Monthly Archives: April 2012
Right now, the housing market has some of the lowest mortgage payments seen in over 40 years. In most cases, it is cheaper for individuals to pay a mortgage than to pay rent. With renting being in demand, you can only imagine how much the prices have increased.
Right now the house prices are the lowest they have been since 2002 according to CNN Money.com.
Homebuyers are getting such an incredible amount of house for little money compared to a few years ago.
For example, if you put 20% down on a $200,000 home, your estimated monthly mortgage payment could be around $763. That’s incredible compared to paying rent for a one bedroom apartment that can cost about $1,000 a month.
Here is another example for individuals that can only afford to put 3.5% down. If you put 3.5% down on an $180,000 home, your estimated monthly mortgage payment could be around $880. That is still a better deal than what you would be paying in rent.
If credit is an issue, start buckling down and fixing your credit so you can buy within the next year or so. Read our previous blog about what negatively affects your credit score.
We say it all the time, but this is truly the buyer’s market. You as the buyer, have so much buying power, and should not miss out or wait for a better opportunity to arise, because it most likely won’t. This is an amazing time to buy for investors, first time homebuyers, and anyone else that is looking to purchase a home. The housing market has the biggest deal of all right now.
With the new guidelines, the Upfront Mortgage Insurance Premium (UFMIP) will be dropping to only .01 percent for FHA Streamlines. This is great news because recently FHA just increased their UFMIP to 1.75 percent for new purchases. The annual mortgage insurance is currently at 1.25 percent, but for the FHA Streamlines this will be reduced to only .55 percent.
FHA Streamlines are a great way to help homeowners simply lower their monthly payment, but many have refused to refinance because of the increased mortgage insurance premiums. However, with this new set of guidelines, many more households will benefit and be able to reduce their monthly payments and interest rates.
It is estimated that 2-3 million FHA borrowers will benefit from this program.
What is required to refinance using the new FHA Streamline?
No employment verification required for FHA Streamlines
No income verification required for FHA Streamlines
No new appraisal required for FHA Streamlines
The FHA Streamline is one of the smoothest and easiest refinance transactions that you could apply for. To be eligible for the FHA Streamline, your loan must have been originated prior to June 1, 2009. You must also have an FHA loan as well as be current on your mortgage payments.
What will you save?
The amount that one will save on their monthly mortgage payment will vary per loan. We have clients that have lowered their monthly payment by $300 using the current FHA Streamline. The savings with the new streamline this June could possibly be the same or greater. That’s a savings of $3,600 a year!
Here’s an example from HUD.gov:
Reduction in Fees Could Save the Typical Borrower About a Thousand Dollars a Year – On Top of Savings from Refinancing
Consider a typical FHA borrower with $175,000 outstanding on their mortgage. Currently, if this borrower refinanced into a 4% loan, they could reduce their monthly payments to nearly $1,010 a month, including both the upfront and monthly mortgage insurance premiums.
With lower mortgage insurance premiums, this borrower could reduce their total monthly payments to about $915 per month. That means nearly $100 in additional savings per month for an FHA borrower – on top of the savings they would receive from refinancing to a lower interest rate.
Who is offering the FHA Streamline?
You can refinance using the FHA Streamline with any lender of your choosing. You do not need to refinance with your current lender. Stateline Funding Corp. is a California lender that offers this program.
**Not all guidelines have been published regarding the FHA Streamline. Information and guidelines have the potential to change. Any changes that occur will be updated once released to the public.
Consumers are never really sure what will negatively and positively affect their credit score. Even more so, consumers may have assumptions of what they think positively and negatively affect their credit, and can be totally off base. Here’s brief information to help you better understand what can hurt your credit score.
Inquiries on your credit report are counted for 2 years. The inquiries affect your credit for up to 1 year. You want to make sure you are not allowing any and every company to run your credit unless need be, such as applying for a loan.
Try to avoid applying for multiple credit cards. You do not need 10 credit cards. These just add inquiries to your credit score, and if not managed properly they can actually harm you later if you aren’t making payments, or are maxing out your limit.
Renting A Car Using Debit Cards
You may wonder how renting a car can affect your credit. Well, for those who rent a car using a debit card, you run the risk of the company pulling your credit. According to a CNN Money video, rental companies have the ability to run your credit if you use a debit card, and therefore cause an inquiry on your account.
Maxing Out Credit Cards
Missing monthly payments and maxing out credit cards will both negatively affect your credit score and bring it down.
When given a line of credit, you need to show responsibility and pay the credit back in a timely manner. Maxing out credit cards shows irresponsibility in managing credit, and therefore will hurt your credit score. Also, missing payments will harm your score.
Managing credit is especially important when trying to purchase a home. Credit scores generally need to be above 640, some cases it is 620. Getting your credit under control and creating a strong profile will help you qualify for a home loan.
The long awaited $26 billion mortgage settlement has been approved. This means that there will be foreclosures released to the market that have been in limbo for months and some even several years. This settlement is expected to speed up the foreclosure process by creating stricter guidelines.
For months, and some even years, delinquent homeowners have been squatting in their home without making a single mortgage payment. Due to the issue with robo signing, many foreclosures were placed on hold, and allowed delinquent homeowners to live payment free.
According to CNN Money article, the average time it has been taking to foreclose on a home is 370 days, which is almost double the typical length it took to foreclose a home five years ago.
There are homeowners who have been squatting in their home for up to three years. However, once this settlement is released, these homes will be released as new foreclosures.
The down fall of this foreclosure wave, is the possibility and likeliness of decreased home prices again.
According to the chief economist, Stan Humphries, for the listing website Zillow, he is predicting that home prices will drop another 3.7% and reach the bottom by early 2013.
Now, banks are determined to turn foreclosures around and get the properties off the market as quickly as possible. In earlier posts we discussed the possibility of investors purchasing foreclosures and quickly turning them into rental properties in order to help with home prices.
As of now, we cannot accurately predict how the foreclosure wave will affect home prices and our housing market, but we can be prepared for this shift and know we will come out of this in due time.
What are the tips and tricks to obtaining the lowest rate possible when refinancing? Well to be honest, you won’t find any. In order to obtain the lowest and best interest rate possible when refinancing, you need to work with a certified mortgage planning specialist.
What is a certified mortgage planning specialist? A certified mortgage planning specialist is someone who has training in the following areas:
- Financial Market and Interest Rate Analysis
- Cash Flow & Debt Analysis
- Real Estate Investment Planning
- Mortgage & Real Estate Taxation
- Ethics and Compliance
The key training that a mortgage professional has when helping you receive a low-interest rate, is the training to be able to analyze the market in order to understand how and why interest rates are continually changing.
So often, consumers shop around looking for the best interest rate, and do not understand why they are receiving so many different quotes from different lenders. What many consumers don’t understand is how interest rates fluctuate and what causes them to change on a daily, even hourly basis.
With a certified mortgage planning specialist, you can be certain that he or she will lock your rate at the opportune time to ensure the best outcome occurs.
We have created a brief four-minute video that will explain what a certified mortgage planning specialist will be able to monitor, such as Stateline Funding Corporation, when it comes to finding the right interest rate for you.
The $26 billion settlement started this pressure on the agencies when the settlement was going to reduce principal balances for 1 million borrowers whose loans weren’t backed by Fannie Mae or Freddie Mac.
Up to now, DeMarco, the director of the agencies, has been against the principal reduction for their loans. His reasoning is to protect the tax payers’ interests in order to avoid another bailout.
DeMarco has also been against principal reduction because there are other alternatives to helping homeowners with underwater mortgages that are just as effective. These alternatives include adjusting monthly payments or forbearing principal, which means only the interest would be being paid, and nothing towards the principal.
The problem with principal reduction is that is does not benefit the responsible homeowners who have continually made their monthly payments. According to a CNNMoney article, Fannie and Freddie have about 3 million loans that are seriously underwater; however, three-quarters would not qualify for the principal reduction because they have been current on their payments.
Those that would qualify to have their principal reduced would have to stop making their monthly payments in order to do a modification. This is a reason why DeMarco does not want to reduce the principal of loans that Fannie Mae and Freddie Mac own. He doesn’t want to encourage homeowners to stop paying their mortgages.
In relation to the borrowers who are current on their mortgages, DeMarco stated,
“These borrowers are demonstrating a continued willingness to meet their mortgage obligations…This should be recognized and encouraged, not dampened with incentives for people to not continue paying.”
If the principal reduction for the Fannie Mae and Freddie Mac loans gets approved, it would be paid for with tax payer’s money.
With the HARP II program under way, we have come across some misleading information that is being given to consumers from other companies. We want to clarify any information that has been given regarding the HARP II program, and make sure you are fully aware of what the HARP II program entails.
However, there are lenders that are misinforming consumers and providing inaccurate information. For example, we have people approved under our HARP II program that have actually been denied by their own lenders.
Lenders are saying they offer the HARP II program, but it’s the original version of the HARP program known as DU Refi Plus.
DU Refi Plus has equity restrictions. With the HARP II program, there are no equity restrictions. You can refinance your loan no matter how much you owe, and no matter what the current value is. Consumers need to be aware that the HARP II program is the newest version of the DU Refi Plus program.
Du Refi Plus requires an appraisal. With the HARP II Program, an appraisal waiver is received if an accurate home value is input during the DU Approval.
Du Refi Plus has lower debt to income ratio requirements. The debt ratio requirement is 45%.
With HARP II, the debt ratio can go up to 60% depending on the strength of your file.
If you haven’t noticed, HARP II is separate from the actual DU Refi Plus program. We want consumers to be aware of what is being offered by other lenders. Not all banks are offering unlimited loan to value loans as well. So before you move forward in any process, make sure you are fully aware of the loan program you are being offered. As always, you can contact our company, Stateline Funding Corporation, and we will gladly discuss your options regarding the HARP II refinance program.
Why is spring the time to buy? Right now home prices are low, extremely low! It’s actually crazy the amount of home one can purchase, in comparison to 2006 before the crash. Buyers have such power right now in this market, and should choose to take advantage of it.
The interest rates are low, which increase buyers’ power even more. Low interest rates help keep your monthly house payment low as well.
The spring and summer are the busiest times for real estate purchases. According to Forbes, “April, May, June and July account for more than 40% of all housing transactions annually, in large part thanks to weather.”
The demand for buying has increased, which has actually lowered the amount of inventory on the market by 19% in comparison to last year’s inventory levels.
Buyers should not be on the fence about jumping into the market and purchasing a home. Prices are low, and if you are waiting for prices to get lower, then you are playing with fire. While waiting for prices to drop further, you could risk interest rates increasing. We have a brief video from a while back that explains how those two situations affect your buying power.
There is also a rising trend of confidence in the housing market. Home builders are already signing contracts to start building new homes again. This shows an improvement in the housing market, and that we are rising out.
What makes spring the best time to purchase a home? There are a few reasons why.
In warmer weather, buyers are more willing to look at houses and go shopping. It’s not fun to browse homes in the rainy, cold weather. When the sun comes out, so do the buyers.
New foreclosure sales will be released on the market that had been delayed. We may also see more short sales and bank owned properties become available. Investors have been purchasing a good portion of these homes using cash, approximately 30% of the available inventory.
Improving Job Market
When the job market is doing well, it in turn benefits the housing market. Each one affects the other. When the job market does bad, that’s when we see spiral down turns. But it seems we are rising above that.
So yes, spring is a great time to purchase a home! Get ahead of the other home buyers and take advantage of the inventory available.