FHA costs rising in April – and HARP 2.0 refi program just got better!


If you need an FHA loan to buy a home or refinance, then you have until April 6th to call me, before the cost goes up.  Plus, we have new updates on the HARP 2.0 government refi program, and it’s good news!  Watch today’s video for details.

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What the heck does “loan-to-value” mean?


There are lots of terms we use in the mortgage industry that aren’t part of everyday parlance. Today, I’ll talk a little bit about “loan-to-value”, or LTV for short.

In fact, I have a video that’s less than 90 seconds long if you’re in a hurry:

Loan-to-value

So, just to recap what I said in the video, your loan-to-value is the percentage of your home’s value that you finance with your home loan.

Whether you a purchasing a home, or refinancing your existing mortgage, LTV is an extremely important factor in making an educated decision about your home loan.

I’ll give you an example:

FHA – When purchasing a home using an FHA home loan, you can finance up to 96.5% of the appraised value of the property. If you are refinancing, you have two options: “rate & term” or “cash-out”. Rate & term means you are refinancing to lower your rate or change the length of your loan. A rate & term refinance is capped at a 97.75% LTV for FHA. Cash-out FHA refinances are limited to 85 per cent of the value of your home. If your current mortgage is an FHA loan, you can refinance with an FHA streamline, which does not have an LTV limitation.

So your needs define your loan-to-value, which helps define what home loan program you are going to apply for.

If you would like to learn more about loan-to-value, other mortgage terminology, or home loans in Oregon and Washington, I invite you to visit my site or contact me. I am long on answers and short on sales pitches 🙂

Thanks for taking a minute to read this post!

Picture: Jason HillardJason Hillard – homeloanninjas.com

Mortgage Advisor in Oregon and Washington MLO#119032

Pinnacle Mortgage Bankers

a div of Pinnacle Capital Mortgage Corp

503.799.4112

jason@mypmb.us

1706 D St Vancouver, WA 98663

NMLS 81395 WA CL-81395

Equal Housing Lender

Just because we can do an FHA loan at 580 FICO, does that mean we should? By: Jason Hillard


this post was originally published on home loan ninjas on July 2nd 2010

Perhaps the biggest advantage to being an affiliate branch of a mortgage bank is our inherently “hybrid” nature. We are the bank; we have more responsibility and control than ever before. However, there are some hard and fast guidelines that all loans we originate and underwrite “in-house” must adhere to. These are policies that ensure our good standing with the investors we sell the loans to. Without access to these investors, we wouldn’t be in business because we do not service loans.

One of these steadfast rules is a minimum FICO score of 640, regardless of the loan program. This is where the “hybrid” nature of our operation kicks in and really sets us apart from a traditional bank. If we have clients that don’t meet certain underwriting criteria as prescribed by our investors, we can broker the loan to another bank. Hybrid: part bank, part broker. It really is a beautiful thing because it allows us to assist more customers than before. And we can be faster on our feet because we aren’t always relying on third parties, and provides more options to the consumer.

A quick perusal of the matrix of banks we are brokered with yielded a surprising tidbit of information: we can still do an FHA loan down to a 580 credit score.

This, of course, brings up an important question…

Just because we can, does that mean we should?

My partner and I, as I have previously mentioned, rarely fill out a client’s home loan application the first time we talk to them. Many people out there don’t qualify for their “ideal” mortgage right away. Others don’t know how much income they truly make. The point is, we get to know the down and dirty details before we begin the process in earnest. Outside of a few exceptions, this is the only responsible way to do business.

Now many times one of those details is a “less than perfect” credit score. Frequently, this can be remedied in 6 to 12 months with a little hard work, diligence, and a willingness to pay the items that are negatively impacting the client’s credit score.

We help people climb back up. Its what we are supposed to do. We are advisors, not just salesmen.

Can you make a case in the post-bubble (fingers-crossed) era for doing loans for people with a 580 credit score?

Right now, we have quite a few clients that are in this range. Actually, we always do because we talk to a lot of people and we don’t believe in simply turning people down with no plan to become “approvable”.

So how do we determine whether or not to proceed?

The answer, to me, lies in whether or not the consumer is climbing the stairs up, or riding the slide down.

slide

Let’s say we had a client come in to review their credit history with us 6 months ago, and at that time, their score was 493. We highlighted a plan of action, and they set their minds to achieving those goals. Let’s now assume that client followed all the steps and now they have a 597 credit score. They mention that they saw a house for sale over the weekend that they absolutely fell in love with. They want to know if they can get approved to purchase the home. I am morally OK with my Originator beginning the process with them. They have worked hard to improve their situation, and want to take an advantage of the opportunity to buy a house they really want, rather than settling for something now and trying to upgrade later.

Now let’s look at another situation that isn’t uncommon. A borrower comes to my mortgage company to get pre-approved to buy a “to be determined” property. They have a 641 credit score at the time of application. They start house-hunting, but can’t find anything they want for 60 days. Then they find something, put an offer in, and the offer is rejected. They put an offer in on another house; this one’s a short sale. They go back and forth with the seller over the next few weeks about closing cost concessions and inspection addendums. Suddenly the credit report is over 90 days old, which means we have to pull a new one. Low and behold, the borrower has maxed out a credit card, or taken a new loan out and missed a payment. Their credit score has dropped to a 599. Should we go ahead with the home loan?

The answer is not so clear cut, but I am damn certain about this: we are not acting in the consumer’s best interest if we don’t at least review the situation with them and determine the delinquency’s validity. It’s not professional to negotiate a mortgage for someone who is on the slippery slope of credit decline.

We aren’t trying to be “negative”, just honest and professional. The collective irresponsibility of borrowers, brokers, lenders, and banks got us into the current mess, and professional responsibility is the only way to prevent a repeat.

question mark image credit  Image: jscreationzs / FreeDigitalPhotos.net

slide image credit Image: Tina Phillips / FreeDigitalPhotos.net

Thoughts on the New Mortgage Insurance Premium for FHA loans – by Jason Hillard | homeloanninjas.com


(originally posted on October 2nd, 2010)

I have had this rolling around in my head for a few weeks now, and with the change in FHA mortgage insurance monthly premiums bearing down on us in a few days, I had to share my thoughts. We’ve been doing a lot of FHA loans in Oregon & Washington, as I’m sure is the case all around the country, and this change is going to affect a lot of people. (I apologize for the low quality of the video, I have successfully screwed my phone’s camera up!)

Again, everything that’s changing about the mortgage industry is done under the auspices of avoiding another meltdown, curbing foreclosures, and making the mortgage-backed security a good investment. So, if you have an insurance policy which is designed to avert the risk of a loan in default to the lender, why would you want the premium on that insurance policy to be collected over time?

From a simple risk-assessment perspective, it would seem that the more time you are exposed to loss, the greater the likelihood that it will happen. The fear is that homeowners will default on their loan payments, so why would you push more of the premium to the monthly payment side (rather than the upfront funding fee) if the reason for the policy is to protect the investor from people who default on those payments?

It seems like the reasonable position would be to get the premium covered from day one. This reminds me of when the downpayment requirement for FHA went from 3% all the way up to a whopping 3.5 per cent. Does that extra .5% really invest the homeowner so much more that it reduces their likelihood of default? I’m not saying their should be less “skin in the game”, but if that’s going to be your approach, why not really DO IT? Make the downpayment 5%, or make some portion of the upfront mortgage insurance on an FHA home loan payable from the borrower’s own funds?

It may just be that I am making the age-old mistake of applying logic to government policy, but I am thinking that the intended purpose isn’t really what we are being told.

You can read some related posts on FHA loans and mortgage insurance:

What is mortgage insurance?

We can do FHA down to 580 FICO, but should we?

Video: mortgage terminology – mortgage insurance

If you have any questions about FHA financing, mortgage insurance, or home loans in general, feel free to send us an email or comment on this post! And if you have any thoughts on why the monthly mortgage insurance premiums for FHA mortgages are increasing while the upfront funding fee is decreasing, we’d love to hear them!

Treasury Designs New Federal Program to Help Stimulate Economy, by Mandelman, Mandelman Matters


This week, the federal government is said to be announcing a new federal program designed to keep our economy vacillating between deflationary collapse and contrived recovery.  The program, referred to as the Special TARP Underwriting Program to Impede Development, will first tackle the challenge of bringing the government’s most inane economic stability plans together under one larger, yet infinitely more purposeless program banner.

Initial funding for the Special TARP Underwriting Program to Impede Development will come primarily from contributions made on a voluntary basis by the nation’s largest and most insolvent financial institutions, through the sporadic unannounced printing of twenty and fifty dollar bills, and from change found in the couches left behind in foreclosed homes.

Names floated in the press for program director included initial frontrunner, Carrot Top, followed by Dan Quail and Paris Hilton, although confirmed reports say that Treasury Secretary Tim Geithner and White House economic advisor, Larry Summers, have thrown their considerable combined clout behind Elizabeth Warren.

“I can’t think of anymore more qualified for this job than Liz,” the Treasury Secretary said while attending a Telethon for the Boatless in Miami Beach, sponsored by the magazine, Unbridled Avarice, and through a grant made by Goldman Sachs.  (In the spirit of full disclosure, Goldman did file papers with the SEC stating that the firm does plan to short that grant in an effort to remain vigilant about it’s risk profile.)

The Special TARP Underwriting Program to Impede Development is known by the acronym, STUPID.  The program is projected to provide assistance to responsible American homeowners who have high credit scores, equity of $200,000 in a second home, and surnames that begin with “Gh” or “Pf,” assuming they did not file a tax return in 1992, and reside primarily in a state that ends in the letter “E”. Qualified homeowners can apply for assistance under the program by calling a toll-free number at HUD; area code 212-GET-STUPID.

Secretary Geithner explained the program to reporters while waiting for his dessert soufflé to rise.  Those in attendance said that he told the group that the program would help homeowners and get the economy back on track by removing the key obstacle to the future profitability of financial institutions.  He also mentioned that the soufflé was dry.

“So, now that you understand what STUPID is, let’s talk about what STUPID does,” Geithner told the group.  “I think you can see why Larry and I feel so strongly that Liz Warren be asked to run the new program.  I think that she, more than anyone else I can think of, is representative of what the program is all about.  I’m hoping that within a very short period of time, the entire country will associate the name Elizabeth Warren with STUPID.  I know Larry and I both do already.”

The good news is that almost all of the HAMP participating servicers have already signed on to participate in the new program, so most homeowners are very likely to find that they have a STUPID Servicer handling their loan.

http://mandelman.ml-implode.com/

Oregon’s homeownership program to receive an additional $49.2 million, by Jeff Manning, The Oregonian


Though it’s months away from awarding a single dollar to struggling homeowners, Oregon’s newly established foreclosure-prevention program keeps growing.

Oregon’s Homeownership Stabilization Initiative is in line to receive another $49.2 million, the U.S. Treasury Department announced Wednesday. That’s on top of the $88 million already awarded by the Treasury.

Oregon officials are still refining the details of its program and won’t be ready to begin dispensing money until the end of the year, said Michael Kaplan, director of the program.

“We’re thrilled,” Kaplan said. Even with the addition of the new money, he said, “we have so much more demand than we have resources.”

The foreclosure epidemic has claimed thousands in Oregon, largely due to the state’s high unemployment. Though it remains far behind foreclosure epicenters like Nevada and California in sheer numbers of foreclosures, Oregon is now seeing new mortgage defaults increase at the third-fastest rate in the country.

The new funding comes amidst a heated debate in Washington, D.C. about government spending and the spiraling federal deficit. While many economists argue the government needs to increase spending to jumpstart the economy, others maintain the country is drowning in red ink.

With the new anti-foreclosure money, the Obama administration is sending a clear signal it intends to continue to inject public money into the economy.

In addition to the new foreclosure prevention money, the Department of Housing and Urban Development announced Wednesday the launch of new $1 billion short-term loan program for at-risk homeowners.

The 24-month loans will be available to homeowners facing foreclosure in part due to “a substantial reduction in income due to involuntary unemployment, underemployment or a medical condition,” HUD announced.

Sen. Jeff Merkley, D-Ore., who has emerged as a vocal advocate for individuals slammed by the economic crash, hailed the new programs. “This funding will help Oregonians who have lost a job through no fault of their own while they get back on their feet,” said Merkley.

Obama first announced formation of the Hardest-Hit Fund in February, steering money to the 17 states most impacted by the foreclosure wave. The Treasury Department announced Wednesday that it is sending another $2 billion to the program, aimed at states where unemployment has remained high.

Qualifying standards for Oregon’s program are still being worked out, as are many of its details. Tentatively, the state envisions four different types of aid:

Loan modification assistance will help homeowners who are on the verge of successfully modifying their existing mortgages but require a small amount of additional financial resources to do so.

Mortgage payment assistance will help economically distressed homeowners pay their mortgages for up to one year.

Loan preservation assistance will provide financial resources that a homeowner may need to modify a loan, pay arrearages, or clear other significant financial penalties after a period of unemployment or loss of income.

Transitional Assistance will help homeowners who do not regain employment during the period of mortgage payment help with the resources needed to move to affordable, most likely rental, homes.

http://www.oregonlive.com/business/index.ssf/2010/08/oregons_homeownership_program.html

OregonRealEstateWanted.com: How It Works


Oregon Real Estate Wanted (http://www.oregonrealestatewanted.com) is a web site created for the marketing of the needs of people seeking to buy real estate in Oregon. Buyers are listed along with their needs and qualification so those that are seeking to sell real estate can contact them just like buyers approach sellers of real estate.

How it works:

Each buyer listed on the site will be given a serial number that will identify them to the public. We offer this so their privacy is protected and fairness in the presentation of all opportunities is assured.

Before being listed on OregonRealEstateWanted.com. A buyer must have met with a loan officer and obtained a pre-qualification letter. This letter will not be listed on the site, but the name and contact information of the loan officer the buyer will be working with will be included with their listing. We encourage the buyer to allow the loan officer to pull their credit report and review all of their income documentation so that loan officer can ensure the buyer is qualified for the loan program they will be applying for. We want sellers and real estate brokers that visit the site to have confidence that the buyers listed have the ability to close on a loan.

We will promote a detailed wish list the buyer(s) are looking for so people that have real estate for sale can compare that wish list with their property. If they feel they have something that is a good fit, they will be encouraged to contact us and we will then notify the buyer of an opportunity.

When a seller or broker notifies us of a property or listing that fits the buyer’s criteria we will present that property to the buyer for their consideration.

By doing this we will allow the buyer to have full access to the available properties that are available. Both properties listed on the multiple listing services and For Sale By Owners (FSBO) will be considered.

This web site will allow Stewart Group Realty to present our clients to a wide range of opportunities.

Oregon Real Estate Wanted
http://www.oregonrealestatewanted.com