Loans and Financing

January 19th, 2012

Utilizing the USDA home loan, some people are leaving the cities for the less expensive and healthier lifestyle of a rural location.  No, they are not settling for some little, quaint farmhouse in the middle of nowhere. The home mortgage program is for everyone with a low or median income, and it funds all styles of single-family and newly built manufactured housing.

Many homes within the Tri-Cities areas are eligible for USDA funding. Most of Washington is a mixture of rural ideals and city-like lifestyle. Therefore, most of Washington lies within eligible zones.

The USDA Home Loan Program

Under the program, families receive numerous perks not available to conventional borrowers.

For example, the USDA program offers a $0 down option.

Other benefits include:

• Reasonable Interest Rates
• Lower Closing Costs
• No PMI, or Private Mortgage Insurance
• 100% Financing

In order to be eligible for the program, borrowers must meet four simple USDA mortgage requirements.

• Meet the median income level for the area.
• Be able to pay monthly mortgage payments
• Pick a house in a USDA eligible area
• Have a credit score of 620 or higher

The guarantee fee was recently lowered to 2 percent form 3.5 percent. Also, the USDA now requires a 0.3% annual fee. These small fees insure the continual survival of the rural development housing loan.

Jasmine Reese is a junior content writer with USDA Loans.com in Columbia, MO.

July 15th, 2011

Did you know that increasing or decreasing your loan or down payment by even $1 can significantly change your rate? It’s true.

If you want to save money on your home loan, it is critical to understand the various limits for loan amounts, down payments, and credit scores as they can have a dramatic impact on your mortgage rate. When you come to the edge of one of these limits, the savings can be huge.

For example, lowering your rate by .5 percent — going from a rate change of 5 percent to 4.5 percent — could save you $45,000! This example is based on a $416,000, 30-year fixed mortgage.

Let’s look at three levers involved in mortgages that can save you money:

1. Loan amount boundaries

You should be aware of three major loan amount boundaries. The boundaries are based on the type of loans Fannie Mae and Freddie Mac are willing to buy. Fannie and Freddie are two government sponsored entities (GSEs) that continuously buy loans from lenders. If your loan amount conforms to their loan size specifications, it is more likely your lender will be able to sell the loan to one of these GSEs. When lenders can sell loans and don’t have to keep the loan on their own balance sheet — tying up their own capital — they are able to offer lower mortgage rates. Here are the loan amount boundaries:

• Loans less than $417,000: The standard conforming loan limit is $417,000. This means that if you get a loan for less than or equal to $417,000, you may qualify for their lowest rates.
• Loans within county limits: In some geographic regions, the conforming limits are higher because average home prices are higher. These expanded limits can go as high as $729,750. Loans that fit between $417k and the county limit are called “super conforming.” These loans still have great rates, but they can be .125 points higher than conforming loans under $417,000. Check out the FHFA.gov site to find the loan limit for your county. (Note: These loan limits are changing Oct. 1).
• Loans above county limits: Any loans that are larger than the county loan limits are called “jumbo” loans. These can be priced as much as .5 point higher than conforming loans.

It is important to know the cutoffs. If your loan amount is close, you can increase your down payment, thereby lowering your loan amount, and bring it under the cutoff.

2. Down payment boundaries

The down payment percentage (the amount of money you put down as a percent of the value of the home) is also important. There can be rate drops at various levels.

• 20 percent – The gold standard for down payments has historically been 20 percent or more. This is where you typically get the best rates. So if your down payment is around 18 percent or 19 percent, consider increasing your down payment.
• 10 percent, 5 percent – Rates can go up as your down payment decreases. 10 percent and 5 percent are common down payment amounts, so sometimes there are larger rate differences around these numbers than others. Five percent is also the minimum for Fannie Mae conforming loans and 10 percent is their cutoff for jumbos. So if you planned to make a 4 percent down payment, you should consider increasing to 5 percent in an effort to lower your mortgage rate.
• 3.5 percent – This is the lower limit for FHA loans. If your down payment is 3 percent, consider putting a little more down to see if you qualify for an FHA loan. It is very hard to qualify for loans right now with a down payment lower than 3.5 percent.

3. Credit score boundaries

This is a no-brainer: High credit scores mean lower mortgage rates and lower credit scores mean higher mortgage rates. That’s why having a good, solid credit score (720 or above) will result in lower rates, assuming all other things are equal. However, there are some credit score limits that will have a more profound impact on your rate. Below are the most important edges.

• 580 – This is the minimum credit score required for an FHA loan.
• 620 – This is the minimum credit score required by Fannie Mae. However, most Fannie Mae loans require at least 660.
• 660 – This is typically the minimum for most conventional loans. Anything below this is typically considered subprime and will be harder to get financing. Although you can get loans at this credit score, you will normally pay a much higher rate.
• 720 – This is the historical cutoff to get the best rates. At this level you will not get any negative rate adjustments. However, in the current market, you can now get even better rates for higher scores.
• 760 – This is where you will now get the best rates. There may be some lenders who give additional breaks at extreme scores (800+) but for the most part, anything above 760 will give you the best rates.

Although changing your credit score isn’t as easy as deciding to increase your down payment, there are some things you can do to make sure your score is as high as possible. You can check your free annual credit report and ensure there are no inaccuracies, pay your bills on time, refrain from maxing out your available lines of credit, and use credit repair sites to remove old blemishes.

February 24th, 2011

In these economic times, many homeowners could really benefit from the money available through a home equity loan or line of credit. However, there’s often confusion regarding the details of these two options. To set the record straight, we compare them side-by-side:

A home equity loan (or second mortgage) is like a home loan:

• You receive the entire loan amount in one big payout (to use however you want).
• You can choose between fixed and adjustable interest rates (typically higher than a regular home loan, but lower than a home equity line of credit).
• You pay the lender back via fixed monthly payments.
• The interest you pay is tax-deductible.
• After a set period (usually 15 or 30 years), the loan is paid off.
• If you default on the loan, you put your house at risk.

A home equity line of credit is like a credit card account:

• You use a special credit card (or checks) to tap into the loan on an as-needed basis – which means you’re only pyaing interest on the money borrowed, not the maximum loan amount.
• The interest rates are adjustable, and higher than a home equity loan, but far lower than an unsecured loan.
• How you pay the lender back depends on the plan.
• The interest you pay is tax-deductible.
• If you default on the loan, you put your house at risk.

February 16th, 2011

HUD released a statement that on all loans issued on or after April 18th 2011, the monthly mortgage insurance rate will be increased.

So, here is an example…

30 year FHA 96.5% loan is currently at .90%, however on or after April 18th, 2011 it will increase to 1.15%. So on a $100,000 loan you would currently pay $74.47 per month , however if you get this same loan on or after April 18th 2011, the new rate will increase to $95.16 per month. So, it’s not more money down for the loan, but it is definitely more money monthly on your loan payment.

This is just the more reason if you have been considering purchasing a home with an FHA loan, you may want to consider doing that before April 18th, 2011 to potentially save you some money. If you have any questions regarding this change or would like us to help you find your next home, give us a call at (509) 735-1025 or send us an email.

January 6th, 2011

Knowing the basics of FHA loan rules helps you stand a better chance of selling your house or condo.

Make your house FHA-friendly, and it will appeal to more homebuyers. Why? Because the Federal Housing Administration is insuring the mortgage loans used by about 30% of today’s homebuyers. 

If your house passes the FHA rules, it will appeal to buyers who plan to use an FHA-insured mortgage. If your house doesn’t qualify for an FHA loan, you’re cutting out 30% of potential buyers. FHA is especially important to first-time homebuyers and those with small downpayments because it allows borrowers with good credit to make a downpayment as low as 3.5% of the purchase price. 

Here’s how to make your home appealing to FHA borrowers: 

Know the FHA loan limits in your area
In Kennewick, Richland, and Pasco, FHA will insure a mortgage of up to $275,000 on a single-family home. FHA mortgage limits vary a lot. 

Home inspections
Most buyers will ask for a home inspection, whether or not they’re using an FHA loan to buy the home. You must give FHA buyers a form explaining what home inspections can reveal, and how inspections differ from appraisals.

How much do you have to repair?
If the home inspection reveals problems, FHA will not give the okay to buy the home until you repair serious defects like roof leaks, mold, structural damage, and pre-1978 interior or exterior paint that could contain lead.  

Dealing with FHA appraisers
Help the lender’s appraiser by providing easy access to attics and crawl spaces, which usually must be photographed. 

Your buyer can hire his own appraiser to evaluate your home. But FHA only relies on reports by its approved appraisers. If the two appraisals conflict, the FHA appraisal preempts the buyer’s appraisal. 

Help with FHA closing costs
Most FHA buyers need help with closing costs, so a prime way to make your house FHA-friendly is to help with those costs.

FHA currently allows sellers to pay up to 6% of the sales price to help cover closing costs.

November 10th, 2010

The mortgage interest rates remain incredible. Today’s rates, provided by Now Mortgage!

30 Year Fixed – 4.125%
15 Year Fixed – 3.375%
FHA 30 Year Fixed – 4.250%
USDA 30 Year Fixed – 4.375%

If you would like to take advantage of these great rates, give us a call at (509) 735-1025.

March 17th, 2009

HUD Mortgagee Letter 2009-08
Released on March 12, 2009

Effective for FHA case number assignments on or after April 1, 2009, the loan-to-value (LTV) of any cash-out refinance to be insured by FHA may not exceed 85% of the appraiser’s estimate of value.

Given the continued deterioration in the housing market, and FHA’s need to limit its exposure to undue risk, this reduction in the maximum LTV for cash-out refinances is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken.

March 13th, 2009

I received this information from a reputable lender in our area, Dana Mundy, with AmeriChoice Home Loans.

FHA & VA announced that they are increasing the minimum credit score from 580 to 620 effective March 14, 2009.  The last day to lock loans under 620 is Friday, March 13, 2009.

October 17th, 2008

Word from Wells Fargo this week was that most investment properties would now be 20% down with very few exceptions, if any. For investors with cash now, this presents a great opportunity to get a lot of properties other buyers will not be able to afford. We have written offers on three bank owned properties this week. Please let us know if we can help you capitalize on this trend.

October 17th, 2008

Interest rates too high?? Buyers and sellers have a great option that is rarely used or talked about. Certain loan programs allow the seller to buy down the buyers rates in the early years of the loan. This can be a great option when rates spike, to help both sellers move property and buyers get in at an affordable payment. Please call for more details.