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Greg Cowart - Mortgage Broker or Lender at The Securus Group
Greg Cowart - Roseville Loan Guy

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Administration rolls back FHA MI change…

I may have jumped the gun on that last post. Yes the HUD Commissioned did announce that on January 27th FHA MIP rates were going to be reduced, but I had no idea that our new president’s first act (and I mean within minutes of being inaugurated) would be to roll back this change.

It’s not a good thing for people buying homes, people looking to refinance to lower their payment, local housing markets, or local economies; but it is what it is… The change has been rescinded.

As always I will let you know if there are any changes when they come.

– Greg

FHA loan limits increase too!

FHA UpdateFresh on the heels of Fannie Mae and Freddie Mac increasing their loan limits, the FHA has followed suit.

FHA has become one of the go to loan products for first time home buyers, those with low down payments, and those with credit challenges. It is a great product for many people in that not only does it allow one to buy (or refinance) with they otherwise might not be able to, since every FHA loan is insured against default investors love them and the interest rate is generally lower than many other options!

The maximum loan limit on an FHA loan in Placer, Sacramento, Yolo, and El Dorado Counties is now $488,750. This matches the “high balance” loan limit for Conforming loans (those backed by Fannie Mae and Freddie Mac) in these counties announced last week.

FHA’s Homeowner Armed With Knowledge blueprint

FHA UpdateLast week the Federal Housing Administration, an arm of HUD (the department of Housing and Urban Development) announced a new “Blueprint for Access” that, if implemented, should lower the cost of having an FHA loan as well as make getting an FHA loan a little easier for some home buyers.

The biggest thing here is the HAWK (Homeowners Armed With Knowledge) program which, in exchange for the home buyer sitting through a short homeowner education course, will cut the historically high FHA mortgage insurance premium factors.

FHA-questions-cost-MIGenerally speaking FHA loans are great. They tend to have lower rates than conventional loans and are easier to qualify for and get closed. The big issue with FHA is the mortgage insurance and how much it can increase a homeowner’s monthly payment.

However due to the housing “crisis” and recession tied to it HUD had to increase the FHA’s cost of borrowing to re-fund its MMI fund (Mutual Mortgage Insurance fund, which losses on FHA loans are paid to lenders from) that had taken a hit due to defaults and foreclosures in 2008-2012. HUD increased both the up-front fee collected on FHA loans (UFMIP) as well as the annual premium that is paid monthly by FHA borrowers as part of their monthly payment to all-time highs; making new FHA loans more expensive than at any time in their history, despite having lower rates than conventional loans.

The HAWK program will reduce the UFMIP by 50 basis points ($1,750 on a $350,000 FHA loan) as well as the annual MIP by 10 basis points ($30 a month on a $350,000 FHA loan).

For those willing to take additional homeowner courses after closing and make on-time payments for the first two years of the loan FHA will reduce the amount of the annual MIP by an additional 15 basis points (another $42 a month on that $350,000 loan, for a total of a $72 reduction in monthly payment).

Right off the top the HAWK program will save an average Roseville/Rocklin/Lincoln buyer between $1750-2,000 off their total loan amount and $70-100 a month off of their payments after two years compared to an FHA borrower that does not participate!

The detailed guidelines will be posted this summer and the program is slated to roll out in the fall. I’ll let everyone know once the program has been implemented and additional details once they are known…

http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2014/HUDNo_14-048

Sincerely,

Greg Cowart

(916) 412-3313 – info@rosevilleloanexpert.com

Creative financing options to increase the odds of getting your offer accepted

(especially in the ultra-hot Roseville and Rocklin real estate markets)

This is a GREAT tip for buyers out there right now…

If you are out there looking at homes and making offers in this market, especially in the Roseville, Rocklin, Lincoln, Granite Bay, or Folsom areas, you know we’re seeing home sellers having a large number of offers to choose from. Likewise they are choosing the best offer they have and the odds of getting a seller credit towards closing costs aren’t as high as they have been from 2008-early 2013. Especially on the hottest, multi-offer properties…

Unfortunately, the reality is many buyers simply can’t pay their own closing costs.  Or can they?

With a little bit of creative financing you can have the winning offer AND also have your closing costs paid for!

On a $349,000 purchase you can simply bump up the rate a little and have us (or any lender really) give you a rebate towards closing costs. If today’s 30 year FHA rate is 4.0% (this is not a rate quote, rates change every day) it would be as easy as taking a 4.25% rate and getting as much as 1% of a lender rebate to pay for all your closing costs.

In this scenario the buyer’s payment only went up by $48 but they got a $3,490 lender credit to cover closing costs and their offer was accepted! In all reality who can argue with a 4.25% rate anyways, especially if it saved $3,500 up front which, if you didn’t have saved for closing, you may not have been able to have your offer accepted anyways.

The same idea can work with pretty much any loan. Putting down 10% and going conventional? It may be possible to make this work too, rather than asking for a seller credit on a property you know will have multiple offers. 

This is how we do it… Get you financed but also get you the home you want instead of someone else having their offer accepted. If you have more than enough for down payment and closing costs this is not really necessary, or advisable, but for those that don’t this is another tool to get your offer noticed and increase the likelihood of being accepted.

Sincerely (your outside the box lender),
Greg Cowart

 (916) 412-3313
gcowart@paramountequity.com

Lincoln still in play for USDA (100% financing)

Yep, that is right. The city of Lincoln, Ca is still eligible for 100% USDA financing.

Over the last two years USDA was supposed to change their eligible areas based on the 2010 US Census but the date of the new map’s going into effect keeps getting pushed back.  The most recent date for the change was Jan 16th, 2014 (it was also slated to change in October 2013, March 2013, and October 2012)…

USDA-mortgage-transWhat does this mean?

Well, it means if you want to buy in Lincoln, or any other city/area that will no longer be USDA-eligible once the new maps go into effect (Auburn being one of them), you now have until (at least) October 1st, 2014 to get into contract and have your lender get the application over to USDA.

For the map of eligible areas plug your subject address into this link on the USDA website and it will tell you if it is eligible or not (Lincoln, CA is 100% eligible as of the search I did today).

USDA Eligibility Map Lookup

If you would like to lookup what the future map looks like, whether it changes on October 1st, 2014 or if they push it back again, it is right here…

USDA Future Eligible Area Map Lookup

If you would like any assistance or would like to get prequalified for a USDA loan please give me a call. In my opinion it is one of the best loans out there, if you want to buy in a USDA-eligible area of course. 100% financing is allowed, it is government-backed so rates are on the lower-end (similar to FHA and VA in most cases), but it does not have the huge UFMIP and annual Mortgage Insurance premiums like FHA does (that makes FHA such an expensive loan in comparison to most other loans these days).

Lets say you are looking in the Northern part of Rocklin but can’t find anything in that your price-range or down payment availability will allow you to qualify for. 12 Bridges is right there and you may be able to (subject to minimum income/asset/credit requirements) buy with a lower down payment, or even none at all.

Sincerely,

Greg Cowart
Senior Mortgage Consultant – 18 Years Experience
(916) 412-3313
info@rosevilleloanexpert.com

CalHome Mortgage Assistance Program (SHRA)

This program, administered by the SHRA, only applies to those in the city and unincorporated portions of Sacramento County (so not available in Citrus Heights, Elk Grove, Galt, Folsom, Rancho Cordova or Isleton) but it is a great deal for those that qualify in buying a home…

The CalHome Mortgage Assistance Program is a down payment assistance (DPA) program for low-moderate income buyers. The DPA equals a whopping 20% of the purchase price, up to $40,000!

The maximum purchase price is currently $199,000 and here are the income limits:

1-person $42,650
2-person $48,750
3-person $54,850
4-person $60,900
5-person $65,800
6-person $70,650

Please contact me if you have any questions about this fantastic program.

Maximum Loan Limits are going down (but that is OK)…

If you have heard about the coming expiration of temporary higher loan limits for FHA, VA, Fannie Mae, and Freddie Mac mortgages put into place in 2008 as an attempt to not let the housing market in higher priced areas fall off a cliff, you may have heard reports of doom and gloom for the housing market.  There have been numerous and varied contentions about the future state of the mortgage market once loan limits drop from the current maximum of $729,750 to $625,500.

The National Association of Homebuilders released a report saying it will be catastrophic however there isn’t really much to worry about for most American markets according to many economists and academics…

“As far as Fannie Mae and Freddie Mac are concerned, there is a tradeoff there between supporting the higher priced homes and weaning the housing finance system off of unusual limits it was put under during the crisis.” This is what Fed Chairman Ben Bernanke said to Congress this week. A study done by George Washington University suggested the same thing; the decrease in the maximum loan amount would raise the cost of borrowing for very few people (forcing them into JUMBO loans) and this world have no effect on most mortgage shoppers and a negligible effect on local housing markets.

FHA loans should see the same (lack of) change. According to the G.W. report “The FHA still could serve 95 percent of its historic targeted market even if the maximum FHA loan limit were reduced by nearly 50 percent” and “FHA’s expansion played a major role in keeping the housing market afloat during the economic collapse of 2008 and 2009. However, we now are left with large loan limits that were set when home prices at the top of the bubble. They don’t reflect current market conditions and are unlikely to assist the FHA in reaching its historical constituencies – first time, minority and low income homebuyers.”

“I understand the private sector is taking at least a significant number of the jumbo mortgage market but at a higher cost,” Bernanke also said.

Bernanke does admit that jumbo loans will come, “at a higher cost,” but we have to put in perspective what exactly that higher cost will be. Interest rates on mortgages today are already near historic lows at about 4.5% today and bond yields don’t look like they will be changing too much in the near future.

The bond market doesn’t seem to think the U.S. is really in danger of defaulting on its obligations, so rates should remain steady. If a jumbo rate is higher, even by a full percentage point, it’s still historically pretty low, and buyers looking at a higher-priced home likely expect to pay a higher interest rate already anyway. The jumbo market has always been like this, except before the temporarily loan amount increase the maximum loan amount was $417,000 (more than $200,000 less than the new lower amount will be) so in all reality no one, not even the homebuilders association, should complain.

-Greg

The Platinum Down Payment Assistance Grant

Almost no money down, literally? Yes, it’s true, and there are only a few places that can offer this program. What I’m talking about is the CHF Platinum Program (some companies have decided to rename it their own name to make it seem like something special only they can do for you, such as the Return to Homeownership Program and others like that, but they are all the same thing). However there are still only a handful of local lenders that can offer this program. Just know that if you hear/see something that sounds just like this but has a different name than Platinum Program, it’s probably the same thing.

This is such a great program and, as opposed to many Down Payment Assistance programs from agencies like SHRA and CalHFA, this grant is not only for the first time homebuyer, people not buying their first home can qualify, and is actually a grant. Not a 2nd mortgage that needs to be paid back over time or when the house is sold. This is true FREE grant money.

Of course there are some rules and not every buyer or property will qualify. However the vast majority of you that want to buy a home in this market should fit in under the guidelines.

Some of the pertinent features of the loan are:

  • The loan can be a 30 year fixed FHA or VA loan ONLY.
  • The grant is 3% of the total loan amount and the proceeds can be used for down payment, closing costs, prepaid items (taxes, insurance), and even earnest money.
  • The 3% grant is not a loan or second mortgage and does not need to be included in the loan calculations
  • No monthly payment: Since it’s not a loan there is no monthly payments and the grant does not have to be paid back

As far as eligibility, here you go…

  • Income limits (Sacramento, El Dorado, Placer counties $90,120)
  • Buyer does not have to be a 1st time homebuyer
  • Owner occupied primary residence in California
  • Single Family Residences, FHA approved Condos, Planned Unit Developments (PUD’s) are OK

And here is what is NOT allowed:

  • 2-4 Units
  • Rental Homes
  • Co-ops
  • Investment Properties
  • Recreational, vacation, or second homes
  • Manufactured Housing

Underwriting

  • Underwritten by our Innerwork Mortgage (FIMC) Underwriting Staff
  • Run through FNMA Desktop Originator Automated Underwriting
  • Minimum FICO score of 640
  • Seller paid closing costs up to 6% to cover normal and customary fees is allowed

Please let me know if you have any questions about the Platinum Program. It’s not going to be the perfect fit for everyone, but will be for a lot of people and will not be around forever!

~Greg

Fannie Mae brings back closing cost assistance, and improves it even more!

I have some GREAT news. Government-chartered mortgage giant, Fannie Mae announced they are bringing back closing cost assistance to buyers of HomePath-eligible homes. People buying one of the Fannie Mae owned REO’s will receive a 3.5% credit towards closing costs. In most cases this 3.5% should be enough to cover 100% of the buyer’s costs, or even buy the interest rate down further! HomePath is already a GREAT program for local homebuyers, especially those with decent to above average credit. These loans already…

homepath renovation mortgageA.) require a smaller down payment than even FHA (3% compared to 3.5%)

B.) require no appraisal, saving $400-$500 as compared to pretty much any other loan

C.) have no Mortgage Insurance premium added on to the payment, realizing a significant saving over other low-down options

To qualify for the credit the offer must be submitted by 4.11.10 and escrow has to close no later than 6.30.11.  to be eligible for the incentive. Also, while HomePath is available to investors (with at least a 10% down payment) ,the 3.5% closing credit is only available to people intending to live in the property as their primary residence.

“Terry Edwards, VP of Fannie Mae’s Credit Portfolio Management team said “attracting qualified buyers to the market and reducing the inventory of vacant homes remains essential to stabilizing neighborhoods and helping the market recover. Since interest rates remain low, the incentive will go a long way toward helping even more families buy a new home so this is a great time for Fannie Mae to offer some assistance.”

To find a list of HomePath eligible homes give me a call/e-mail or check it out yourself at http://Homepath.com. You can also ask your Realtor to do a search for HomePath homes for you (if you need a referral to a top-quality Realtor in your area let me know). I see a lot of these properties in the Sacramento and Roseville real estate markets. The lists are updated with new properties as they come to the market.

 Fannie’s Press Release

 ~Greg

Housing in the US never as “undervalued” as it is today…

Continued depreciation of property values in 2010 has made housing more undervalued relative to income than ever before. Using the latest Case-Shiller home price index American housing was 21% undervalued when compared with disposable income per-capita.

This data includes the index published by the Federal Housing Finance Agency and shows that housing in the 4th quarter of 2010 was 15% undervalued as measured against American’s disposable income. The results point to the idea that housing is exceptionally undervalued, and the gap has gotten bigger.

Current low housing prices, coupled with historically low interest rates (the 20 year average is 7% but a minimum down FHA loan can be had for 4.5% today), explains why the monthly mortgage payment on a median priced house bought with a 20% down payment has fallen to an all-time low of 13% of the median income. Real estate costs now appears close to fair value when set against rents according to the numbers (and I have seen plenty of people buy for less than they were paying in rent recently).

These low prices and rates mean there is plenty of scope for housing to perform well in the near to mid-term. Also, the Sacramento market currently has MANY more buyers than there are properties to sell in this low-mid price range, so the demand is there to keep it moving.

Looking at the long term, as I have talked about a number of times recently, a sharp fall in the mortgage delinquency rate throughout 2010 means there will be fewer homes in the foreclosure pipeline, and as current foreclosure pipelines continue to shrink we should see a return to a more normal real estate market in the Sacramento region. This will not happen overnight but with less and less first payment defaults, there will be less and less foreclosures going forward.  

So, with home prices as “undervalued” as any time in history, what are you waiting for?

~Greg