Wednesday, September 28, 2011

Mortgage updates that could make or break your loan

Piperpartners Ann Arbor real estate
Here is a list of timely mortgage updates provided by mortgage lender  Bob Yopko that may affect you if you are in the market to secure a residential mortgage. There are many interesting facts here that could affect your loan.  Take a look.

Starting October 1, RD will change the structure of its funding fee. Currently, RD charges 3.5% upfront (which it adds to loan amount) and no monthly mortgage insurance. On all loans approved by RD after October 1, RD will charge 2% upfront (and still add to loan amount) but will charge an annual fee of .3% of loan amount. On a 100,000 loan, this will amount to $25 per month. This monthly fee will be for the life of the loan.

RD still requires annual authorization from congress. This is expected shortly, but there may be a short delay when RD's fiscal year ends on September 30th.

Authorization for higher limits for FHA loans will expire September 30th. This means the statewide maximum loan amount will be $271,050. This represents a reduction from $345,000 in Washtenaw county and $297,500 in Detroit metro area. Loans with higher limits must have an FHA assignment dated before October 1, 2011.

Private Mortgage Insurance (PMI) is required on all conventional loans with less than 20% down payment. Over the past few months, two of the remaining  six providers of private mortgage insurance left the business because of capital requirements. The four remaining providers are likely to be more picky on which borrowers they will insure, so our low down payment borrowers may be forced to use government loan programs (FHA, VA and RD).

The Veterans Administration charges a funding fee on loans for all veterans (except veterans with service related disability). October 1st, that
funding fee will be substantially reduced. VA loans were already one of the best loans available, and they just got better. Roughly 10% of all adults in Michigan are veterans, so make sure you ask, and refer your VA home loan borrowers to First Equity.

Several credit issues seem to be coming up often. Here is a quick summary to help you avoid deals that can't close;
Student Loans-Deferred student loans are counted as debt payments by all loan programs except FHA. Your borrowers may think they don't have to count deferred student loans but unless they have 12 months left on deferment and are going FHA, they will. Borrowers with large student loan balances should make sure their loan officer considers this carefully.
Credit Repair & Disputed Accounts-
There are a number of "credit repair" companies that guarantee to raise clients credit scores. They frequently accomplish this by disputing negative credit items. By law, disputed items are removed from scoring models while the dispute is in progress, which can last from 6 months to indefinite. Borrowers see their scores go up, and think they are set. Unfortunately, underwriters have placed requirements that all disputed items on credit reports be settled before they will use the reported score. That means the items are taken out of disputed status, and unless the creditor agrees with the dispute, the negatives remain and scores drop. If you have borrowers using a "credit repair" service, make sure they speak with a seasoned loan officer before moving on a purchase. 

Here is a quick guide for condo approvals with various loan programs-
Conventional-Conventional loans have various levels of condo approvals, from streamlined to full approval. Level of approval is generally set by automated underwriting. Generally, existing condos with association in hands of homeowners for at least a year are fairly easy to approve. New condos in hands of developers and still selling units are the most difficult. Site condos do not need to be approved, but association and insurance info is required.
FHA-The FHA approval process was moved into hands of investors this year. There is still a list of approved condos, but approvals have an expiration date. Some investors will only take previously approved projects, and some will approve projects not on the list. For new approvals, expect some time and expense. FHA does not need to approve site condos but association and insurance info is required.
RD-RD approves condos in a similar fashion to conventional loans. Site condos do not need approval but association and insurance info is required.
VA-Site condos and attached condos both require VA approval. If a project is not on the list, approval can be applied for. Expect 6-8 weeks and several thousand dollars in attorneys fees.
The red flags that could stop your condo from being financed are as follows;
-Large number of rental  units versus owner occupied
-Large number of foreclosures
-Large number of units behind on association fees
-Lawsuits or other legal problems
-Substantial deferred maintenance

Thanks to Bob Yopko at FIRST EQUITY RESIDENTIAL MORTGAGE, INC. for providing this mortgage update.  If you have any questions give Bob a call at 800-557-0270 or 734-475-0270 or contact a Piperpartners Ann Arbor real estate agent for more details.  Image courtesy Andy Piper Flickr

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