What’s New on the Mortgage Front?

From low down payment options for first-time buyers to jumbo loan options for move-up purchases, find out what lenders are offering buyers today.

September 2014 | By G.M. Filisko

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Buyers’ loan options may have changed more than you may realize. Restrictive lending requirements since the Great Recession are starting to loosen up, and lenders are offering more flexible financing options for borrowers. Here’s a reference guide of new products (as of mid-September 2014) that you can recommend to new buyers, move-up clients, and home owners who want to refinance. But always advise your clients to check with lenders or mortgage brokers for the latest terms and conditions of any loan product.

** Bear in mind that this is only a small sampling of what is going on in the mortgage market. If you are looking for more information on a different mortgage product, contact me. My info is at the end of the article.

Chase Mortgage Banking	Chase’s DreaMaker loan is geared for low- to moderate-income borrowers, including first-timers, says Jim Manelis, senior vice president in Phoenix. Funds are available for up to 95 percent of the home’s value, and there’s no upfront private mortgage insurance. Unlike FHA loans, interest rates don’t increase or decrease based on borrowers’ FICO score, and borrowers can cancel PMI when they get to an 80 percent loan-to-value ratio. “In some cases, we think this is cheaper than an FHA loan,” says Manelis. In late September, Chase will introduce fixed-rate and adjustable jumbo loans with a maximum 85 percent LTV. Maximum loan amounts will be $1.5 million with a minimum 740 FICO score. Chase will also offer fixed and adjustable jumbo loans with 80 percent LTV. Maximum loan amounts are $2 million; these also require a 740 minimum FICO score. Chase is also expanding its loans for nonowner-occupied properties in late September. Post-recession, it offered only 15-year amortization; 30-year amortization will now be available. It’s also expanding these loans to states it had previously not offered them following the recession, including Arizona, California, Nevada, Oregon, and Washington. Though not at the volume it reached before the recession, Manelis says Chase is also seeing its home equity business warm up. “As values come back, to finance home-improvement projects or fund kids going to college, our volumes are way up.”
Guaranteed Rate	“We’re seeing the reemergence of lower down payments needed in the jumbo market,” reports Dan Gjeldum, Chicago-based senior vice president Guaranteed Rate is offering 80-10-10 jumbo loans of up to $1 million, in which borrowers put 10 percent down and then do a first mortgage of 80 percent of the home’s value coupled with a second mortgage for the remaining 10 percent. Borrowers need a minimum 720 FICO score and will pay about 1/8 percent more on their interest rate than if they’d have put 20 percent down. The caveat: Documentation for these jumbo loans can get a little heavy for self-employed borrowers. Assume a borrower’s income tax return may show income from a company she owned in 2013 but not in 2014 because the entity was dissolved. The underwriter will now ask for corporate dissolution records.
HomeTrust Mortgage Corp.	The down payment is the main barrier millennials face to home ownership, says Evan Geiselhart, the Schaumburg, Ill.–based company’s CEO. HomeTrust is marketing what it calls a launch loan. Borrowers need a job and a minimum credit score of 660. They need at least 5 percent down, but that entire amount can be a gift. In exchange for paying no monthly PMI, borrowers will pay a higher interest rate, typically 1/8 percent or 1/4 percent higher. HomeTrust Mortgage is also offering asset-based adjustable mortgages for borrowers with a FICO score of at least 680 who have substantial assets but not necessarily adequate income to qualify for a mortgage. Perhaps retirees have $400,000 invested in the stock market. HomeTrust will take 70 percent of those invested assets—but not amounts in checking or savings accounts—and divide that number by 60 to arrive at an income it imputes to the borrowers. That income, plus any actual monthly income, allows borrowers to qualify without drawing from or pledging the asset.
Quicken Loans	“People still think they need 20 percent down,” says Bill Banfield, vice president of the Detroit-based lender. Not true. Quicken’s offering loans for borrowers who put only 5 percent down and allowing them to pay a one-time fee or a slightly higher interest rate to avoid monthly PMI. Borrowers need a 680 or higher FICO score. If interest rates rise, Banfield says assumable loans may become a valuable marketing tool for home owners whose loans are assumable. FHA and some VA loans are assumable, he notes, as are conventional ARMs after they adjust. They typically require buyers to requalify for the loan on their own, just as they would with any mortgage. In addition, buyers would be required to replace any equity the seller has in the home. Assume the home’s value is $200,000, and the owners’ current mortgage is $160,000. Buyers looking to step into the owners’ mortgage would have to come up with $40,000.
Wells Fargo	In hot markets where buyers may be forced to make an all-cash offer just to push their bid to the top of the multiple-offer heap — think San Francisco, Manhattan, Washington, D.C., Los Angeles — they can apply for a Wells Fargo jumbo purchase loan within 90 days of the closing, says Joe Rogers, executive vice president in Columbia, Md. Technically that would be considered a refinance situation because the consumer already owns the home, and terms are less favorable for refis than for purchase loans. However, Wells Fargo will treat it as a purchase loan. Minimum loan amounts are $417,000, and the maximum is $6 million. Wells Fargo is also offering borrowers the opportunity to lower their monthly payments by slapping down a chunk of money. Typically, that lowers only the principal amount of the loan; the monthly payment remains unchanged. However, Wells Fargo will recast the loan to lower the monthly payment for borrowers who make a one-time payment of at least $20,000.   QUESTIONS ABOUT MORTGAGES? Contact me directly: Paula Allin – HomeSmart Professionals 401-241-2976 / PaulaSoldit@cox.net http://www.PaulaAllinRealEstate.com

The Real Estate Commission Explained

The real estate commission is the agent’s fee for service. It is a percent of the sale price negotiated at the time of the listing. Every seller has the right to negotiate the commission, just as every agent as the option to hold fast to their fee.

Full-service agents charge more than fee-based, or flat-fee, agents. Know what you expect and want from your agent before attempting to discount the commission.

Agents with an in-depth knowledge of the market, a team of associates and assistants, a full marketing plan and a syndicated listing schedule will always charge more than an agent who merely adds your house to the MLS and wishes you luck with your sale.

The Real Estate Commission Explained photo

In traditional home sales, sellers always pay the commission—but there are exceptions. Auctions usually charge buyers a 5% “premium”, or commission, for instance.

There is a tendency by some buyers to think they can negotiate the commission to get a better price for the home. They cannot. The listing agreement specifies the commission. It is a contract between the seller and the brokerage. It details the terms under which a commission is paid and the total commission to be paid.

Based on the type of listing agreement the seller agrees to—Exclusive, Variable, Non-Exclusive—the commission can change. For instance, in a variable-listing agreement, the agent could make more or less depending on who represents the buyer or who procures the buyer. Again, the seller specifies this up front.

The buyer, therefore, can only negotiate the purchase price and terms of the sale, with the seller’s agreement. The buyer’s agent is paid by the seller, because the listing agent is sharing a percentage of the commission. Sharing the commission is called cooperating, or a co-op commission.

And remember, the real estate commission—along with most costs associated with buying and selling a home—is tax deductible.

The graphic, above, shows the average split between cooperating brokers and the fees that the brokerage charges to the agent for the “benefit” of using their name.

Have Questions regarding Brokerage, Listing agreements or Buyers ability to negotiate?
Contact me directly:
Paula Allin
HomeSmart Professionals Real Estate
401-241-2976
PaulaSoldit@cox.net
http://www.PaulaAllinRealEstate.com

Want to find out what your home is worth?
Start here: http://www.paulaallinrealestate.com/sell/
Looking to start a New Home Search?
Look here: http://www.paulaallinrealestate.com/search/

The Truth About Buying a Home: You DON’T Need 20% Down

The Truth About Buying a Home: You DON’T Need 20% Down
In a recent survey, How America Views Homeownership, it was revealed that 68% of Americans feel that now is a good time to buy a home and 95%said they want to own a home if they don’t already.

Franklin Codel, head of Wells Fargo home mortgageproduction, explains:

“Although the home buying process has changed in many ways in recent years, our survey found Americans still view homeownership as an achievement to be proud of and many believe that now is a good time to buy a home.”

Confusion Creates Paralysis

However, the survey also reported that many are afraid to purchase a home because of uncertainty about “qualifying for a mortgage or navigating the home buying process”. Though 74% said they “know and understand” the financial process involved in buying a home, they also gave answers that suggest otherwise. For example:
•30% of respondents believe that only individuals with high incomes can obtain a mortgage
•64% of respondents believe they must have a “very good” credit score to buy a home
•44% believe that a 20% down payment is required

In actuality many of these beliefs are unfounded. Let’s look at the question of down payment:

Freddie Mac, in a recent blog post addressing the issue, confirmed that there is misinformation regarding the amount necessary when determining the down payment for a home purchase:

“Did you know 40 percent of today’s homebuyers using mortgage financing are making down payments that are less than 10 percent? And how about this: since 2010, the number of people putting down less than 10 percent for conventional loans has grown three fold. So, not only are low down payment options real, they represent a significant portion of today’s purchases.”

In a separate Executive Perspectives, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management explained further:
•A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
•Qualified borrowers can further reduce the down payment coming out of their own pockets to 3 percent by lining up gifts from family, grants or loans from non-profits or public agencies.

Education is the Key

Boyle talked about the importance of educating potential buyers:

“Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”

Codel agreed:

“It is important for prospective homebuyers to feel empowered to ask lenders and real estate agents questions about available options, such as down payment assistance or FHA loan programs or VA loans for veterans.”

Bottom Line

If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You may be pleasantly surprised.

Questions about the Home Buying Process?
Contact me directly:
Paula Allin
HomeSmart Professionals Real Estate
401-241-2976
PaulaSoldit@cox.net
http://www.PaulaAllinRealEstate.com

Ready to begin your New Home Search?
You can find all of the available properties in Rhode Island Here:

http://www.paulaallinrealestate.com/search/

by The KCM Crew on September 23, 2014 in For Buyers

Mortgage Rates Make Biggest Jump of the Year

Still at historically low levels (and lower than last year at this time) but may be a sign of things to come.
If you are looking, now is the time to make that move…

Daily Real Estate News | Friday, September 19, 2014

Mortgage rates were on the rise this week, with fixed-rates making the biggest one-week leap so far this year, Freddie Mac reports in its weekly mortgage market survey. Fixed-rate mortgages are now at the highest level since the week ending May 1.

More in Mortgage News:
• Emerging From the Shadows
• What’s Necessary to Bring Back First-Time Buyers…
• Get a Discount on Your Mortgage

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 18:
• 30-year fixed-rate mortgages: averaged 4.23 percent, with an average 0.5 point, rising from last week’s 4.12 percent average. Last year at this time, 30-year rates averaged 4.50 percent.
• 15-year fixed-rate mortgages: averaged 3.37 percent, with an average 0.5 point, rising from last week’s 3.26 percent average. A year ago, 15-year rates averaged 3.54 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.06 percent, with an average 0.5 point, increasing from last week’s 2.99 percent average. Last year at this time, 5-year ARMs averaged 3.11 percent.
• 1-year ARMs: averaged 2.43 percent, with an average 0.4 point, dropping from last week’s 2.45 percent average. A year ago, 1-year ARMs averaged 2.65 percent.

Source: Freddie Mac

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FSBO’s Must Be Ready to Negotiate

In a recovering market, some sellers might be tempted to try and sell their home on their own (FSBO) without using the services of a real estate professional. The real estate agent is a trained and experienced negotiator. In most cases, the seller is not. The seller must realize the ability to negotiate will determine whether they get the best deal for themselves and their family.

Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:

• The buyer who wants the best deal possible
• The buyer’s agent who solely represents the best interest of the buyer
• The buyer’s attorney (in some parts of the country)
• The home inspection companies which work for the buyer and will almost always find some problems with the house.
• The termite company if there are challenges
• The buyer’s lender if the structure of the mortgage requires the sellers’ participation
• The appraiser if there is a question of value
• The title company if there are challenges with certificates of occupancy (CO) or other permits
• The town or municipality if you need to get the COs permits mentioned above
• The buyer’s buyer in case there are challenges on the house your buyer is selling.
• Your bank in the case of a short sale

Need Help Negotiating your Home Sale? Contact me:

Paula Allin

HomeSmart Professionals Real Estate

401-241-2976/ Paulasoldit@cox.net

Set up your own New Home Search here: www.PaulaAllinRealEstate.com

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Getting A Mortgage: Why So Much Paperwork?

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably below 5%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <5%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Questions about the Mortgage Process? Contact me:

Paula Allin

HomeSmart Professionals Real Estate

401-241-2976/ Paulasoldit@cox.net

Set up your own New Home Search here: www.PaulaAllinRealEstate.com

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4 Reasons to Buy Before Winter

It’s that time of year, the seasons are changing and with them bring thoughts of the upcoming holidays, family get togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don’t have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 11.2% (most pessimistic) and 27.8% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Questions about Buying Your New Home? Contact me:

Paula Allin

HomeSmart Professionals Real Estate

401-241-2976/ Paulasoldit@cox.net

Set up your own New Home Search here: www.PaulaAllinRealEstate.com

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Mortgage Giant Opens Door for Earlier Return of Ex-Home Owners

This is Great News if you have had a Foreclosure or Short Sale in your past. The wait to buy a New Home has just gotten shorter!

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Former distressed borrowers may be able to jump back into home ownership sooner than they expected. Fannie Mae officials say the organization is overhauling its policy to change the minimum waiting period following a pre-foreclosure sale or deed-in-lieu of foreclosure, taking the standard wait-out period from seven years to four years or perhaps even shorter.

To be eligible for a new mortgage loan, Fannie requires formerly distressed borrowers to show they’ve reestablished their credit after a foreclosure, bankruptcy, preforeclosure sale, or deed-in-lieu. The standard waiting period was two years with a maximum 80 percent loan-to-value ratio and four years with a maximum 90% LTV. Standard eligibility, however, is seven years. In some cases, such as extenuating circumstances where borrowers had a prolonged reduction in income that was beyond their control, they may only have to wait two years with a maximum 90% LTV to get a new mortgage again.

Under the new policy, Fannie has removed the LTV requirements. All loans with application dates on or after Aug. 16 now will have a standard waiting period of four years, and only two years under extenuating circumstances.

For example, a borrower who had a preforeclosure sale five years ago — not due to extenuating circumstances — would be eligible for a new loan with as low as a 5 percent down payment (they would not have been eligible prior to the change in the policy unless they at least had a 10 percent down payment). Also, a borrower with a deed-in-lieu two years ago that was due to extenuating circumstances would also be eligible for a new mortgage backed by Fannie with as low as a 5 percent down payment, in which they would not have been otherwise and would have needed at least a 10 percent down payment.

Questions about the New Rules? Contact me:

Paula Allin

HomeSmart Professionals Real Estate

401-241-2976/ Paulasoldit@cox.net

Set up your own New Home Search here: www.PaulaAllinRealEstate.com

Other programs, such as the FHA’s Back to Work program, are also available to formerly distressed borrowers and are curtailing the wait times even more, to as little as 12 months following a foreclosure or short sale.

Source: “Fannie Mae Widens Credit Box for Failed Home Owners,” HousingWire (Sept. 9, 2014)

Daily Real Estate News | Wednesday, September 10, 2014

Why It Pays to Be a Home Owner

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Home owners are building net worth at a pace that is up to quadruple that of a renter.

In the past 15 years, the net worth of the typical home owner has ranged between 31 and 46 times that of the net worth of the typical renter, according to the Federal Reserve’s Survey of Consumer Finances, which is based on 2013 data.

On average, home owners had nearly $200,000 in net worth compared to the average $5,000 net worth of renters, according to the survey.

“Home owner equity is a substantial component of home owner wealth,” Danielle Hale, research economist at the National Association of REALTORS®, writes on the association’s Economists’ Outlook blog.

Questions about the Home Ownership? Contact me:

Paula Allin

HomeSmart Professionals Real Estate

401-241-2976/ Paulasoldit@cox.net

Set up your own New Home Search here: www.PaulaAllinRealEstate.com

Daily Real Estate News | Tuesday, September 09, 2014

5 Questions You Should Ask Your Real Estate Agent

Whether you are buying or selling a home, the process can be challenging. That is why we always suggest that you take on the services of a real estate professional when embarking on a potential home move. However, not all real estate agents are the same. A family must make sure they hire someone who truly understands the current housing market and, not only that, knows how to connect the dots to explain how market conditions may impact your decision.

How can you make sure you have an agent who meets these requirements?

Here are just a few questions every real estate professional should be able to answer for their clients and customers:

• Are home values approaching a new bubble or will prices continue to appreciate?
• Is it better for a first time buyer or a move-up buyer to wait until they save a bigger down payment before they purchase a home?
• Where will 30-year mortgage rates likely be in 12 months?
• Why do I need an agent when I can just as easily find the house online myself?
• Is buying a home still a good investment for my family?

Make sure you hire an agent that can answer questions like those above. That will guarantee the home buying or selling process will be much easier for you and your family.

Ask me, I can answer All of the Questions above…and then some!

Questions ? Contact me:

Paula Allin

HomeSmart Professionals Real Estate

401-241-2976/ Paulasoldit@cox.net

Set up your own New Home Search here: www.PaulaAllinRealEstate.com