Archive for San Diego Mortgage Underwriting
January 14 2011
Let me start by stating the fact that 75% of loans in San Diego and across the country are Fannie Mae and Freddie Mac products.
Both GSE’s started with a call “risk-based pricing” to be able to price in risk from borrowers who have lower credit scores. It looks like these fee-based premiums are now for most Freddie Mac and Fannie Mae loans even for borrowers with stellar credit.
Under the new pricing borrower with 800 credit score is putting 24% down will have to pay .25% to fee. To put this in perspective on a $400,000 loan that’s $1000 more in fees. A borrower with a 679 score at 79% loan-to-value would be hit with an astronomical 2.75% fee on the same $400,000 house that’s $11,000 in fees! Some of the other new adders are for condominiums there is a .75% fee and there is an adverse market fee which is pretty much every neighborhood in the country (according to Freddie and Fannie ) of .25%.
I understand the risk-based pricing model is to charge more for borrowers who pose more risk but it seems now that everybody needing a loan is seen as a risk by the GSE’s.
This is only a few of the price increases that make it nearly impossible for San Diego home buyer to get that ” billboard” interest-rate that most companies advertise.
Above is a chart of a few of the price adds that go into effect next week. Please note that none of these ads apply the 10 or 15 year mortgages.
If you or someone you know can use my help or advice on a home mortgage product or guideline please call me at 619-285-2921 or APPLY HERE
If you are in front of your radio tonight between 6 and 7 tune in to 107.9 FM to hear the radio show. If not you can hear the show live online at www.my1079.com by clicking the listen now button. I will be speaking about San Diego Real Estate and Mortgage market with Jeff Campbell from Jeff Campbell and Associates and we will be taking questions via his e-mail. Send an e-mail with any questions to myfavoriterealtor(at sign)yahoo.com to have your questions answered on the air.
For everyone that has been waiting for the perfect time to buy real estate in San Diego and get a San Diego home mortgage NOW is the time due to 3 BIG factors.
Loans are going to get a lot more expensive in coming months for a few reasons.
- The federal government has announced that they will stop buying mortgage backed securities as of March 30th
- To take advantage of the 1st time homebuyers tax credit buyers must be in contract by April 30th
- On April 5th FHA will be raising the upfront MIP from 1.75 to 2.25 and there has been talk of also raising the monthly insurance premiums and the amount of down payment needed.
1. The rate reduction plan is going away!
This plan is something that you might not have been aware of, for the past 13 months the FEDs have been spending a huge amount of money to keep mortgage rates low is San Diego and the rest of the country. The money 1.25 trillion (YES WITH A T) dollars that was set aside is almost gone and the government has made the announcement that they will no longer buy the securities to help the market. We can’t really guess where mortgage rates in San Diego will go but the Deputy Chief of Freddie Mac said “interest rates are bound to rise to 6% in 2010 because private buyers will demand a higher rate of return on securities than the FED did”. Mark Zandi the chief economist at Moodys has said publicly that 6% “sounds about right”. It is very important for buyers to understand that the rate on a mortgage has much more bearing on cost then the price of a home so later in the week I will be posting an example to show this.
2. You MUST be in contract for your new San Diego home by April 30th to get the $8,000 in FREE government money!
It seems like most people know that to get the incentive to buy a home from Uncle Sam you need to close escrow by June 30th this year but many people don’t know that the property MUST be in escrow by the end of April. The last time the credit was extended the government said that there will NOT be any more extensions of the tax credit so the time to get qualified for your San Diego home mortgage and start shopping for your new home.
3. FHA is losing money by the minute and needs to raise funds!
Some projections are saying that FHA will have to pay out on up to 25% of the loans that they insured in the last 2 years. With already low reserves the FHA needs to increase its cash holdings in order to pay out claims. One way that they are doing this is by increasing their upfront Mortgage Insurance Premium from 1.75% to 2.25% on any FHA loan originated after April 5th. This “small” percentage increase might not sound like much but on a $350,000 San Diego mortgage it is $1750 more paid by the buyer. I’m sure like me you can think of a million other things to spend that money on . This week HUD is also asking Congress to increase the monthly mortgage insurance and down payment requirements for the FHA program.
Later in the week I will also be posting an example of how this will affect monthly and over all payments.
If you have any questions about this information or any other San Diego mortgage or real estate questions feel free to give me a call at (619)285-2921
Here is another short video from Kim at Credit Plus on how to make sure your FICO score is as high as possible. Having a high score is more important than ever when you are applying for a credit card, car loan or a new San Diego home mortgage. If you have any questions give me a call at the office at (619)285-2921 for a complimentary credit a debt evaluation.
The segment from last Thursday of John Dupree of Jeff Campbell and Associates talking about short sales. I was giving some information about high loan to value and 100% financing options for San Diego home buyers and the avaliability of high LTV San Diego Mortgage loans.
Now it is more important than ever to know what you credit report looks like and what it contains when you are trying to buy a home and qualify for a San Diego home mortgage. In this short video Kim Castro from Credit Plus goes over the only REAL free credit report. This is a huge tool in fighting identity theft and disputing inaccurate reporting from the 3 credit bureaus. Once you have pulled a copy of your credit please feel free to call me at 619-285-2921 so that I can help you maximize and increase your FICO score and dispute any incorrect information that might be on the report . In many cases the way your debt is spread out is much more important than how much debt you have for the FICO scoring model and being proactive can help you qualify for the best San Diego home mortgage, auto loan or credit cards in the future.
My last 2 posts have been about some long needed changes to conventional Fannie Mae loans. Although the changes will make it harder for some people to qualify for a San Diego Home mortgage loan it will help stabilize the local real estate market for the future. It looks like FHA insured loans will follow suit according to information put out this week.
At this point 60% of the mortgages that I am doing in San Diego are FHA due to the lax restrictions on down payment and credit scoring. FHA has recently came out and said that the reserve amounts that they have on hand is well below the mandated 2% so many people have said that trouble is waiting just around the corner for the insurance program. Now it looks like steps are being taken to strengthen the reserves.
The Federal Housing Administration is now asking for the mortgage insurance premiums that they collect be increased. They are also asking for the minimum FICO score requirements to be raised from 580 to 620.
The upfront mortgage insurance premium is usually financed into the loan and is currently set at 1.75% of the loan amount for all San Diego home mortgage loans with FHA financing. With the new fee’s that are being proposed the percentage will be higher and it will no longer be able to be financed. This can and will affect the buying power of people looking to buy real estate in San Diego. Right now the minimum down payment for a FHA home mortgage is 3.5% if they change the upfront premium to 2% that would effectively make the required down payment 5.5%.
Besides the upfront changes Housing Secretary Shaun Donovan will be asking Congress to raise the annual (monthly payment for annual premium) from 55 basis points where it is currently capped. This change will affect the DTI (debt to income ratio) of perspective home buyers and how much home they can afford.
I will make sure to keep you updated as more information is released.
NOV 30 2009
Besides the DTI changes to qualify for a conventional San Diego mortgage loan that I went over last week there are some other major changes being imposed by Fannie Mae on December 8th that will affect many people looking for a San Diego Home Mortgage.
If you have had a Bankruptcy, Foreclosure or Deed in Lieu of Foreclosure after the change it will be harder to qualify for a San Diego home mortgage.
The Fannie Mae Desktop Underwriter will be updated and will affect any applicant of a San Diego home mortgage that has had a Foreclosure with a completion date more than 5 years ago but less than 7 years. Starting with the December 8th update the minimum credit score will be a 680 FICO with a maximum of 10% down (but good luck finding MI coverage). The purchase of a second home or investment property will not be permitted and there will be NO cash out refinance transactions for any property type.
For the San Diego home mortgage applicant with a bankruptcy the rules will also change. If an applicant has a Chapter 13 that was discharged within the last 24 months , dismissed in the last 48 months, or filed but not discharged or dismissed in the last 48 months will get a “Refer with Caution IV” recommendation. This is an approval level that no lender is honoring.
If the applicant of the San Diego home mortgage has had a non-Chapter 13 bankruptcy that has been filed, dismissed or discharged in the last 48 months the application will get the same refer with caution recommendation.
Some other changes that will apply to people looking for a San Diego home mortgage are:
An IRS 4506-T form will have to be completed for every loan at the time of the application and the closing. This is an IRS form that will let the mortgage company get a transcript of the applicants taxes directly from the IRS in addition to the copy of taxes that we have to get as part of the application process.
Verbal Verification of Employment will have to be done 10 days before the note date on every non self employed borrower for every mortgage being sold to Fannie Mae.
Reserve requirements for investment properties and second homes will also be changed. When getting a home mortgage for a second home the reserves have been lowered to only 2 months but on and investment property it has been increased to 6 months. Retirement accounts can now be used as reserves but only at 60 percent of current face value of those accounts.
These are a few of the many underwriting changes in the mortgage industry so it is more important than ever to work with a seasoned mortgage professional. If you have any mortgage questions or would like to pre qualify for a new San Diego home mortgage give me a call at 619-285-2921. You can also click here to pre-qualify now.
Last Friday The Department of Housing and Urban Development (HUD) had a news release that will impact the San Diego mortgage process quite a bit. HUD controls the Federal Housing Administration (FHA) insured mortgage programs that have seen a huge increase in popularity since the “mortgage meltdown”. Fridays press release gave reference to plans to implement a set of new credit policy changes that will strengthen the agency’s risk management. Rumors have been going around that FHA has dropped below the capital reserve ratio of 2% mandated by congress. They have also announced that a new position of Chief Risk Officer will be created for the first time in FHA’s 75 year history.
Most first time home buyers are using FHA programs for their San Diego mortgage since they allow up to 96.5% financing so the stability and survival of the program is extremely important. These changes take effect January 1st 2010 and have an effect on who can originate FHA loans, the appraisal process and reserve requirements for lenders that originate FHA mortgage loans. This news seems to be very positive for consumers and hopefully for the San Diego housing market as a whole.
To see the press release CLICK HERE.
Apply now for your new mortgage!