Fannie Mae

How Long Is The Wait to Buy a Home After Derogatory Credit

With the down turn in the economy over the past several years coupled with high unemployment, many good borrowers have been forced to make difficult decisions on which bills to pay. Generically speaking, paying the mortgage should alwys take number one priority. That is not always feasible unfortunately.

For those homeowners who were foreclosed, walked away and/or had to file bankruptcy there is life after major derogatory credit. Depending on the nature and circumstances in which you had to default on your previous home, the waiting period can be sooner than you think.

Below you will find a matrix that illustrates the governed waiting periods required for derogatory credit events.

It may not happen as soon as you would like, but there is hope. Just remember that real estate and the mortgage industry is no longer in their glory days when these type of major derogatory credit events were simple ant hills on the super highway to home ownership.

Bad things happen to good people. If you would like to speak about your specific situation and how you could get back on the fast track to home ownership, contact me today to schedule free credit review and consultation.

Fannie Mae

Higher Home Loan Fees from Fannie Mae and Freddie Mac

Do you have less than 25 percent as a down payment for your next home purchase in Northwest Indiana?

Do you need a home loan term longer than fifteen years?

Is your FICO credit score less than exceptional?

If you answered yes to these questions, you will soon be paying even more to get a home loan for purchase or refinance.

Fannie Mae and Freddie Mac are raising credit risk fees that are charged to lenders for the first time since 2009. These increases will affect a vast majority of home loans sold to Fannie Mae (since April1, 2011) and Freddie Mac (beginning March 1, 2011).

Here is an example of the impact of the higher home loan fees from Fannie Mae and Freddie Mac.

Say you are purchasing a nice home in Valparaiso Indiana for $250,000. You have a 20 percent down payment. Your FICO credit score is 720. Your credit risk fee will now be $1,000. If your FICO credit score is 680, the credit risk fee will now be $3,500.

If you want to find out what these fees could mean to your home buying situation, contact us today. Home loan rates are still at historically low levels and if you are looking to purchase a home or refinance your existing home, now is the perfect time to plan accordingly.

Fannie Mae

Top Real Estate and Mortgage Headlines for April 2nd

In case you didn’t hear the news, the unemployment rate has fallen to 2-year lows. Why is this important to real estate?

People who are not employed can not buy homes. As lending guidelines have tightened over the past 2 years, even a temporary layoff could derail a home purchase.

While we collectively wait for more jobs, let’s take a minute to review what the top real estate and mortgage headlines are today according to the National Association of Realtors.

• Bargain-Seeking Home Buyers on the Hunt
  The spring selling season is heating up as investors make more cash buys, foreign buyers increase, and other buyers look to snag a good deal.
• Mortgage Rates Continue to Inch Up
  For the second straight week, mortgage rates were on the rise, reports Freddie Mac.
• GOP Senators Join Efforts to End Fannie, Freddie
  More lawmakers are jumping in to chip away at the housing giants as the government continues to seek ways to shrink it’s role in the mortgage market.
• Watch for Red Flags That May Get You Audited
  The number of tax audits is increasing. Find out what may put your tax return at risk of being audited.
• You Can’t Bribe Your Way to Lower Property Taxes
  An Orlando man was arrested Wednesday on charges that he tried to bribe an appraiser to lower his home’s tax assessment.
• Home Owners See Big Value in Remodeling
  Nearly 40 percent of home owners say that a major home improvement is the best long-term investment you can make, according to new research by Mintel.

These are the top real estate and mortgage headlines for Saturday, April 2, 2011.

Want to know how these national real estate headlines could impact you right here locally in Northwest Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let our collective years of real estate experience in Northwest Indiana guide you to an informed and successful real estate transaction today.

Fannie Mae

Top Real Estate Headlines for Week Ending: August 27th

As we all look forward to the weekend, let’s pause for a moment to review what the top real estate and mortgage headlines were this week according to the National Association of Realtors.

• July Existing-Home Sales Fall, But Prices Rise
  Home prices rose in July, though existing-home sales continued their slide following the expiration of the home buyer tax credit.
• Is the Housing Slowdown a Sign of a Double-Dip?
  As unemployment and mounting foreclosures continue to bind the housing market, analysts fear a slide back into recession.
• Foreclosures Down, But Late Payments Up
  The inventory of houses in the process of foreclosure are down for the first time since 2006, but the number of loans that are one payment late went back up.
• Commercial Conditions Favor Business Growth
  Rent discounts and other favorable conditions in commercial real estate markets make it a good time for expansion moves by business, an NAR report suggests.
• 4 Business Tips for Social Networking Success
  Are you using social networks to garner more business leads? Read tips on how to expand your reach.
• Mortgage Rates Continue to Fall
  Average interest on long-term mortgages hit a record low for the eighth time in nine weeks, and could go even lower.
• 7 Must-Have Apps for Your Smartphone
  Get ideas on some of the latest apps that can be used in your real estate business, from faxing on-the-go to creating property “reminder” tours.
• Protest Rising Over Resale Charges
  Some builders are now including in contracts a clause that requires buyers to pay them a 1 percent transfer fee every time the house is sold over the next 99 years.
• New York Housing Bucking Trends
  Inventory has dropped in half from a year ago and well-priced apartments are selling in a week.
• Fannie Mae to Prohibit ‘Appraisal Cutting’
  The secondary mortgage market company doesn’t want lenders to cut valuations anymore on appraisals in dispute.
• Military Growth Drives Fastest Rise in Income
  Jacksonville, N.C. tops the list of USA Today’s metro areas with the largest per-capita income gains from 2000 to 2009. See what other cities made the list.

These were the top real estate and mortgage headlines for the week ending August 27, 2010.

Want to know how these national headlines could impact you right here in Northwest Indiana? Subscribe to this blog, Today’s Real Estate Reality, and let our resident local market real estate experts guide you to an informed and successful real estate transaction.

Fannie Mae

Can’t Get The Lowest Mortgage Rate? Blame Fannie Mae

Conforming mortgage rates may be posting all-time lows this week, but that doesn’t mean you’ll be eligible for them. You may have already called your mortgage loan officer and found this out the hard way.

It’s because of a federally-mandated mortgage-pricing scheme known as “loan-level pricing adjustments”.

In effect since April 2009, loan-level pricing adjustments are changes to a loan’s base rate and/or fee structure based on that loan’s inherent risk to Wall Street. It’s similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications in Valparaiso Indiana featuring any of the five traits are subject to price adjustments:

1. Credit Score (i.e. the borrower’s FICO is below 740)
2. Property Type (i.e. the subject property is a multi-unit home)
3. Occupancy (i.e. the subject property is an investment home)
4. Structure (i.e. there is a subordinate/junior lien on title)
5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It’s these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers — your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government’s loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your mortgage loan officer for help with interpretation.

Fannie Mae

Fannie Mae Interest Only Mortgage Guidelines Set to Change

If you plan to buy or refinance your home in Crown Point Indiana with a conforming interest only mortgage, get your loan application submitted no later than this Friday, June 18th. 

Starting next week, Fannie Mae is clamping down on the popular loan product.

An “interest only” mortgage is exactly what its name implies — a mortgage for which the monthly payments consist entirely of interest with no principal reduction. Because there’s no amortization, payments are less costly on a month-to-month basis.

For example, assuming principal + interest payments at 5 percent, a $250,000 mortgage carries a monthly payment of $1,342.  The payment on a comparable interest only mortgage, however, drops to $1,042.

That’s a payment difference of $300 and the size of the cost savings, not surprisingly, is the biggest reason why Fannie Mae is making its changes.

In its official announcement, Fannie Mae says it wants to give the interest only option to “borrowers who are in a position to choose it as a financial management tool” rather than allowing homeowners use it as an affordability tool for their budgets.

Going forward, there are new minimum standards for interest only home loans.

• Applicants must have a 720 credit score or better
• Applicants must have at least 24 months of reserves
• The property type may not be a 2-unit, 3-unit or 4-unit
• The property must be a primary residence, or vacation home

Furthermore, only purchase and rate-and-term refinances are eligible.  Cash out refinances are prohibited.

Interest only home loans aren’t for everyone, but if you plan to finance with a Fannie Mae mortgage and interest only is your preference, get your loan application submitted as soon as possible. Starting Monday, approvals will be tougher to come by.

Fannie Mae

Borrowers Beware – Fannie Mae Tightens the Vice Again!

A new loan quality initiative from Fannie Mae is making it harder for Portage Indiana home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage. 

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular — even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment. 

Loan level pricing adjustments are mandatory loan fee based on your credit score.

Lastly, underwriters will be looking at your credit report’s Credit Inquiry section. The goal is to see if you’ve been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae’s Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it’ll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don’t buy new cars, don’t buy new appliances, and — most definitely — don’t open new credit cards.  Be extra safe with your credit because a mortgage application that’s supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

Fannie Mae

1 in 8 Banks Still Tightened Prime Mortgage Standards

The Federal Reserve says that financial markets “remain supportive of economic growth“. Residential mortgage guidelines, however, continue to tighten.

If you’ve applied for a home loan recently, you probably felt it; extra scrutiny on income, assets and credit scores, among other things.  The hard proof of the changes, however, can be found in the Federal Reserve’s quarterly survey of its member banks.

Every 3 months, the Federal Reserve asks senior bank loan officers around the country whether their respective banks’ “prime” residential mortgage guidelines tightened since the last survey.

For the period January-March 2010, 1 in 8 banks surveyed toughened their qualification standards. 

Only 4% loosened them.

When we account for the Fed’s survey in conjunction with new underwriting standards from Fannie Mae and FHA, it’s clear that getting approved for a mortgage in 2010 is more difficult than at any time in recent memory.

Today’s homeowners and home buyers in Munster Indiana have taller hurdles to leap:

• Minimum FICO scores are higher
• Downpayment/equity requirements are larger
• Debt-to-Income thresholds are smaller

In other words, mortgage rates may stay low throughout 2010, but that won’t matter to homeowners failing to meet the new, minimum eligibility standards as set forth by the lenders.

If you’re among the many people wondering if now is the right time to buy or refinance a home, remember that — along with a probable increase in mortgage rates — mortgage approvals are getting more scarce.

The best home price or mortgage rate in the world won’t matter if you’re ineligible for financing.

Fannie Mae

Oops! Fannie Mae Did It Again – Set to Tighten Guidelines

For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.

The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.

Fannie Mae made its official announcement April 30, 2010.  The changes will roll out to home buyers and homeowners in Chesterton Indiana and everywhere else over the next 12 weeks.

The first guideline change is tied to ARMs of 5 years or less.

Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate.  For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.

The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.

The second change is Fannie Mae’s elimination of the standard 7-year balloon mortgage.  Balloon mortgages were popular early last decade.  Lately, few borrowers have chosen them, though.  Mostly because rates have been relative high as compared to a comparable 7-year ARM.

And, lastly, Fannie Mae is changing its interest only mortgages guidelines.

Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

1. The home must be a 1-unit property
2. The home must be a primary residence, or vacation home
3. The borrower’s FICO must be 720 or higher
4. The mortgage must be a purchase, or rate-and-term refinance. No “cash out” allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments “in the bank” at the time of closing.

Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.

Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market.  So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.

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