This has been a week of big stories and interesting changes within the Financial Industry and overall economy of the United States. Here are some links to articles regarding these stories.
JP Morgan takeover of Bear Stearns for $2/share.
Fed cuts Overnight Lending Rate to Banks by 3/4 Point.
Mortgage Rates (30 YR Fixed) hold steady despite cut.
Stocks are Rallying Today.
Obviously, it has been a week of newsworthy items. From takeovers to Federal Reserve Rate cuts, we continue to see the country and its leaders fight to stave off a Recession. But we need to keep our eye on a few items: Unemployment, Job Growth Rates, Consumer Confidence/Spending, and inflationary concerns. Still a tough road ahead.
The mortgage industry continues to see a tightening due to mortgage backed securities losses and the "credit crunch" that is largely affecting the ability of borrowers to obtain new loans or refinance old ones. Tomorrow, I will discuss the upcoming changes to Fannie Mae's guidelines that will affect interest rates for customer's based on credit score, as well as discuss PMI (one mortgage insurance company) and their response to the Stimulus Package.
Make it a great Thursday.
Thursday, March 20, 2008
Thursday, March 13, 2008
FHA and the FED
Over the last month or so lenders have continued to tighten and remove loan programs that were once available. This is mostly due to the lack of liquidity within their own portfolio. They no longer have the resources to fund deals that aren't "A" paper deals (which means good credit, adequate reserves, significant down payment, etc.). This has caused most investors/lenders to reduce the amount they will lend on purchases and refinances. Programs aren't available without a 5% cash contribution for purchases and upwards up 10-15% in value on refinances. In addition, Mortgage Insurance companies are too reeling from the credit and housing crisis. Some have put a cap on how high they will allow LTV/CLTV to go for coverage. In AZ the cap is at 90% (though some exceptions can be made - it is a difficult process). Add to all this that rates are about .375%-.50% higher than they were 30 days ago and the plot continues to thicken.
The above may sound bad but in reality it is a switch for the better. People that can afford homes and have adequate resources are getting into great loan programs that will help them for years to come. Lenders and Investors are not just thinking about the money they are thinking about the borrower and making the best decision for their company as well as the borrower. Though it isn't always easy, it is necessary.
Two newsworthy events occurred within the last 10 days. The first is in regards to FHA. In Maricopa County, the loan limit was raised from $263,500 to $346,250. The second was in regards to the Federal Reserve. "The Fed said it will make $200 billion available to financial institutions in an effort to ease a crisis of confidence that is making it harder for families and businesses to borrow money" (Tomoeh Murakami/Washington Post). What does this mean for borrowers?
FHA Change to $346,250.00
1) LESS DOWN PAYMENT/CASH TO CLOSE: FHA loans allow for at least a minimum contribution of 3%. (In light of most programs outside FHA, currently requiring a 5%contribution).
2) CREDIT ISSUES: If there are some deragatory issues on your credit, you still may qualify for FHA based on your DTI ratios and Income Stability.
3) REFINANCES: For those borrowers that have ARM's that may be adjusting, if your loan is less than this amount you may be able to refinance up to a higher LTV if your home's value was hit by the recent market turndown.
FEDERAL RESERVE INFLUX OF $200 BILLION
1) INCREASES LIQUIDITY WITH LENDERS/INVESTORS: It is no secret that Mortgage Companies and Banks were hit by this recent change in home values. The companies lost so much money that there is very little room to offer products that may cost the companies more money. They have become safe and so in turn it becomes more difficult to find a decent program with little cash requirement. This extra liquidity may give some companies the opportunity to loosen their standards.
See: http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030701225_2.html?sid=ST2008030800132
We may not know how all of this will eventually shake out but we do know that relief in some form may be available. That is good news. Keep your eyes and ears open for more updates down the line. Make it a great day.
The above may sound bad but in reality it is a switch for the better. People that can afford homes and have adequate resources are getting into great loan programs that will help them for years to come. Lenders and Investors are not just thinking about the money they are thinking about the borrower and making the best decision for their company as well as the borrower. Though it isn't always easy, it is necessary.
Two newsworthy events occurred within the last 10 days. The first is in regards to FHA. In Maricopa County, the loan limit was raised from $263,500 to $346,250. The second was in regards to the Federal Reserve. "The Fed said it will make $200 billion available to financial institutions in an effort to ease a crisis of confidence that is making it harder for families and businesses to borrow money" (Tomoeh Murakami/Washington Post). What does this mean for borrowers?
FHA Change to $346,250.00
1) LESS DOWN PAYMENT/CASH TO CLOSE: FHA loans allow for at least a minimum contribution of 3%. (In light of most programs outside FHA, currently requiring a 5%contribution).
2) CREDIT ISSUES: If there are some deragatory issues on your credit, you still may qualify for FHA based on your DTI ratios and Income Stability.
3) REFINANCES: For those borrowers that have ARM's that may be adjusting, if your loan is less than this amount you may be able to refinance up to a higher LTV if your home's value was hit by the recent market turndown.
FEDERAL RESERVE INFLUX OF $200 BILLION
1) INCREASES LIQUIDITY WITH LENDERS/INVESTORS: It is no secret that Mortgage Companies and Banks were hit by this recent change in home values. The companies lost so much money that there is very little room to offer products that may cost the companies more money. They have become safe and so in turn it becomes more difficult to find a decent program with little cash requirement. This extra liquidity may give some companies the opportunity to loosen their standards.
See: http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030701225_2.html?sid=ST2008030800132
We may not know how all of this will eventually shake out but we do know that relief in some form may be available. That is good news. Keep your eyes and ears open for more updates down the line. Make it a great day.
Friday, March 7, 2008
Application
In order to begin the actual process, it is necessary to complete a loan application. The form is called a 1003 - Uniform Residential Loan Application. It can take anywhere from 30 minutes to an hour or more depending on the amount of information that you will be providing to the Loan Originator. (By that I mean- the more accounts you have, income sources, real estate holdings etc. the longer it may take to complete)
In today's age of technology, Loan Originator's have access to software that allow us to input your information into the system and pull credit as well as run Automated Underwriting all while taking a phone application. It is convenient and provides almost instant feedback to the customer if they are willing to spend the time with the LO.
The application doesn't lock you into any programs or interest rates, its purpose is to show intent on your part to complete the loan process with the LO and to provide the LO with the ability to make a sound credit decision on your behalf. Normally, a fee is associated with taking a pre-approval and/or application. The fee is to cover the costs of pulling credit, running AUS, etc. It in no way provides the LO with any income. If they are charging you more than $25-$50 and you haven't decided on a program or agreed to an appraisal then be careful (they may be taking you for a ride). However, once a loan program is agreed upon and the initial disclosures are signed the fee may be higher. Again it allows us to cover the costs of the appraisal, credit, AUS, and is credited back to the borrower at closing.
For example: If there is a solid deal in the works, then I may charge $350 to get the ball rolling. This is a good faith payment from you that you are willing to do the loan with me and that I can go ahead and order the appraisal. If you are specifically asking for a pre-qualification/pre-approval for the purchase of a new home then I will more than likely collect the $50 fee and when you are ready to go collect the remainder of the upfront fee for the application.
In a nutshell, you will be asked about income, debts, assets, credit history, schooling, dependents, social security number, address, job, race, nationality, real estate, and much more. This will provide a solid base and give the LO the chance to provide a sound credit decision with regards to your file. There are two fees, either pre-qualification/pre-approval or an application fee.
Once you are ready then the next step begins, deciding on the program and terms. Stay tuned for more information next week on programs and terms.
Have a safe and wonderful weekend.
In today's age of technology, Loan Originator's have access to software that allow us to input your information into the system and pull credit as well as run Automated Underwriting all while taking a phone application. It is convenient and provides almost instant feedback to the customer if they are willing to spend the time with the LO.
The application doesn't lock you into any programs or interest rates, its purpose is to show intent on your part to complete the loan process with the LO and to provide the LO with the ability to make a sound credit decision on your behalf. Normally, a fee is associated with taking a pre-approval and/or application. The fee is to cover the costs of pulling credit, running AUS, etc. It in no way provides the LO with any income. If they are charging you more than $25-$50 and you haven't decided on a program or agreed to an appraisal then be careful (they may be taking you for a ride). However, once a loan program is agreed upon and the initial disclosures are signed the fee may be higher. Again it allows us to cover the costs of the appraisal, credit, AUS, and is credited back to the borrower at closing.
For example: If there is a solid deal in the works, then I may charge $350 to get the ball rolling. This is a good faith payment from you that you are willing to do the loan with me and that I can go ahead and order the appraisal. If you are specifically asking for a pre-qualification/pre-approval for the purchase of a new home then I will more than likely collect the $50 fee and when you are ready to go collect the remainder of the upfront fee for the application.
In a nutshell, you will be asked about income, debts, assets, credit history, schooling, dependents, social security number, address, job, race, nationality, real estate, and much more. This will provide a solid base and give the LO the chance to provide a sound credit decision with regards to your file. There are two fees, either pre-qualification/pre-approval or an application fee.
Once you are ready then the next step begins, deciding on the program and terms. Stay tuned for more information next week on programs and terms.
Have a safe and wonderful weekend.
Subscribe to:
Posts (Atom)
Active Rain Site
You can find great local Scottsdale, Arizona real estate information on Localism.com Eric Murrietta is a proud member of the ActiveRain Real Estate Network, a free online community to help real estate professionals grow their business.