Sunday, March 1, 2009

Ann Arbor Area Mortgage Update

Important mortgage and financing updates courtesy of Bob Yopko at First Equity Residential Mortgage. By now most everyone has heard about the much improved first time home buyer tax credit. Here is a summary:

The stimulus bill replaced the $7500 home buyer tax credit with a much better $8000
tax credit that does not have to be repaid (unless the homeowner moves out or sells
within first three years). The credit is for people who purchase between 1/1/09 and
11/30/09 and have not owned a principal residence in past three years. The credit is
for individuals who make less than $75,000 or married couples who make less that
$150,000. The credit is capped at 10% of purchase price, and can be claimed on 2008 returns.

Ann Arbor area condos that are not on the FHA approved list will require larger down payments and additional points -

FNMA recently announced a 3/4 point pricing adjustment for all condo loans over 75% loan to value. That means that there is a price add on for purchasers of condominiums with less than 25% down on FNMA loans. This add on amounts to 3/4 point (or $750 per each $100,000 of loan amount). FNMA also specifically directed servicers to charge this fee on Michigan site condos, which is a change in previous policy. Some Freddie Mac investors are not charging this fee on site condos, but be aware your condo and site condo buyers may face higher pricing on their financing.

Since we are seeing more and more potential buyers with foreclosures or bankruptcies in their past, I thought I would review current policies for loan qualification. Note these are agency policies and some investors are enforcing more restrictive rules.
Bankruptcy (7) 4 Years 2-3 years 12 months**
Bankruptcy (13) 2 Years payments 2 years payments 12 months**
Foreclosure 5-7 Years* 3 Years 12 months**
Short Sale 2 Years Case by Case 12 months**
Note-After bankruptcy or foreclosure borrower must reestablish good credit. Chapter 13 payment history must be perfect. *Fannie and Freddie will allow a purchase of primary residence 5 years after foreclosure with minimum down payment of 10% and credit score of 680. After 7 years there are no restrictions. Multiple bankruptcies extend the waiting period. There are exceptions for extenuating circumstances, but qualifying is very very difficult. If borrower was hit by a car and in a coma for 9 months and his home was foreclosed, he can buy a home 3 years later instead of 5.
**RD says there is no waiting period after foreclosure or BK, but require a 620 minimum credit score. RD Investors require 12 months and must have a very good narrative.

In mid-2008 FNMA dropped their maximum number of loans per person from 10 to 4.
This inconvenienced borrowers buying and refinancing investment properties. FNMA has announced it's intention to raise that limit back up to 10 loans for borrowers with strong credit profiles.

In President Obama's speech last week he announced that starting March 4th, Fannie and Freddie will begin accepting refinances on current Fannie and Freddie loans without requiring new appraisal. The idea is that since they are already on the hook, if the borrower is lowering their payment and not raising the loan amount, it makes sense for everyone to let it go through. This is good news in that a number of homeowners will be able to get out of ARMs, balloons and high rate mortages, which should cut down on foreclosures. It is bad news, in that if the program works well, refinance mortgages will swell, slowing an already overburdened
underwriting system. Expect more delays in approval of your purchase loans.

First Equity offers RD loans with escrows for repairs. Escrows are limited to $10,000 or 10% of loan amount, whichever is less. This allows 100% financing on homes that need some repairs, allowing more of your clients to bid on bargain homes. Call for details.

First Equity is offering a proprietary Doctors Loan Program in Michigan. The loans are available up to 95% loan to value with no PMI for purchase or refinance. Loan amounts are available up to $650,000 with no pricing adjustment for jumbo loan size. Deferred students loans are not counted in debt ratios. If you are a doctor looking for a downtown Ann Arbor condo or a condo near the University of Michigan consider this program and give us a call.

Thanks to Bob Yopko for the updates and clarifications.

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