NOT required to offer this enhanced program to the public and there will be an inconsistent rollout by banks and lenders. First Priority Financial is both a banker and a broker, so we still have the ability to direct your loan to the Lender offering the most flexible guidelines of HARP 2.0.
I’ve written about the USDA home loan program in the past but its ease of use, great rates, and fairly liberal qualifying criteria make this a loan program that many home buyers should consider using – if you don’t have 20% to put down.
Besides the VA loan program this is the only 100% loan program in existence. With literally just a few hundred dollars out of your pocket you can purchase almost any home in Stevens County (and most of the rest of rural Washington as well). The goal of USDA’s lending programs is to “provide low- and very low income people the opportunity to own adequate, modest, decent, safe, and sanitary homes in rural areas.”
USDA actually has two different loan programs - the USDA Singe Family Housing Guaranteed Loan Program (Section 502 loan) and the USDA Rural Housing Direct Loans (Section 502 Direct) – with the later being almost completely invisible to the public.
Why? For one, there’s no one “selling” the Direct loan program because it’s not offered by lenders. You have to apply directly to USDA for this program. Second, the Direct loan has a pretty restrictive income limitation and the population group that meets these restrictions is a much smaller group than those who qualify for the Guaranteed Program.
The first qualifying criteria of USDA programs is a limitation based upon your income – and not just yours but everyone in the household. This means they’ll count the income of anyone living in the home over the age of 18 (with some exceptions for full-time students). For the Guaranteed program the income limit is 115% of the area median, adjusted for family size, and for the Direct loan program it is 50% to 80% of the area median, adjusted for family size.
Assuming you had income approaching the $73,600 limit you’d be on track to qualify for a home priced over $250,000. That amount covers quite a few very nice homes in Stevens County and rural Spokane County.
The second qualifying criteria for utilizing the USDA programs is location of the home. Generally speaking they will lend in “rural” areas.
There are other limitations I’ll lump into the category of those that don’t meet USDA’s stated goal of helping those in need. If you have enough money in savings to make a 20% down payment they may reject your application. You cannot own another home, even if you rent it to tenants. The program is designed to help people that need help, not those who have lots of savings but don’t want to put it down on the home.
Getting pre-approved for the USDA loan is the first step in the process. Many, but certainly not all, lenders can offer the program and all have their own application process. With us, it’s a 15 to 20 minute telephone conversation and you’re on your way.
If you, or someone you know, has limited savings and wants to purchase a home, the USDA program is a program you should consider.
Give us a call ~ we’d be glad to help qualify you for the UDSA home loan program.
The lending industry has suffered dozens of small and large regulatory changes over the last twelve months. The new rules were intended to save consumers money by creating a more transparent process or by closely mandating the way lenders handle certain parts of the process.
Of course these changes were mandated by our friends in WA D.C., none of whom (as far as I can tell) have any actual knowledge of how the lending industry works. Although two of them, Senators Christopher Dodd and Kent Conrad know enough to get sweetheart loans via Countrywide’s now infamous “V.I.P” program. The program waived “normal” fees, points, and lending rules for friends of Countrywide.
Two of the largest changes this year were the Home Value Code of Conduct (HVCC) and the Mortgage Disclosure Improvement Act of 2008 (MDIA). Both were concocted to “protect” consumers but I can tell you from experience that both are actually costing consumers more money and jeopardizing their entire transaction. I'm a strong supporter of consumer education throughout the process but the execution needs to be done in a lest costly manner.
Following is my very non-technical and non-legal review of both.
HVCC was implemented by lenders “voluntarily” to settle a pending lawsuit. The suit claimed that lenders were forcing appraisers to overvalue your home so we could make more loans. Supposedly we threatened to withhold future business from our appraisers if they didn’t cooperate. The only specific case of wrong doing prior to the settlement was a lawsuit by New York Attorney General Andrew Cuomo against an appraisal subsidiary of First American Corporation. Cuomo maintained that Washington Mutual threatened to take future business away from First American’s appraisal company if they didn’t raise the value on already prepared appraisals. Why didn’t Cuomo sue WAMU at the same time as First American? WAMU couldn’t be named in the suit because Federally Chartered banks are exempt from oversight by state Attorneys General. Boy, there’s topic for another day! The rules now require that lenders order your appraisal from a blind pool called an Appraisal Management Company.
What does an AMC do? They farm out the report to whatever local appraisal will do the report for the lowest cost – and the AMC takes a huge chunk of that. Because it’s a blind pool I can no longer communicate with the appraiser ahead of time and make sure we’re not wasting your money on an appraisal that won’t work. In addition, I can no longer expedite your report by utilizing whichever of my professional appraisers is available tomorrow. You are at the mercy of whomever the AMC assigns to your report.
The Mortgage Disclosure Improvement Act of 2008 is well intended but can easily delay your transaction if your lender is not very careful. The rule details when a specific disclosure form – the Truth In Lending (TIL) form – must be delivered to you. The Act further defines what “delivered” means and has been interpreted to mean 3 days after said form has been mailed to you. Lenders are not allowed to spend your money ordering an appraisal until you’ve received the initial TIL form – hence your transaction is now delayed right at the beginning of the transaction. Rebecca and I have adapted our business to handle these new regulations without a problem for the customer, as have other professional lenders. However, we have heard horror stories of consumers losing their rate locks or not moving into their new home on time as a result of these new regulations.
This post was inspired by a discussion amongst real estate agents on a web forum I read recently. Contributions came from agents all over the country. These agents represent both national franchises (Keller Williams, Century 21, Coldwell Banker, etc.) and independent firms.
The discussion was about whether it was acceptable to force prospective home buyers to register on an agent’s property web search page or whether to make the information viewable without. There are thousands of web based home search sites and most (virtually all) are funneling data from the same source - the local multiple listing service (MLS). The unspoken secret is that these property search sites are great for the consumer but can also be incredible lead generation tools for an agent at the same time – if they force you to register to see the information. If you do register on a site just be prepared for some sort of follow up from whoever is hosting the site you used.
The forum posts got me thinking about what really is the most effective way for a consumer to search for and ultimately buy their next home.
Your best opportunity to locate and buy the perfect home is a simple three step process – loan preapproval, utilizing a web based property search, and employment of a professional Realtor. I’ve listed them in order of importance as each builds on the previous step.
There is absolutely no sense in even dreaming about a new home until you’ve had your loan preapproved. I worked with dozens of clients over the years who were heartbroken when they came to me with the home already picked out and I had to tell them they did not qualify.
It doesn’t matter how high your credit score is or how much money you make, I guarantee you that “good” borrowers are having their loans denied all the time for one reason or another. There are just too many potential skeletons in the closet that lenders are trained to look for. A preapproval will make the process much less stressful, allow you to shop with full knowledge of exactly what your payments and closing costs will be, and place you in a much stronger negotiating position with the seller of the home you chose.
Expect the preapproval process to take anywhere from a couple of days to a couple of weeks depending upon how many and what kind of skeletons you have! It should not cost you more than $15 for the credit report the lender will need to order on your behalf.
After your lender has assured you that you are fine to move forward you’ll want to begin using the web to search for homes. I wrote “homes” plural because I believe your mindset at this point needs to be that you are just trying to zero in on a particular neighborhood or two and to get an idea of how much your dream home is really going to cost.
Once you’ve done your preliminary home search on the web it’s time to partner up with an awesome agent. Why? Three reasons – an agent costs you (the buyer) nothing, an agent will have information about specific homes and neighborhoods that just aren’t available on the web search pages, and the agent will help you negotiate the deal with the seller.
Your real estate agent should be someone you like and trust as they will be handling a very expensive transaction on your behalf. It’s best if you can be referred to an agent by someone who can personally vouch for their past performance. If not you certainly want to interview a couple until you find one you are comfortable with.
To get pre-approved for a loan or to get a Realtor referral, please send Rebecca or me an email at MMullin@TheLoanConsultant.com, or give us a call at 509-252-9151. We’d love to share our knowledge with you!
One of the most popular first time home buyer programs is the HUD FHA loan. The best part is you don't have to be a first time home buyer - anyone that qualifies can use this program.
The only limitation is that the base loan amount can’t exceed $271,050 (at least in the Spokane area – higher limits apply in higher cost areas like Seattle and the Western part of our state) which equate to a home price of about $280,000. That does not mean you can’t use the program to purchase a more expensive home, it just means you will need to make a larger down payment if you do.
Highlights of the FHA loan are:
The FHA loan can be a great program for "out of the box" situatioons that don't fit the cookie cutter mold a Conventional loan program requires. I recently helped a college student who had completed his AA but is still working on his 4 year degree at Eastern Washington University. He had some part time work experience, but nothing you could use to qualify for a home loan.
His mother was willing to co-sign his loan but two different lenders said the son needed to have a history of working before he could qualify. I knew that was not HUD's requirement so I spoke to a couple of our other wholesale partners and found one who was willing to accept the loan with just the mother's income - even though she wasn't going to live in the home. Now this young man is a home owner years earlier than if he’d had to wait until he graduated and obtained full-time employment.
WARNING ON FHA LENDING - When talking to a lender about an FHA loan be wary. In 2007 only 4.12% of all homes sold were financed with an FHA loan (Source: FHA Single Family Activity in the Home-Purchase Market Through January 2009). In 2008 that number had jumped to almost 13% and it’s running close to 30% year to date in 2009.
Why the dramatic increase in FHA loan business?
Well, FHA is the “new” loan program of choice for all the lenders who used to peddle subprime and alt-A loans. HUD’s new Secretary, Shaun Donovan, testified before the US Senate on April 2, 2009 that the number of FHA approved lenders had increased by 525% since 2006!! I’m not a math genius but I think that means that only 20% of the current FHA approved lenders have been involved in this specialized lending product for more than 2 years. The other 80% have just jumped on the bandwagon. If you talk to a lender about an FHA loan, your first question should be “how long have you personally been approved to offer this loan program?”
Home loans are my passion - if you have any questions about how an FHA loan can help someone finance their first home just give me a call at 509-252-9151 or send an email to mmullin@theloanconsultant.com
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20 years of experience in real estate investment and finance - I have solutions for any real estate needs you might have.
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