26 Sep 08 
The Constant Changes to Fannie Mae Lending Guidelines
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…And the Impact to the Real Estate Market.
The Real Estate Market is in the tank, toilet, down the drain or is flat out awful.
Wall Street is reeling and the Government is jumping in and attempting to save us from all the potential problems we “could” be facing.
All this fall out has created constant changes at Fannie Mae making it is more difficult to borrow money for Real Estate purposes than ever before. I am not here to judge BUT I have to give an opinion every once in a while so here it goes!
Looking around my Real Estate Marketplace and seeing all the troubled financial situations that have been created by shady lenders and unprofessional mortgage consultants and can’t help but wonder how this problem, being multiplied nationwide, isn’t more significant than it seems.
I know that foreclosures are up and that those people in troubled loans continues to rise. I see my email volume increase monthly with desperate people just looking for a suitable solution. I am not quite sure that tightening lending guidelines is the solution here because I see these changes as making things worse not better.
If these rules continue to tighten we will see very few homes being purchased, banks left with enormous volumes of foreclosed properties and financial difficulties running rampant across the country. It’s a ripple effect, financial problems in one industry causes problems in others and yet other so on and so forth.
OK now that I have that off my chest here is a list of changes to lending guidelines that will have a lasting impact on the Real Estate market:
- Unless you have more than 25% equity in your home expect the interest rate on a refinance to be considerably higher than someone who does. A three percent premium was just place on all loans whose loan to value exceeds 75% loan-to-value. Even at 75% you have a minimum 1.5% premium.
- So you are an investor and want to leverage your purchases. You are now limited to 4 properties!
- If you buy a property for cash for various reasons you will now have to wait 6 months to refinance that property for cash out.
- If you get a loan on a property putting down 50% and want to refinance some of that cash out, you will now have to wait 6 months.
- If you are looking to combine a first mortgage and a non-purchase second, a second mortgage taken out after the purchase, you will be considered a cash out transaction regardless of how long you have had that second mortgage. Because of this you are now limited to 75% loan-to-value on the new refinance.
- So you attempted to sell your home with no luck and have a need to refinance. Well you now have to wait a full 6-months even for a rate and term refinance. Making matters worse you are now limited to 70% loan-to-value for that refinance.
There are several more but these will give you a good sample of the Fannie Mae changes. I know there are those niche lenders out there who have the ability to arrange for a loan even if you don’t meet these guidelines but you can expect to pay a large premium for that loan. Remember Fannie Mae and Freddie Mac are the most common loans given to homeowners in the US. As the guideline keep tightening you can expect to have more issues with homeowners not being able to purchase of refinance.
As always, find a professional to work with and ask questions. If your representative doesn’t know the answer he or she won’t pay the consequences of not knowing, you will.
I am here to help so contact me via my BLOG at www.thelanegroup.blogspot.com or www.brentlane.wordpress.com
Tags: brent lane, fannie mae, fannie mae changes, first mortgage, freddie mac, freddie mac changes, home equity, homeownership, interest rate on refinance, lending guidelines, loan on a property, loan to value, Real Estate, real estate market, wall street government
01 Jul 08 FHA Purchase Loans: Don’t “Assume” You Know It All Till You Read This!
Guess who’s back, back again? (name that artist)
It’s FHA and they are here to stay! (Hey that rhymed)
It is funny how cyclical things really are and in the mortgage world we are no different. Lending practices have now repeated themselves with decreasing home prices and FHA loans becoming the save all loan that every mortgage company is making it’s new darling.
FHA loans have accounted for more that 60% of the loans I have closed over the past 9 months and in my office it’s 75% or more. So it is no secret that FHA is the loan to choose for a variety of reasons:
- Fist Time Home Buyers can achieve a 100% purchase.
- You don’t have to have perfect credit to qualify.
- Gift money from relatives is encouraged.
- Refinance your upside down mortgage. (Short-Refi)
- Cash the equity out of your home up to 95% of the value.
- A buyer can qualify with a non-occupant co-borrower. (allows co-signers)
- New higher loan amounts for higher priced areas. (FHA LOAN LIMITS)
- The loan is assumable when the buyer goes to sell their home. (Hang on here!!!)
ASSUMABLE….. Wait a minute here you mean to tell me that if I sold my home the new buyer is going to take over my payments? Well that is partially right!
Here is how Assumable FHA Loans work……
Say you buy a property today for $100,000 and you get a new loan at an interest rate of 6.5% on a 30 year fixed term. You plug along and 5 years later you want to sell your home that is now worth $150,000 and the new buyer is trying to qualify can only get a 9% interest rate for their new loan.
You can offer the buyer the opportunity to “assume” your loan and take over your payments.
Putting it all together, the balance of your loan could be around $85,000 or so after you made the payments for 5 years and the new buyer would have to come up with the difference or $85K (minus) $150K (equals) $65K difference.
The benefits to the buyer are two fold, they get an interest rate that is much lower than the current interest rate they could get from a bank AND they have an accelerated pay off schedule because there is only 25 years remaining on the note!
Now this isn’t such a big deal when it really comes down to it because most people won’t fully understand the benefits until you try to sell your home. The hard part will be remembering that you can allow the new buyer to assume your loan.
I will leave you with this, when it comes to loans the FHA mortgage is one of the most expensive when it comes to closing costs. (I hear you, the costs can be financed but that doesn’t mean it isn’t expensive) To counter that cost in your mind it might help you to remember that your FHA mortgage is assumable so when you go to sell your property you will have a competitive edge over your competition allowing you to sell your home at top dollar in a timely fashion.
Get my Free Report :
“The FHA Loan Secret to getting up to $10K for Home Improvements when you Purchase Your New Home.”
Email me for your free report at Brent@brentlane.net
Brent Lane
The Lane Group
http://thelanegroup.blogspot.com
Tags: co-borrower, co-signer, fha loan limits, fha loans, first time home buyers, gift money, home equity, loan payments, mortgage loans, perfect credit, refinance, sell a home
04 Jan 08 What is a Reverse Mortgage Home Loan
There are hundreds, if not more, different types of home loans available today. Most home loans result in you putting up your home’s equity in exchange for money. You then make monthly payments to the lender to pay back the money and in turn slowly build your home’s equity back up. With a reverse mortgage home loan the terms are the exact opposite. You receive a cash amount using your home’s equity, but you don’t pay the money back like a traditional home loan. Instead, you keep the money until you die, sell the home or no longer live in it.
Qualifying terms for a reverse mortgage home loan is different than the terms for a traditional type mortgage. For a reverse mortgage you won’t be making payments so you don’t need to show proof of income. You don’t even need any type of income to qualify. Traditional mortgages require you to make payments and if you fail to make them you could lose your home. With a reverse mortgage there are no payments so there is no worry about losing your home.
Fees are still involved when getting a reverse mortgage. Expect to see an origination fee, service fees, appraisal fees and others depending on your lender. Most of these fees can be financed and applied to the mortgage so you won’t come up with out-of-pocket expenses.
To get a reverse mortgage you will follow the steps of any other type of home loan. First you find a lender and learn their terms. Fill out any application forms to start the loan process. An appraisal will then be made on your home to determine the value. Next you and the lender will come to an agreement of terms for payment options, loan interest rates, etc. After approval of the loan from the lender you will then sign all paper at the closing. The money is then paid to you in the form of payment you chose. The money can be received as cash in a lump sum, a credit line with terms you set or as a monthly payment to you. Repayment can then be made by your heirs/estate after your death, when you sell the home or when you no longer live in the home.
You can learn more about home loans in our Arizona Real Estate section.
Tags: equity, home equity, Home Loans, lender, mortgage, qualified loan, reverse mortgage, traditional mortgage
