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 Income Changes Go Into Effect Jan. 20, 2009

As long as nobody complains, the proposed income limits will go into effect on January, 20 for the USDA Rural Housing mortgage program.  The tables below are for FLORIDA only; other states will have the increases, as well, but the amounts will vary.  This is for 100% financing that also allows a buyer to finance their closing costs!

 

CURRENT TABLE

County	1-Person	2-Person	3-Person	4-Person	5-Person	6-Person	7-Person	8-Person
All counties except those listed below	49,950	56,600	63,700	70,750	76,400	82,050	87,750	93,400
Clay, Duval, Nassau, St Johns	51,400	58,750	66,100	73,450	79,350	85,200	91,100	96,950
Collier	56,200	64,250	72,250	80,300	86,700	93,150	99,550	106,000
Gadsden, Jefferson, Leon	50,000	57,150	64,300	71,450	77,150	82,900	88,600	94,300
Palm Beach	55,700	63,650	71,600	79,950	85,900	92,300	98,650	105,000
Okaloosa	50,850	58,100	65,400	72,650	78,450	84,250	90,100	95,900
Broward, Pinellas, Monroe are not eligible

 

PROPOSED TABLE

County	1-4 PERSONS	5-8 PERSONS
All counties except those listed below	70,750	93,400
Clay, Duval, Nassau, St Johns	73,450	96,950
Collier	80,300	106,000
Gadsden, Jefferson, Leon	71,450	94,300
Palm Beach	79,950	105,000
Okaloosa	72,650	95,900
Broward, Pinellas, Monroe are not eligible

For each person over 8-persons, add 8% of the 4-person limit.

NOTE:  This is not an income increase for the 4-person and 8-person households. It simply removes the tiers for the 1-3 and 5-7 person households.  It does have the effect similar to an income increase for those families in the 1-3 and 5-7 groups.

Reminder: These are NOT gross income limits.  THE TOTAL ADULT HOUSEHOLD INCOME CAN BE MUCH HIGHER THAN THE “ADJUSTED” INCOME LIMITS IN THE TABLE.  Deductions are allowed for: child care (12 yr old or less) to allow employment of the adult; $480/annual for each non-applicant under age 18; $480/annual for full time student over age 18; and $400 if anyone is elderly or handicapped.  If the gross adult household income is less than the limit, you are good to go.  If the income is over the limits, use the adjustments. 

Contact me right away and let’s get you or your clients into a new home by Christmas!!!!

USDA Rural Housing Loan…….With Rates as low as 4.25%!!!

We can offer a buydown on a USDA Rural Housing loan to clients. What this means is that the first year, the rate is 4.25%, the 2nd year, it is 5.25% and the 3rd through 30th year, it is fixed at 6.25%!

 

This is done by having the seller pay for the buy down. If there is a motivated seller, they can pay points to get the rate lowered the first and second years and then fixed for the remainder of the term. This is NOT an adjustable rate mortgage; it is fixed but just has the feature of having the 1st and 2nd year lower than the remainder of the term to allow a buyer to have a lower payment at the beginning.

Because it is a rural housing loan, the buyer can finance any and all closing costs that the seller doesn’t pay which means that the funds a seller is willing to pay towards closing can be used to buy down the rate and the buyer still comes out of pocket with no money down for a true 100% financing program!

If you are a buyer and would like to take advantage of this, or if you are a seller who would like to explore this option, or if you are a Realtor® with motivated sellers for your listings, please contact me and we can discuss this program for you!

USDA Rural Housing Mortgage Eligibility Information

If you are a Realtor® with a client, or you are a prospective real estate buyer, the USDA Rural Housing loan is a great program!  It is one of the last truly “no money down” program and allows closing costs the the seller isn’t paying to be included in the loan amount!

 

 

The areas that are eligible will probably surprise you.  Their maps haven’t been revised in nearly 10 years and, as this program is based on the full-time population in an area, much of the Florida urban maps  are still considered in this program.  The maps won’t be revised until 2012, or later, so they will remain as they are today but after that time, the elibility restrictions will be tighter on location.

Feel free to contact me if you or your client is looking for financing at 100% in Florida, Alabama, Georgia, North Carolina, South Carolina or Tennessee.  We underwrite these loans in our office and can issue a prequalification within 30 minutes!

 

Florida Real Estate Foreclosures: Inflated Fact or Fiction?

Florida has gotten the reputation for being “the foreclosure capital of the nation”.  What they don’t tell you is that the basis of this “fact” is the the Lis Pendens filing, which is the first step in the foreclosure process.

A Lis Pendens is file and it can take 6, 8, 12 8, and even 24 months in some cases to actually get to foreclosure.  During this time (after the filing of the Lis Pendens and prior to the foreclosure), many of these properties are being sold (either as a short sale or a regular sale), or some of the homeowners are getting loan modifications and restructuring their mortgages or some owners are getting a deferrment of payments.  When one of these solutions occurrs, the foreclosure is stopped, thus the number of “foreclosures” in Florida is actually less than what is being reported as fact.

Another piece that is being reported incorrectly is that “there are a disproportionate number of people being left homeless in Florida” due to this “high number of foreclosures”.  In some areas of our state, over 70% of the properties on which Lis Pendens are being filed were purchased by speculators as investment properties with the sole intention of selling them fast for a profit.  The majority of these speculators are residents of other states who took advantage of exotic loan products (Ie: stated income or no doc).  As these products have gone away, so have the speculators.

Due to this distortion of the number of foreclosures in Florida, investors have tighted their guidelines concerning loan to value and property and/or occupancy type that they will finance in Florida.  Several years ago, it wasn’t uncommon for investors and banks to allow a mortgage lender or broker to secure 100% financing on a 2nd home or investment property for their clients and we are now limited to 75 – 80%.  Some investors, including Chase and Suntrust, have recently gone so far as to make the decision to get out of the condo and investment financing markets altogether in the state.  Chase has even ceased financing 2nd home properties in Florida, regardless of the property type (single-family detached, attached, condo, etc.) and are limiting primary home purchases of detached properties to 90% and of attached properties (townhomes, duplexes, etc.) to an 80% loan to value!

While the pendulum on financing properties in Florida has swung in an entirely opposite direction from where it was several years ago, there are still programs available to buyers of ALL property types in Florida and of all occupancy types (primary, 2nd home, or investment) if you work with the right lender or broker.  No matter what you may be hearing in the media, 100% financing for primary homes is alive and well (VA Mortgage, USDA Rural Housing Mortgage, Community Assistance Programs, Community Second Mortgages) and there is also an FHA Mortgage, which only requires a 3% down payment (3.5% after December 31, 2008).

With the tax advantages offered with home ownership, as well as the new tax credit created with the signing of HR3221 for up to $7,500 for those individuals who haven’t owned a home in the last 3 years, now is an advantageous time to buy and get the benefits of these tax credits/deductions.  Interest rates are still low and purchase prices have dropped.  Florida residents who are considering buying a primary home and keeping it for a long time (over 4 years) should jump in with both feet.  BUY NOW OR KICK YOURSELF LATER!

 

What a Difference a Week Makes! Why it is SO AWESOME owning real estate in Florida

Last weekened, we were on the edge of Hurricane Gustav; this week, it was a beautiful weekend.  While everybody knows that the real estate market nationally is down, and it is here, as well, the prices in our local market make buying real estate in Florida a great investment!

We have something that makes us different than say, Kansas or Oklahoma, or most of the rest of the U.S……a GORGEOUS COASTLINE!  Here in the Destin/Ft. Walton Beach area, our sand truly looks like snow.  It isn’t too hot to walk on like the Atlantic seaboard, and it even squeaks when you walk. And the water?  Simply AMAZING!  Today, we saw about 20 dolphins, and for a few minutes even had a show worthy of Seaworld with the jumping they were doing.  The color of the water is something that you can’t believe until you see it, but there’s a reason this is called the “Emerald Coast”!  It is a great place to vacation and an even better place to live.  I didn’t have a great day yesterday so I took today to go to the beach and relax and that’s where I took this picture (yes, I used sunscreen!)   It’s the same pier as in the blog from last week about Hurricane Gustav.  What a difference a week makes??

In our area (the Panhandle), we have the best of both worlds – a great resort area with awesome beaches that are easily accessible and certainly not over-crowded, especially at this time of the year, and a “small town” feel, as well.

There is a true sense of community here.  We have 3 military installations very close (Hurlburt Field, Eglin AFB, and Duke Field), we’re within driving distance of Biloxi, MS, (approx. 2 hours), New Orleans (approx. 3-1/2 hours), and Atlanta (5-1/2 hours).  There is a new international airport being constructed in Bay County, and football is KING in the Fall!

I love living in a place where you can go to a high school football game on Friday night and the temperature is comfortable, then drive to see the Florida State Seminoles play on Saturday,  and then go to the beach and spend the day Sunday and get a tan!  We have world-class restaurants and shopping in Destin and the Sandestin/Santa Rosa Beach area, lots of saltwalter and freshwater fishing, and we still have that small town feel that makes living here an experience that most only get to dream of!

I can’t imagine living anywhere else and I am quite certain that our market will come back and our real estate will ALWAYS be valuable just becuase of where it is located!