Mortgage Changes Coming Up…………….

FHA Monthly Mortgage Insurance to Increase and How to Save

Your Clients’ Money in Their Monthly Payment

On Monday, February 14, 2011,  HUD announced the premium change for mortgage insurance on all FHA cases for those case numbers issued on or after April 18, 2011.

Currently, the monthly mortgage insurance on an FHA loan is .85 for loans that are less than or equal to 95% loan to value and .90 for loans that are above 95% loan to value.  Effective with all case numbers issued on or after April 18, 2011, the monthly mortgage insurance will increase to 1.10 and 1.15, respectively (this is on loans that are greater than 15 years).

We at Waterstone do have a way to save your client and that would be to have them make application with us and us to get their FHA case number prior to April 18 to get them locked in to the lower monthly mortgage insurance amount, and end up saving them thousands of dollars over the life of their loan!  Even if they are purchasing a short sale and it hasn’t been fully approved by the short sale lender, we can get the case number prior to that date.  We just have to have a signed application from the client to do that.

If you have any questions, please feel free to contact us.  I have attached HUD’s Mortgagee Letter explaining this to this email.

HUD Extends 90-Day Seasoning Waiver
Here’s What You Need to Know: We Can Finance Properties

That the Seller Has Owned Less Than 90 Days!

On Friday, January 28, 2011 HUD announced the extension of the 90-day seasoning waiver.

Here are the 4 things you need to know about this waiver:

1. The extension is effective for all sales contracts executed on or after 2/1/11 through 12/31/11, unless otherwise extended or withdrawn by FHA.
2. All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
3. In cases where the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender justifies the increase with supporting documentation and/or a second appraisal and provides a home inspection report to the borrower (borrower can be charged).
4. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

As a result of the high foreclosures that have been taking place around the nation, FHA, through this regulatory waiver, encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes with the objective of increasing the affordability for first-time and other purchasers and helping to stabilize real estate prices, as well as neighborhoods and communities where foreclosure activity has been high.

Let’s all do our part to encourage affordable homeownership and help our communities at the same time. Please contact me to discuss ways that we can work together to help more of our clients attain the American dream of homeownership.

Higher Fees Coming From Fannie and Freddie!
What Will This Mean to You and Your Clients?

Does your client have less than 25% down to put on a home?

Does your client need a loan-term longer than fifteen years?

Is your client’s credit score less than exceptional?

If you answered yes to these questions, your client could soon be paying more to get a mortgage.

Fannie Mae and Freddie Mac are raising risk fees that are charged to lenders for the first time since 2009, and these increases will affect most loans sent to Freddie Mac (beginning March 1) and Fannie Mae (beginning April 1).

Here’s an example: Say your client is purchasing a $250,000 home, putting 20% down, and their credit score is 720. Their risk fee will now be $1,000 (versus $500 before). And if their credit score is 680, the fee will now be $3,500 (versus $3,000 before).

If you want to find out what these fees could mean to your cleints’ situations, give me a call today. Home loan rates are still at historically low levels and if they’re looking to purchase or refinance a home, now is the perfect time to act…before it will cost even more to do so.

Every Other Tuesday Update – November 9, 2010

 

Sue Botelho |  850-362-6901 | sbotelho@waterstonemortgage.com | www.sue-botelho.com NMLS #26520 Waterstone Mortgage Corp. (NMLS #186434) is a wholly-owned subsidiary of WaterStone Bank SSB (NASDAQ: WSBF) Florida Office of Financial Regulations Licensee Exempt

Employment Picture Helps Housing MarketHousing and employment levels are directly linked, so it is great news that our nation’s employment picture has brightened.The U.S. Labor Bureau reported that their national unemployment rate remained unchanged at 9.6% from the previous month.  But the real story is the increase in the private sector.  It is the private job growth that is reflective of economic growth.  Non-Farm Private Payrolls grew at the best pace in over a year, adding 159,000 jobs.  Plus, their last month’s figures were revised upward by 110,000.This along with very positive manufacturing data has put the final nail into the coffin of the “double-dip” recession theories.  After this month’s blistering Existing and New Home sales data, the positive job growth adds further stability to our nation’s housing market. What’s New With Fannie’s Guidelines: A Cheat Sheet Effective December 13, 2010, Fannie Mae adds new bumps to the lending landscape, and takes others down.Guidelines are changing across 9 separate areas of the mortgage approval process. Collectively, the updates figure to impact nearly everyone in want of a conforming home loan. They run the gamut from income and assets to documentation and reporting.A few of the more major changes:•The 97% “Flexible Mortgage” is eliminated, replaced by a standard 97% loan subject to loan-level pricing adjustments•Borrower “minimum contributions” are eliminated for 1-unit purchases with at least 3% down. Gifts and grants are permissible sources for a down payment.•All revolving debt must be included in debt-to-income ratios, regardless of whether there’s “10 Payments Or Less”. If there’s debt, it must be counted.  This will lessen the amount of home certain buyers can purchase as it will increase their debt to income ratios.•For debts that show no monthly payment on the credit report, a 5% monthly payment against the balance must be assumed unless a minimum monthly payment can be verified via the creditor, or the credit bureaus.Furthermore, the new guidelines contain a note that former homeowners with a foreclosure on record must wait 7 years before re-applying for a conforming mortgage.Loan applications taken prior to December 13, 2010 will be exempt from these new rules.  Make sure you talk to any prospects/clients you currently have to let them know that they may end up approved for less of a mortgage, thus decreasing their buying power, if they don’t make loan application by December 13!  Have them call us today to apply! Manufactured Home Financing We have been getting a lot of questions recently about manufactured (mobile) home financing.  Waterstone Mortgage CAN finance a single-wide or a double-wide manufactured home (primary home occupancy only) with certain restrictions, ie: when it was manufactured, property can’t be in a flood zone, etc.  For more information, call me to discuss and let’s help your clients get financed!  Realtor Tip of the Week With all of the changes that have taken place in mortgage lending, why waste your time driving potential clients around showing properties when they may not be able to qualify?  Have them contact us to get prequalified before you spin your wheels (literally) and spend uncounted hours on people that may not be able to purchase.  On the other side of that, if you have a client that tells you they have credit issues and you may know going in that they can’t currently qualify, get them to us right away and we can work with them on credit repair to give you back an approvable buyer!  I hope you found this update useful. Feel free to pass along to a colleague or two.  Please let me know how I can help you, your client or someone you know.

Every Other Tuesday Update – 10/12/10

Fannie Mae Rolling Out New Lending Rules

Effective December 13, 2010, FNMA is changing its mortgage lending guidelines.  For some applicants, this will simplify the loan approval process; for others, it will toughen the process.  How it affects a client depends on their credit profile and loan characteristics.

When the new rules roll out, accepting cash gifts for downpayment will be easier.  Under the new guides, buyers of primary homes, 1-unit properties can forgo FNMA’s typical “minimum 5% borrower personal down payment contribution”.  Downpayments on these properties will be able to be 100% gifted and/or granted funds.  Buyers of second homes and multi-unit properties can’t use this but it’s great for people buying primary homes.

There are also two changes pertaining to revolving debt (credit cards and/or equity lines).  Right now, if a debt has less than 10 payments remaining, we don’t count that debt in the debt-to-income ratio.  Beginning December 13, we will have to count them.  Also, if the credit report doesn’t show a monthly payment, beginning on December 13, we must assign a payment equal to 5% of the outstanding balance.  Both of these will most likely increase the number of loan denials in 2011 due to them increasing a clients’ debt-to-income ratios.

Lastly, salaried workers and applicants whose commission/bonus income accounts for less than 25% of their total income will have fewer paystubs to produce for underwriting.

Loan applications taken prior to December 13, 2010 will be exempt from these new rules.  Make sure you talk to any prospects/clients you currently have to let them know that they may end up approved for less of a mortgage, thus decreasing their buying power, if they don’t apply by December 13!  Have them call us today to apply!

95% Primary Home Purchases ARE Available!

I had an appointment last week with a client who was told by 3 other local lenders that “nobody in Okaloosa County is able to do 95% primary home purchases unless they do an FHA loan” because the MI companies aren’t offering that.  THIS IS NOT THE CASE AT ALL!  At Waterstone Mortgage, we can offer 95% primary and 90% second home single-family purchases with mortgage insurance.  If you hear the quotation above, RUN from that office and call us here at Waterstone – we are closing them!

95% HomePath Condo Purchases (30 Year Fixed) Available!

I want to remind you that we CAN do 95% condo purchases on any FNMA repo that is eligible for the Homepath program.  This will be a regular, 30 year fixed rate program even if the project is consider a condotel now!  Call us if you have a condo buyer wanting a 95% fixed rate mortgage!

Local vs. Not Local Underwriting

We have been asked a couple of times whether our underwriters are local or not local at Waterstone Mortgage Corporation.  While I can somewhat understand the reasoning as to the basis for this question, I want to point out several benefits of the underwriting system employed by Waterstone Mortgage Corporation so that you can see that the fact that our underwriters may not be right here in our office doesn’t cause a problem for our Realtors nor for our client and can, actually, be a benefit.

 

We employ the newest technology at Waterstone Mortgage Corporation and our underwriting is “paperless”.  We simply upload the file to our system and our underwriting department is automatically notified immediately that there is a file to be underwritten.  They take it from there.  We don’t have to overnight it or fax it; it is simply uploaded to them and that is where they underwrite it from.

 

There can also be some benefits from NOT having local underwriting:

 

• Typically, those companies with localized underwriting only have one or two underwriters on staff; if they become sick or take a vacation, it backs up the entire system.  If one resigns or is let go, it can really back it up.
• Having an entire department for underwriting that employs at least 10, if not more, underwriters, as well as an underwriting manager, allows files that may be denied to be reevaluated and possibly approved.  Some of the things underwriters decline files for are “objective” and having others that can review the file can help a file that may have been denied to be approved and closed, thus getting a Realtor a commission they may not have gotten otherwise.
• We have heard of many cases where local lenders with local underwriting push back deals that are closing later to underwrite a deal that is closing quicker.  Our underwriters do their underwriting on a “first come/first serve” basis so that if you have a file closing in a month and we have everything up to them, they can get the file cleared now and have a clear to close for a long time instead of your client having to wait while other files that are closing sooner are underwritten.  In fact, we have a deal closing on November 1 that has been cleared to close since September!
• Underwriters are sometimes prejudiced to certain areas and/or companies and this isn’t something that is called into play with an out of town underwriting department. They have no personal knowledge of any one real estate company and/or agent, nor any specific area, in our market and those prejudices don’t surface, thus allowing a file to be approved.

 

At our Ft. Walton Beach office of Waterstone Mortgage Corporation, three of us have been underwriters in the past and are able to tell if a file is approveable or not up front.  We are also kept up-to-date about changing guidelines BECAUSE we have an out of town underwriting department.  We don’t have one, maybe two, people trying to underwrite files and not able to spend time giving the loan officers updates on information as it is changing.  As you can see from the changes above, things are still changing, and it’s important for all of us, not just the underwriters, to be aware of these changes in real time, not the day before it happens!

USDA Funding Still Not Available – But We Are Still Able to Close and Fund USDA Rural Housing Mortgages!!!

The new bill allowing for the increased USDA guarantee fee has been passed by both Houses and signed by the President.  We are being told that new funding will begin in October and that many lenders will be starting to do USDA loans again in either October or November.

If you are looking for 100% financing in the form of a USDA Rural Housing mortgage, call us TODAY, not in October or November – we have never stopped doing them!  We are still able to get them closed and funded with a conditional commitment that most other lenders are unable to do!

This program is a great program for those of you wanting a low-interest rate loan with no money down.  Call us and we can get you prequalified in less than 30 minutes!

Northstar Mortgage is Changing to WATERSTONE MORTGAGE Corporation!

As we have seen many legislative changes in the mortgage industry, and are certain that more will be coming, we at the Ft. Walton Beach office of Northstar Mortgage Group have decided that it would be in the best interest of our clients and referral partners (Realtors®) if we were to become employees of a bank or employees of a mortgage company that is wholly owned by a bank.  This would give us some advantages that we don’t currently have:

• Stronger Financial Backing/Access to more Capital (because we will be bank owned – the bank has over $2 billion in assets and the mortgage company will do over $750 million in volume for 2009)
• Lower Rates
• Better Technology
• Consistency in the Process for Each File
• Marketing Department/Full-time Graphic Artist on Staff
• Training
• Knowledge and Experience
• Faster Closings due to Quicker Underwriting Times
• Wider Variety of Loan Programs

After having talked to several companies and weighing the benefits of each, we have made the decision to become a part of WATERSTONE MORTGAGE CORPORATION, which is wholly-owned by Waterstone Bank of Pewaukee, Wisconsin!  This change will become effective as of January 1, 2010.  The transition will be made very easily because the only change that will be made as far as communicating with us will be our email addresses.  We will remain at our same location in the office behind ECAR, our phone and fax number will remain the same, and we will still have the same employees giving you the same level of service (and probably even a higher level) that you have become accustomed to from us.

This change is being made to increase our ability to serve you and your clients and we think that you will find that it will do that and more!  I have included the press release (below) from Waterstone about this change and know that you will find Waterstone Mortgage Corporation to be a greatly-needed change from the lenders you are currently using!

We are going to be having a presentation to the Real Estate Community, most likely in the afternoon of January 5 at the Kathy Building of ECAR.  We are currently making the arrangements for this and will be sending details as soon as we have them.  This meeting/presentation will be to show you how Waterstone does business and allow you to meet some of their regional management people from Winter Park, FL, as well to introduce you to some programs that you will find VERY exciting (for instance, most lenders, Northstar included, cannot lend at certain condominiums, ie: Tidewater and Destin West – Waterstone has a program that is based on the approveability of the CLIENT, not the project, and will allow us to do mortgages in those, and other buildings, that are not currently lendable!)

We will be contacting the Realtors® and borrowers on each and every one of the files we currently have in process to get their permission to transfer the file to Waterstone.  Northstar Mortgage Corporation, LLC, will no longer be operating after the end of this year in any location as all offices are affiliating themselves with banks or bank-owned lenders.

Our current email addresses will not be accessible after Thursday, December 31; our new email addresses will be as follows:

Sue Botelho – sbotelho@waterstonemortgage.com

Mike Roche – mroche@waterstonemortgage.com

Laura Baldwin – lbaldwin@waterstonemortgage.com

Ed Kelley – ekelley@waterstonemortgage.com

However, we will not be able to access these email addresses until Monday, January 4, so we have created email addresses for you to use in the meantime:

Sue Botelho – SueWaterstone@gmail.com

Mike Roche – MikeWaterstone@gmail.com

Ed Kelley – EdWaterstone@gmail.com

Laura Baldwin – LauraWaterstone@gmail.com

Here are our cell numbers, as well, in case you need to get in touch with any of us from Thursday until Monday:  Sue:               850-797-7946; Mike:  850-499-1623; Ed: 850-585-0880.

We want to wish you a Very Happy New Year and the hope that Waterstone Mortgage Corporation can help to make it a prosperous one!  Again, following is the press release from Waterstone Mortgage Corporation.

 

WATERSTONE MORTGAGE CORPORATION

1133 QUAIL COURT

PEWAUKEE, WI  53072

 

******

 

For Immediate Release

 

******

 

Waterstone Mortgage Corporation Continues to Expand

 

Despite the recent industry decline, Waterstone Mortgage Corporation has continued to grow and gain market share. The Pewaukee, Wisconsin-based company is  expanding with an office in Ft. Walton Beach, FL. 

Waterstone Mortgage is a full-service residential mortgage banking firm that was recently named the 3^rd largest among Milwaukee-area mortgage banking companies in 2008 by the Milwaukee Business Journal. Waterstone began operating as a residential mortgage lender in 2001. As of 2006, the company operates as a wholly-owned subsidiary of WaterStone Bank SSB, which is a unit of Waterstone Financial, Inc. 

The Ft. Walton Beach office is located at 2 Park Circle, Suite A, Ft. Walton Beach, and has been managed by Sue Botelho and Mike Roche under the name Northstar Mortgage Group, LLC., for the last 3 years.  The office, which will continue to be managed by Sue and Mike, and will continue as they have, still employing their Loan Processor, Laura Baldwin, and another Loan Officer, Ed Kelley.  This office has expertise in all facets of mortgage financing, including Condotel, FHA, USDA and VA loans.   The current employees of Northstar Mortgage Group’s Florida office will all now be employees of Waterstone Mortgage Corporation. 

Waterstone is able to originate loans of all credit types for sale on the secondary markets. All functions from originating, processing, underwriting, closing, and funding are performed in-house by Waterstone employees. By becoming a Waterstone Mortgage Corporation office and effectively Waterstone Mortgage Corporation employees, Northstar Mortgage’s Florida office will enjoy more cost-effective operations by utilizing Waterstone’s administrative and processing support system. The stability created from the backing of WaterStone Bank offers the new office the ability to become involved in different investment opportunities that haven’t been previously available to them. 

Expanding into different areas of the country is a benefit to Waterstone as well, by offering increased productivity and the opportunity to experience and utilize markets not currently available to Northstar Mortgage Group. Northstar Mortgage Group’s Florida office is a well-known and reputable mortgage lender, and Waterstone will enjoy the positive association with the Florida lender. 

In attracting new offices, Waterstone traditionally considers contacts the company has made through previous business interactions. Quality people and businesses are the first considerations, followed by the locations of said businesses.  

Waterstone Mortgage Corporation currently employs 293 people with offices located in Pewaukee, Madison, Lake Geneva, Delafield, Mequon, and Menomonee Falls, WI in addition to Florida, Idaho, Illinois and two Colorado offices.

What Makes a Loan Officer a Success?

I am being interviewed for a podcast that will be on iTunes this coming week and the subject is “What Makes a Loan Officer a Success”. Having pondered this, I have concluded that two traits are needed: knowledge and involvement. While trying not to appear demeaning, all of us can market, learn to market, or hire someone to do our marketing for us. However, unless and until we know what it is that we are marketing, even the best marketer will be scrambling to make their car payment or keep their cell phone on! In these days of ever-changing guidelines, it is imperative that we, as loan officers, learn those guidelines, relearn those guidelines, study them and commit as much of them as possible to memory and then keep up on the changes as they happen. Several months ago, I took a Friday, Saturday and Sunday and spent them holed up in a hotel room going over and over my investor’s guidelines and the mortgage insurance guidelines (I’m in Florida, which is a market that has different rules than other states in many cases.) Doing this, while somewhat boring at first, showed me so much more that we CAN do as opposed to what we can’t do. My object wasn’t to find out anything other than what limitations the different investors we work with and the MI companies were placing on us but I found ways to get loans done that I didn’t realize even existed! It’s amazing how many people will say that they are “loan officers” or “mortgage consultants, advisors, or experts” only to find out that they really don’t know how to get a loan closed from beginning to end. They may not know all of the correct documents that are needed for the underwriter and have to keep going to the client and asking for more, which is extremely unprofessional and frustrating to the client, they may not know the maximum loan to value or debt to income ratio or minimum credit score needed, and they may just throw answers out to appear knowledgeable that, in the end, makes them look as unknowledgeable as they really are. It is better to respond to a question with either (a) the right answer that you know because you study your guidelines continuously or (b) an “I am not 100% sure but I will check on it and get right back to you” than it is to every try to appear that you “know your stuff” and throw out an incorrect answer! The second trait needed is INVOLVEMENT. All the knowledge in the world won’t help unless and until you have someone to share it with. As a loan officer, the best place to start spreading that knowledge is with Realtor®. I have found that being involved in my local association through committees and sponsorships, being an active member of the local chapter of Women’s Council of Realtors, and being involved in community and/or charitable organizations allows me to share my knowledge when questions are asked that tell the other party that I know what I am talking about. If a Realtor® asks me a question and I just give an answer to “appear” knowledgeable and then it turns out that my answer is wrong, I wouldn’t expect to do business with that Realtor® again, and rightfully so. Even worse, they will probably tell other Realtors® and then your reputation will be sullied going forward. When you are at functions for your Board or other organization functions, DO NOT MAKE IT ALL ABOUT YOU OR YOUR COMPANY! Being involved means doing the task that is required of that committe or group and it isn’t about self-promotion! It is through these efforts, however, that you establish relationships and some of the other people in these groups may ask you questions and if you give the right answers, they may then refer you business. Nobody “owes” any of us their business; it is up to us to “earn” it. My creed is and always has been: “If I help you to grow your business, it will then, in turn, help me to grow mine”. The key to doing this is patience and making sure that in any and all answers in conversations you have with the Realtor, borrower, title company, etc. is one that you don’t just make up to look like you’re smart. In my head, the “smart” person I picture is Einstein……..if you prove you’re no Einstein, you will also find you’re no Trump or Gates, either!

10 Real Estate Deal Killers

I attended a class the other day called “10 Things to Ask Your Buyers Before Taking Them House/Condo Hunting” and will be addressing those issues in an upcoming blog entry but wanted to put together a list of what can kill a deal for a buyer or a seller. Please feel free to share this information with your buyers and sellers!

1.  Skipping the Mortgage Preapproval Process: For buyers, getting preapproved for a mortgage gives them a clear idea of how much they can safely borrow, plus it addresses credit issues and kick-starts other financial paperwork. What’s more: it identifies them as a SERIOUS BUYER. With mortgage guidelines changing almost daily these days, a buyer needs to be 100% sure that they can afford the down payment requirements and meet the credit score requirements of a particular property type. Sellers with a hot property should demand nothing less than proof of preapproval from the potential buyer’s lender (hopefully it’s Northstar Mortgage!) There is no sense in wasting time on time wasters! I know most Realtors require their clients to get preapproved prior to ever showing them the first house but I also know Realtors who spend sometimes months showing prospective clients properties, taking them to lunch and/or dinner, searching the MLS for them and then find out that the client cannot get approved for a mortgage at all! On top of having spent countless time with an unqualified prospect, the Realtor has also spent money on them. IF A CLIENT IS UNWILLING TO GET PREAPPROVED, HOW SERIOUS CAN THEY POSSIBLY BE??

2.   Not Knowing What a Condotel is: As Fannie Mae, Freddie Mac, FHA and VA tighten up their credit guidelines, they have basically choked the ability to do a fixed rate mortgage for a condo in a resort area. If you have a client that is buying a condo and you can go on Google, put the name of the project and the city in, and find that you can rent a unit in the project for a day or for a week, chances are you seller will NOT be able to get a fixed rate mortgage to buy a unit in that project as it will be considered a “condotel” or “condohotel”. If the HOA has 10% – 15% (depending on the investor) or more of the units in the project as delinquent on their dues, it makes the financing in that project even that much more difficult. If the project has the word “Resort” in the legal name of the project, it is a condotel. Here in our local market in the Panhandle, one or all of these affects about 99.9% of the condo projects! Before you show condo units to a prospective client, MAKE SURE THEY ARE AWARE THAT THE AVAILABILITY OF A FIXED RATE MORTGAGE IS ALMOST NON-EXISTENT! While we are able to finance condotels with several investors utilizing adjustable rate mortgages, you would be very surprised at how many calls A DAY I get from clients who are at contract on a unit and then find out that they can’t get a fixed rate mortgage. You would be doubly surprised at how many of them end up not buying at all! (It’s currently noon as I am writing this and I have already had 5 of these calls today and in all cases: they were at contract and talking about not buying.) The investors we use do NOT require a condo checklist so it’s sort of a “don’t ask, don’t tell” policy on the HOA dues. If your client knows up front that they can get a mortgage and the type and terms of the mortgage, they are more apt to buy a unit as opposed to finding out after they find the perfect unit. The prices and deals on condos right now are so incredibly good that some people don’t care that they have to do an ARM but if they find out after the fact, it sours them and causes them to take pause and possibly not buy!

3.   Not Understanding the Length of the Buying/Selling/Financing Process: I have no idea what the numbers are, but there is a high percentage of real estate being sold that is either a short sale and/or REO that have to be approved by the bank currently holding the note. This process can take as little as 3 weeks or as long as 3 months (and even longer) and sometimes, buyers lose their enthusiasm. Make sure your client knows going in that buying one of these properties (or selling one, if you are the listing agent) will not happen overnight. If they know up front, it doesn’t create a fear in the buyer or seller because it takes longer than they may have expected. On the financing side: because rates have dropped to almost historical lows, most underwriters are taking more time to get files underwritten than what it used to take. Talk to your loan officer and get a realistic idea of how long it may take (I have heard of some underwriters taking 5 to 6 WEEKS to underwrite files based only on the sheer magnitude of the number that they have received recently!!!)

4.  Assuming the Appraisal Equals the Actual Value: In theory, appraisals are objective estimates of value. But several different appraisals can yield several different numbers. For example: an appraisal that’s been done for a possible refinance may have been slightly inflated to encourage that refinance. So make sure that, as sellers, when a house is put on the market the agent do a CMA to better indicate the home’s worth. As a buyer, get similar comps from your agent! But realize that the TRUE VALUE of a property is what someone is willing to pay for it. There is no emotional value added to an appraisal.

5.  Exposing Your Hand During Negotiations: Buyers should never let their love for a house cloud their vision. They need to try to contain their enthusiasm. Otherwise, the sellers and/or their agent will know they’ve hooked a live one and assume you may forgive certain flaws because they think a particular property is right for them. Also, I always suggest to my clients that when they make an offer on a home that they tell me the amount and I will send a preapproval for that exact amount. If a client is preapproved for $200,000 but is offering $179,000 for a house that is listed at $190,000, they are giving the seller an unfair advantage in knowing that they can afford more!

6.   Opting to Use An Agent That is a Friend of a Friend or a Family Member (aka: choosing the wrong agent): Buyers and sellers should interview several agents from small and from large firms. Get references and success stories. Opting for a friend or family member who is a Realtor doesn’t assure one of the best results in all cases and it could cause a rift. Choosing an agent who suggests the highest list price is not a recipe for success and neither is opting for the agent who charges the lowest commission. Remember that the following qualities in a Realtor will usually get the job done right: smart, empathetic, experienced, dedicated and one that pays attention to a buyer’s list of wants and needs in a house!

7.  Not Realizing The Other Costs Involved in Homeownership: If a client is preapproved for a mortgage with a lender, that preapproval is based on their gross, not net, income. This means that they may can qualify for a payment that is higher than they may want to spend. Mortgage lenders do not take into consideration, unless it’s a VA loan, the cost of lawn maintenance, utility bills, groceries, insurance, childcare, pool maintenance, entertainment, gas, auto repairs, etc. Just because a client can afford $1,500 a month doesn’t mean that they should buy a house that uses all of that to pay just the mortgage payment. Because today’s largest pool of buyer’s are first time homebuyers, it is very important that the Realtor explain all of the other expenses that the client may not realize will be involved with owning a home! Opting for a dream home that may otherwise create negative quality-of-life challenges (ie: longer commutes, higher taxes, bad schools) can cause buyers to question their decisions after a few months. If a buyer purchases a home and finds that the other expenses involved causes them to lose that home or not be able to afford to do much else (house poor), how many referrals do you think they will give you??!!

8.   Not Knowing What They’re Signing: The sales contract is a legally-binding document. Buyers and sellers should review it as if their legal well-being were at stake (because it is!). It should address all concerns of both parties, such as who will pay what for closing costs and repairs. A poorly written or incomplete contract can cost time, money and emotional energy and tie up a deal for weeks or months. If there have been any oral commitments, they should be put in writing. Also, realize that just because a house is being sold “as is” per the contract, most lending programs will not let a property close that has certain repairs necessary if they are pointed out on the appraisal (ie: roof leak, exposed wiring, etc.) Always address a dollar amount of repairs that a seller is willing to pay on the contract instead of leaving it blank to make sure that the house makes it to closing.

9.  Not Paying Attention to The Good Faith Estimate: As mortgage lenders and brokers, we are all required to give a client an estimate of the costs involved in the closing of the property. In fact, we are required, BY LAW, to give this to a client no later than 3 days after they make loan application. As a Realtor, go over the estimates with your client! There are unscrupulous lenders and brokers who will intentionally leave certain costs off (ie: escrows) or intentially underestimate the cost of other items (ie: taxes, insurance, title company fees) just so that a client will go with them and then the client finds out too late (at or immediately prior to closing) that they have to bring more money to closing than they initially thought. What do you suppose happens if the client doesn’t have the additional money to pay these fees??

10.   Waiting for Prices to Go Down or For Interest Rates To Drop (aka: timing is everything, but maybe not in the sense you’re thinking): Right now, mortgage interest rates are at or very close to historical lows. Housing prices have decreased, as well. I read an article that indicates that we are very close to reaching price stabilization. Once that is reached, prices will start to increase. Mortgage rates may go a bit lower, but there is always a chance that they will increase. If a buyer is hoping that the price or rate will drop and either one goes the other way, it will end up costing them. How do you know the bottom is reached until it is too late? Buyers need to get the psychology of “what is my interest rate” out of their head and look at the monthly payment – that is what you write a check for every month! Increasing rates and decreasing prices can cause a mortgage payment to be higher than what it may have been at a higher price! If you have a client looking for to purchase real estate, find out what PAYMENT AMOUNT they feel comfortable with and work back from that instead of calling your lender to ask “what’s the rate”. Rates these days are contingent on exact credit scores in most cases and while someone with a 740 credit score may be getting a rate of 5.25%, a client with a 650 credit score may end up with a rate that is 1-1.5% higher than that! It’s not about the rate – it’s about the MONTHLY PAYMENT!

I hope that this list offers you some insight into those things that we see that make buyers and sellers upset and can cause them to change their mind about buying or selling real estate or referring their friends, family and coworkers to you in the future. If you are working with any buyers in Florida, Alabama, Georgia, the Carolinas or Tennessee, or are looking to purchase real estate in any of those states, I would love the opportunity to work with them and insure that your deal gets to closing and, if it’s not doable, not hesitating to tell you up front!

The Stimulus Package

Today may be the day that the American Recovery and Reinvestment Act of 2009 (aka the Stimulus Package) is passed; the Senate is voting on it right now. It is anticipated that it will be on President Obama’s desk to sign into law this weekend. While we don’t have all of the information about this Act, here are some highlights:

Contains a record-setting $10.472 billion in funding for the USDA Guaranteed Rural Housing Program to insure Rural Housing mortgages. These funds are in addition to funds the program has already received through the Continuing Resolution, as well as additional funding expected from Fiscal Year 2009 Appropriations legislation or further Continuing Resolution legislation. Again: WE HAVE NEVER STOPPED CLOSING AND FUNDING USDA RURAL HOUSING LOANS AND WILL CONTINUE TO DO THEM EVEN WHILE OTHER LOCAL LENDERS HAVE STOPPED AND ARE TELLING YOU THEY ARE OUT OF MONEY! There was a rumor that the USDA guarantee fee was going up as part of the Stimulus Package; it will remain unchanged at 2.0% for purchase transactions. There was a tax credit increase requested by the Senate; it has since been scaled down to $8,000 (or 10% of the value of the home, which ever is lower) from $15,000, which is still $500 above where it currently is. This is for any first time homebuyers who purchase homes from the start of this year until the end of November. It starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit IF they sell their homes within three years.

 More details will be provided to you concerning the impact of the Stimulus Plan once we go through the final version that is signed into law. Until that time, none of these are in effect yet.

Fannie Mae LOOSENED a Guideline – A Step in the Right Direction!

Over the last 18 months, since August, 2007, mortgage guidelines have been tightening due to the conditions of the industry.  It seemed that every day since then we have gotten updates from Fannie Mae, HUD, Freddie Mac and our individual investors that made mortgage lending a little tougher, albeit still possible and not as hard as the news media states.

However, on Friday, I received an email from a fellow mortgage lender in the Tampa area with an attachment from Fannie Mae.  A while back, both Fannie and Freddie tightened up lending for buyers of 2nd homes and investment properties to the point that they could not purchase additional properties if they already had four (4) mortgaged properties, including their primary home.

I have been interviewed by newspapers and Good Morning, America and my focus has always been the same: they should allow those people who have good credit, sufficient down payment, good and deep credit, and reserves after closing and who have debt to income ratios of 45% or less to buy additional properties.  This would help the market because these are the people who would love to scoop up some of the great deals that are available in the real estate market these days.  It appears that Fannie Mae listened!

The new Fannie Mae guideline, that goes into effect for mortgages purchased after March 1, 2009, allows buyers to have 5 to 10 financed properties if they meet strict conditions.  They have to have 25% down for a 2nd home and 30% down for an investment property.  There are reserve requirements dependent on the type of property they are purchasing.  There are debt to income restrictions, as well as a requirement for allowing rental income only under certain conditions.  But the fact remains: this is the first LOOSENING of guidelines that we have seen in a LONnnnnnnnnnnnggggggg time and it could point to better times ahead!

While Fannie Mae is loosening, I have checked with all of our investors and, so far, none of them are following suit.  Some had said that since Freddie Mac hasn’t loosened their guidelines that they are not going to loosen theirs.  I would like to think that Freddie will follow suit soon and that the investors will then allow us to offer mortgages for buyers of 2nd homes and investment properties with more than 4 financed properties.  We just have to wait and see but I truly believe that this is a good sign for the mortgage industry and the real estate industry!

USDA Doesn’t Lend Money – So How Can They Be Out???

It is amazing to me to see how many phone calls we are getting from around the country asking how we can still do USDA Rural Housing loans since they are “out of money”!  It is a misconception that the USDA lends money – they don’t!  Their role in the USDA Rural Housing Loan is to guarantee (insure) the loan against default.  That is why the have the 2% funding fee as opposed to monthly mortgage insurance.

Currently, they have used the entire appropriation that was given to them by Congress for FY2009; however, they are still issuing conditional guarantees that say “subject to new Congressional appropriation”.  In fact, a mortgage lender or broker used to have to reserve funds for this program but this year you don’t because they have been told that they have appropriations that are perpetual, meaning that they will be reissued but they have to go in front of Congress to have them signed.

While many lenders and brokers are finding that their investors (the ones that actually DO lend the money) are not willing to fund these mortgages until those appropriations are signed by Congress, we at Northstar Mortgage Group are still originating, closing and funding USDA Rural Housing mortgages.  We had one that closed Friday, one closing tomorrow, and two closing on Tuesday and they are being funded!  It is up to each individual investor as to whether or not they will take the chance and our investors firmly believe in this program and in Congress to appropriate additional funds for guarantees so they are allowing us to continue to close these types of mortgages.

Because of this lack of belief on the part of many other investors, we even got 4 new mortgages in from other lenders/brokers this week that will be closed by the end of next week.  We underwrite the USDA loans in house, we fund with our own money, and are able to get them closed quickly.  If you are being told that your lender won’t close on this program and you have a contract expiration, please feel free to contact me and let’s get your loan closed while others stand on the sidelines saying they can’t be done!