Another appearance on XETV San Diego 6. This time on San Diego Living I was with John Dupree from Jeff Campbell and Associates going over some big reasons that NOW is the time to buy San Diego Real Estate. There are big changes coming for FHA financing, we still have the home buyer tax credit and a program that should be HUGE in the San Diego market 95% condo financing with a conventional loan. We will also be putting on monthly loan modification and Short Sale workshops free of charge.
For more information give me a call at (619)285-2921
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.
Fannie Mae Lowers the Debt to Income Ratio to Qualify for Home Loans.
Fannie Mae has said that the debt to income (DTI) requirements for all applicants will be going down from 55% to 45% (more income to qualify) so anyone looking for a San Diego mortgage loan should re-qualify as soon as possible. On a regular basis Fannie Mae reviews the DU system (desktop underwriter) to limit losses and to ensure that credit risk assessment will stay strong on as many future loans as possible. The new rules will go into effect between now and December 12th and one major lender has already changed guidelines to the new levels. This new change in the San Diego mortgage and home buying process should not be a surprise considering the recent mortgage loan performance in San Diego and the rest of the country. From 2003 until just last year the maximum debt to income ratio on most home loans was 60%, these ratios do not include food , utility bills, gas, insurance or anything else that is not listed on the credit report. If you factor these in it is easy to see why home buyers didn’t have much left over at the end of the month. With just a few unexpected expenses a home owner qualifying at such a high ratio could easily contribute to the recent “correction” that we have seen in the San Diego real estate market.
Make Sure that You or Your Client Still Qualify for that New San Diego Mortgage Loan!
It is extremely important that all perspective home buyers get re-qualified for their San Diego Home Mortgage. Since most soon to be San Diego home buyers have been putting in multiple offers on many properties to try and have one accepted for MONTHS they might be pre approved at a higher DTI and will no longer qualify for the same price home. Working with an experienced mortgage planner is more important than ever because with a proper file there are some exceptions for this new rule. Fannie Mae has announced that on an exception basis some loans will be approved at up to 50% DTI. There must be strong compensating factors like a steady job history, a large amount of assets and high credit scores. It is extremely important that all documentation is packaged properly UP FRONT before the property search even starts and before anything is submitted to the lender to ensure that a strong case can be made for any exceptions. It may be necessary to pay off a few small debts or to restructure a file completely even if a borrower was pre-qualified just a month ago.
If you or someone that you know is looking to buy or refinance a home in San Diego now is the time to make sure you still qualify. Give us a call at 619-285-2921 or click here to apply online. You can also download out printable mortgage planning package by clicking here.
In a huge contrast to how things were a few years ago, these days it can be harder than ever to qualify for and close a San Diego mortgage loan.
Besides Freddie Mac, Fannie Mae and FHA having tighter rules, many lenders have more strict guidelines in place for financing that are called, “overlays”. Knowing which lenders have what overlays does help us place your San Diego home mortgage with a lender that will give us (and you) the fewest problems. I have come up with a list of the 5 most common hurdles that we have seen in the past 2 years that can and will keep your San Diego mortgage loan from closing. These apply if you are looking to buy real estate in San Diego or refinance your existing home.
1) You Owe Too Much Money.
This is one of the basic 4 C’s of lending. When you are applying for your new San Diego mortgage loan you have to show a CAPACITY to pay it back. The fact is, guidelines are changing rapidly and on Fannie Mae loans the debt to income ratio is being dropped from 55% to 45% (this was up to 60% last year). These ratios do not include food, utilities, auto and life insurance, auto expense, medical expense or any discretional spending. If you have balances on a lot of credit cards and car loans, you might owe too much money to qualify.
2) There are Issues with Your Tax Returns.
All loans today (with a few VERY rare exceptions) are done with full documentation. This means to qualify for your San Diego mortgage loan we will need to show underwriting your Tax Returns for the last 2 years. In the past this has mainly been a problem for people that are self employed because of “creative accounting practices” and excessive deductions. More recently I have seen issues with W2 employees ranging from non reimbursed tools for construction workers and mileage deductions for sales people to rental income not being fully disclosed or even shown on the wrong schedule of the returns.
3) The Property Does Not Appraise
This is another one of the 4 C’s of lending, COLLATERAL. It seems basic, but a lender will not loan you more than a home is worth or in this market 96.5% (FHA only) of what it’s worth. With the new HVCC guidelines and the big drop in San Diego home prices, many homes and condos are not getting an acceptable appraised value. It has always been said that Real Estate is a local business and here in San Diego our local market is changing at a rapid pace. We have been seeing a lack of inventory and multiple offers on listed properties which should show that supply and demand is pushing values higher but with the new appraisal guidelines many appraisals are coming up short.
4) The Condo Association is Broke or There Are Too Many Rentals in the Complex.
Getting condo financing for anything over 80% Loan to Value is impossible right now for any financing other than FHA. Both FHA and conventional sources of funding are getting stricter on condo financing and it’s actually easier to get manufactured home (think mobile home) loans then loans for condos because of a few big hurdles. Many San Diego condo complexes don’t have the reserves required to qualify them as lendable because they have too many people that are late on their dues or that have been foreclosed on. The other reason is that complexes are being turned down is that there are too many rental units. Lenders are now requiring that over 50% of the units need to be owner occupied and many in our area are not. This is why we check the financials, default levels and owner occupancy levels early in the process of getting your San Diego mortgage loan approved.
5) You or the Property Don’t Qualify for Private Mortgage Insurance.
In recent years (before 3 years ago) if you didn’t have 20% for a down payment you could just get a second mortgage. There was no problem doing a refinance or purchase loan in San Diego because there were companies lined up willing to loan up to 100% of a property’s value with a FICO score as low as 580. These loans went away almost overnight when property values started dropping and the only option besides FHA (which is government mortgage insurance) is to get PMI or Private Mortgage Insurance. As with everything in lending, these policies are harder to qualify because they require a lower debt to income ratio and a higher FICO score. Also, private mortgage insurance companies will not issue a policy on a condo.
These are just a few of the reasons why it is more important than ever to work with a local San Diego mortgage expert. If you have any questions or would like to pre-qualify, give me a call at (619)285-2921.