Multiple Mortgages

According to Fannie Mae and Freddie Mac rules, you are maxed at 4 financed properties. If you own a fifth, you will not get financing from a Fannie Mae and Freddie Mac direct seller. That does not mean you cannot get financing for a fifth, or additional property. What it means, is that you have to find a lender that offers portfolio products. Portfolio products are loans that they lend their own money on, and possibly also service. Since the bank is lending their own money, they can be a little more flexible on the guidelines when it comes to the number of maximum properties.

Lenders with portfolio products may offer rates a little higher, and different adjustments and hits to the rate, based on LTV, FICO and terms, just like Fannie and Freddie.

Also, on cash out refis, the owner must have owned the home for at least 6 months.
Please check with you loan officer about the properties with high loan-to-values and secondary financing. There are tighter restrictions on them, and therefore, Freddie and Fannie may not be an option, in those situations.

Another point to keep in mind, it applies to 4 properties, NOT 4 mortgages. If you own 4 properties, 1 primary residence and 3 investments, and each home has 2 mortgages, that will still be considered having 4 financed properties.

Sr. Mortgage Broker
Fairfax, VA Homes

New GFE and HUD-1

As of the first of the year, there are new regulations from RESPA. RESPA has created a new Good Faith Estimate and a new HUD. They were created to try and protect the consumer more. I am in full support of protecting the consumer and educating them. The issue is, these forms are not conforming. Banks are asking for different forms or additional forms, thus making the process more complicated than simple. Also, there is a lot of confusion from the governing agencies, the lending banks and the brokers. The idea behind it, is good, the process is showing to be mediocre. Even though regulatory and government agencies brag about how they are helping the consumer, it actually may end up costing the consumer, because of delays, problems with locking rates in, and even more confusion.

Some of the issues that have come up are; the proper disclosure of yield spread premiun for brokers, the true cost for the borrowers, and the pass-thru fees.

I believe down the road, things could show a benefit, but there needs to be a conforming process, so all parties involved can be on the same page, and receive the same training.

We have gone from a market-place with very little regulation, to a market with over-the-top regulation. I am in favor of the regulation, because I strongly believe it gets rid of the individuals who do not belong in the industry.

MD Sr. Mortgage Broker
Fairfax, VA Homes

Buying a Condo? Lenders now requiring HO-6 coverage

This is for new condo buyers. Previously only some condo owners bought renters insurance. Renters insurance is to cover the contents of your property, and its actually very affordable. The condo fee payment you make every month covers the structure, the maintance of the building and the amenities.

Previously banks did not require renters insurance or HO-6 (as the insurance companies call it), for your condo purchase or refi. The change you will see, is that banks are now requring HO-6 coverage to be approved for your condo purchase. The policy is usually a couple of hundred dollars a year. Most banks will let you pay for it at settlement, and then you get billed for it annually.

It has always been a great idea to have, but now you will see it as a requirement, not an option. Most insurance carriers can give you a quote without seeing an appraisal. They usually generate that from baisc information about the property and the loan amount. This will apply to all condos, no matter which loan product you use.

Alex Echeandia Sr. Mortgage Broker, 301-881-8900 x208
Fairfax County Homes

House approves HR 4173!

This Bill was passed in the House and now will go to the Senate for their approval. 4173 proposes multiple changes. First is an increased in cunsumer protections, by creating the CFPA, Consumer Financial Protrection Agency. Secondly would be to end taxpayer bailout for large financial firms. Thirdly would be to let the SEC rein more power in to protect investors from people like Madoff and firms like Stanford Financial.

It will also outlaw any predatory mortgage lending practices. It would make the process for mortgage lending to show a true benefit to the borrowers while ensuring the borrowers ability to repay the loan. This legislation outlaws alot of the practices that were prevelant in the subprime boom.

Sr Mortgage Broker
Fairfax Homes

Down Payment Sources

Since it’s is very rare to find 100% financing, almost everyone needs a down payment. The exceptions are; VA and USDA loans. Assuming you do not qualify for one of those, you will need at least 3.5% for a down payment, to qualify for an FHA loan. One source that some people overlook is the Roth IRA. The Roth is a retirement plan where you make after-tax contributions. Since you have already paid taxes on that money, you can withdraw the amount you contributed to use for the purchase of the home. There will be no tax penalties or fines, as long as you do not withdraw any of the gains. I will always check with my CPA to make sure your personal financial situation does not have anything unique that might cause a issue down the road.

Having the ability to use your Roth plan, may help minimize your cash assets for your purchase. You may need those cash assets for other expenses related to the purchase; furnishing, appliances, painting/floors, etc.

Another option you may look at is 401k employer plans. Some employer plans have the option to make a loan against the 401k. Most plans let you borrow up to 50% of the current value, and have a determined repayment time period. They usually charge a low interest, and that goes back into your plans. Please check on the different loans, because I know of at least 1 plan that offers 2 different loans; A personal loan and a loan for a home purchase. The loan for a home purchase offers you a longer repayment period. Also, please be aware that the amount that is being repaid will be deducted directly from your paycheck, and therefore, your income will have to be adjusted for qualifying purposes.

Sr Mortgage Broker
Fairfax County Homes

Rate and Market Update

Even though the market has been somewhat crazy this week, and there have been bad auctions in the market, believe it or not, rates are still super low. 30 year conventional is under 5%, and FHA loans are also under 5%. Jumbo loans for conventional and FHA financing are at 5% or a little above it. These rates are still very super low!! There is alt of talk in the market place that FHA may increase the down payment from 3.5% to 5%, and the tougher guidelines, and additional requirements. A lot of it, so far, is talk. I try to update the actual changes. Even though it may be tougher to get loans approved, it is hard to pass up on these rates, especially if you are betting they get lower. If you are wrong, you cold pass the opportunity to saves thousands of dollars in the coming years. We are still waiting to hear if the temporary loan limits will be extended for 2010. Also, the tax Credit for 8k First Time Home Buyers has been extended until 04/30/2010. In addition there is a $6500 tax credit for home owners who have been in there house for 5 years and are upgrading.

I know this is a dreaded term, but ARMs are actually record lows! I not saying they are for everyone, but in certain situations, they can be a real benefit for borrowers. 5 year ARMs are a little under 4%! If someone is a first time home buyer, and is not expecting to live in the home for too long for either personal or job related reasons, taking advantage of that super low payment, can be a huge savings or allow him to borrow more money to find his dream home. I am not telling people to over extend themselves, because that is what happen a few years ago. Again, on certain situations, that can really provide a true benefit to the borrower, ARMs can be a helpful program.

DC Metro Sr Mortgage Broker
VA specialist

Condos

Condos

There have been and they are going to be more changes to the condo financing market. First FHA was going to take away the spot-on approvals, and then it decided it was not going to do it, now they are back to getting rid of it. If you are a prospective condo buyer, the best thing you can do for yourself, is check to see if it is FHA approved. You can do that by going to this link, https://entp.hud.gov/idapp/html/condlook.cfm.

It is easy; either enter the name of the condo project or the city and state, and click on “submit”. If it is not, it will be difficult to get thru FHA as a spot on approval. I few weeks ago I mention that the spot-on approval was a great alternative for non-FHA approved condos. That is not the case anymore. I know it seems quick, but trust me, in this market, guidelines are changing daily. The biggest issue you will run into is that the banks that say they can do a spot-on approval will require a condo cert completed. The one question that causes problem is, they want to know how may units are insured by FHA. Since it is not approved, FHA does not keep track of those statistics, and you will have to rely on the condo management company. They do not track that information, and your option will be to do a property search for each unit to see what type of loan they have. If the project is 4, 6 or 10 units, it’s doable. If you are working with a project that has 400 condos, it is not feasible. Your next best option is a conventional loan with MI. That will probably max you at 90 loan-to-value. More changes are coming on 12/07/09 and also in January, please stay tune.

DC Metro Area, Sr. Mortgage Broker
Fairfax County Homes