Larry Saunders

There has been a substantial increase in home sale activity in the past thirty days or so as the spring real estate market is heating up.  Every day I’m getting calls from homebuyers who want to get pre-qualified for purchasing and home and a good percentage of them are going under contract.  I’ve met with a number of clients recently that have told me that they realized they would not get as much for their home as they could have a few years ago but they decided to go ahead and sell home and buy a larger home because they realized the larger home price would also be lower and it actually would be easier to make the move now… especially with interest rates still at the lowest they’ve been in their lifetime.

The Market Report by the Charlottesville Association of Realtors recently reported a 9.2% increase in home sales in the first quarter of this year compared to last year.  That is certainly a good sign.  There are reports that there are still a lot of foreclosures but agents are seeing mulitple contracts and the price being bid up above the list price in some cases. It seems to me that we are at the “bottom” of the market and home prices are stabilizing and potentially moving up from here.

Larry Saunders
Mortgage Loan Officer
Mahone Mortgage, LLC
Mobile: 434-466-5662

Larry Saunders

It was announced this week that FHA will have a new premium structure starting April 1, 2012.  FHA will increase the monthly Mortgage Insurance premium (MIP) by 0.1% per year.  This is increase the annual premium from the current level of 1.15% per year to 1.25% per year.  If a home buyer takes out a $200,000 loan, this will increase their monthly payment by about $16 per  month.

In addition, FHA will increase the Up Front Mortgage Insurance Premium (UFMIP) by 0.75% effective April 1, 2012 also.  This will change the UPMIP from the current level of 1% of the loan amount to 1.75% of the loan amount.  For the home buyer taking out a $200,000 loan, this will increase the premium they pay by $1,500.  As always, the UFMIP can be added to the loan amount.

These figures for are home buyers using 30 year, fixed rate, FHA financing with the minimum down payment of 3.5%.  The premium cost is lower with bigger down payments or 15 year financing.  However, I’ve found the majority of people using FHA financing use 30 year financing with the minimum 3.5% down payment.

Larry Saunders
Mortgage Loan Officer
Mahone Mortgage, LLC
Mobile: 434-466-5662

Larry Saunders

There was an article in the Washington Post today by Ken Harney about an issue that all of us in the real estate industry should be cognizant of.   You probably are aware of The Mortgage Forgiveness Debt Relief Act that was passed in 2007.  This law allows homeowners who have received principal reductions on their mortgages as a result of loan modifications, short sales or foreclosures to avoid income taxation on the amounts forgiven.  Homeowners in this situation did not have the funds to pay their mortgage so they certainly would not have the funds to pay income tax on the “windfall” principal reduction they received.

This law is set to expire at the end of this year and in today’s political climate, it appears unlikely this law will be renewed.  In an election year with lots of tax and budget issues, the cost of this program (estimated at $2.7 billion) will be hard to justify.  Ken points out that some members of Congress are opposed to what they see as a federal benefit for people who did not pay their home loans and this benefit is then subsidized by taxpayers who did the right thing and stayed current on their loans even while their mortgage was underwater or they were facing severe financial distress.

I’m bringing this issue up because it is likely you are talking with clients who are considering a short sale, a foreclosure or a loan modification.  These types of transactions typically take a substantial amount of time.  If someone is in this situation, it is likely they will have even more financial stress if their transaction does not finalize until next year because then they will have to pay federal tax on the amount of their mortgage loan that is “forgiven” by the bank.  This is information that homeowners in this situation need to take into consideration when they are making hard decisions about how and when to proceed.

Larry Saunders
Mortgage Loan Originator
Mahone Mortgage, LLC
Mobile: (434) 466-5662
Email:  larrys@mindspring.com

Larry Saunders

I worked as a Realtor for twenty years and as a Mortgage Loan Officer for the past 10 years and I’ve always told everyone to bring a cashier’s check for the funds necessary for closing on their home.  Well, things have changed.  Over the past year, many banks have been putting holds on cashier’s checks.  This creates a problem because those funds have to be available immediately.

There is an easy solution to this new issue.  Just have the borrower have thier bank wire the funds from thier bank to the closing office’s bank.   The funds will be readily available for the closing office to disburse the funds to the seller (or the lender if the transaction is a refinance).  The closing office can provide the necessary information to the borrower for where to have the funds wired and every bank can easily make the arrrangements.  It does take several hours for a wire to go through to it is best to plan ahead and make arrangements for sending the wired funds the day before closing.

Larry Saunders
Mortgage Loan Officer
Mahone Mortgage, LLC
Cell: 434-466-5662

Larry Saunders

It has been my experience that most people think when they see a mortgage interest rate advertised in the newspaper or the Internet that “the rate” they see is “the rate” they would get if applies for that mortgage loan.   There is always the possibility that “the rate” is artificially low to make the lender’s phone ring and then the potential borrower would be switched to a different rate for a myriad of reasons (bait and switch).  Assuming the lender is not unethical, there are still many reasons why the actual interest rate a borrower receives is different than “the rate” they expected.

Most people do not realize that the actual interest rate a borrower receives is customized for that borrower’s particular situation.  There are many adjustments to the rate that might raise or lower the interest rate.   Most of the adjustments tend to increase the rate rather than lower the rate.  About the only adjustment that lowers the rate bit is a 40% or large down payment.  All the other adjustments will increase the cost of the financing.  Most people think a great credit score will lower their interest rate. Actually, a great score will not lower the rate but score less than great will increase the cost.  The lower the score, the greater the cost.

Fannie Mae and Freddie Mac publish a chart of adjustment base on the credit score and the loan to value (the loan amount divided by the appraised value of sales price, whichever is lower).  All banks will have to pay these fees to Fannie Mae of Freddie Mac when they sell the loan to them so this fee is collected from the borrower when they close on the loan.   The smaller the down payment and the lower the credit score is will increase the cost of the financing.

There are many other  adjustments made to arrive at the actual interest rate.  If the loan amount  is small, most lenders will increase the rate.  The longer the period  of time a loan lock is required, the more fees get added.  If there is a second loan associated with the property, there are additional fees.  Investment loans have additional costs that can change the final interest rate.

There are many other possible details that could alter the interest rate for a home loan.  It would be a good idea for a borrower to discuss with their lender how their situation impacts the financing they need so that the financing is adjusted to best suit the borrower’s situation.

Larry Saunders
Mortgage Loan Officer
Mobile (434) 466-5662
Mahone Mortgage, LLC

Larry Saunders

I’ve had a number of people ask me how long they must wait before they can purchase a home after they have been through a short sale (sales price did not cover amount owed) or a foreclosure (home given back to bank).  Of course, if you pay all cash for your new home, you can buy it right away.  If you require financing like most people, there are guidelines in place that establish minimum waiting periods that vary depending upon each unique situation.

If FHA financing is being used to purchase the new home, in a foreclosure situation it would be possible to buy 3 years from the date the foreclosure was completed.  If there are acceptable extenuating circumstances, it could be possible to buy 1 year after the foreclosure.  If there was a short sale, the  same 3 year rule applies from the date the sale was closed and transferred to the new owner.

If conventional financing is being used to purchase the new home, if there was foreclosure, it takes 7 years before this financing could be used if there are no extenuating circumstances.   Technically, it might be possible to purchase after 3 years with acceptable extenuating circumstances and at least 10% down.  It is even possible to buy a home 2 years after a short sale closes if the borrower uses a 20% or larger down payment.

With VA financing used to purchase the new home, it only takes 2 years to wait after a foreclosure and only 1 year if there are acceptable extenuating circumstances.  The same 2 year rule applies after a short sale.

It is also possible to use USDA Rural Housing financing in these types of situations.  With Rural Housing financing, the waiting period is 3 years for a foreclosure or a short sale.  And with acceptable extenuating circumstances, Rural Housing is possible anytime after the foreclosure or short sale.

To summarize, a short sale would be more preferable than a foreclosure.  If extenuating circumstances are claimed, they have to be out of the control of the borrower and well documented.  In all foreclosure or short sale scenarios, the borrower’s credit score will be downgraded substantially.  It will be necessary for the borrower to re-establish good credit during their waiting period to be considered for home financing after the requisite waiting period.

Larry Saunders
Loan Officer
Mobile: (434) 466-5662

Larry Saunders

If you think you missed the boat for locking in a low mortgage interest rate for buying a home or refinancing, there is no need to worry.   Home loan rates do change a little bit each day depending upon market conditions… but rates are still at historically low rates.  The most popular financing used today is 30 year, fixed rate conventional financing and you can still snag that financing in the upper 3% range.    If you want to use little or no down payment, you could go with FHA, VA or Rural Housing financing and those rates are a little lower than conventional financing.  If you want to pay your home loan off sooner and decide to go with 15 year financing, you can get that in the low 3% range.  Of course, everybody’s situation is different and the exact interest rate a borrower can get is determined by many factors including credit score, down payment, type of property, and how long a rate lock is required.  But you can still get a great rate no matter what your situation is.

Larry Saunders
Mortgage Loan Officer
Mobile (434) 466-5662
Mahone Mortgage, LLC

Larry Saunders

Fannie Mae and Freddie Mac are now accepting mortgages into the new and improved Home Affordable Refinance Program (HARP  II).  HARP is the refinance program that allows homeowners who own more than their home is worth to take advantage of today’s low interest rates.  This new program removes the 125% loan to value (LTV) ceiling for fixed rate mortages owned by Fannie Mae and Freddie Mac.  LTV is determined by dividing your new mortgage amount by the current market of your home.

With the decrease in home values in the past few years, a lot of homeowner’s fall into this category where their home loan is greater than the current value.  Without the HARP program, these homeowner’s would not be able to refinance and take advantage of today’s low interest rates.

This new HARP program also lowers the risk-based fees when refinancing which makes refinancing even more attractive.  In many circumstances, it has been my experience that a new appraisal is not required for one of these refinances.  If a borrower’s current loan does not have private mortgage insurance (PMI), a new HARP loan will not require PMI even if the new refinance loan is more than 80% of the current market value of the home.

There are some eligibility requirements for these new loans.   The existing mortgage must  have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.   Borrowers must be current on their mortgage payments with  no late payments in the past 6 momths and no more than one late payment in the last 12 months.

Without a program like HARP II, homeowners curren on thier mortgage had to suffer the decreased market value of their home and the inability to take advantage of lower interest rates.   This program is designed to help those home owners.  There are a number of other detailed qualifications so a homeowner should contact a lender to determine if refinance would be possible and if refinancing would be in the financial best interest of the homeowner.  I would be glad to analyze your situation to provide you with what would be the best options for you.

Larry Saunders
Mortgage Loan Officer Mobile
(434) 466-5662
Mahone Mortgage, LLC

Larry Saunders

Starting this year, homeowners can no longer write off their private mortgage insurance (PMI) premiums like they have for the past several years.  Some type of mortgage insurance is required when a home buyer uses less than a 20% down payment.  Mortgage insurance for conventional mortgage loans can be paid two
different ways.  It can be paid as an additional premium with their monthly mortgage payment.  Homebuyers can also choose to use a technique that I’ve recommended for years and that is to use what is called Lender Paid Mortgage Insurance (LPMI for short). W ith LPMI, the borrower pays a one time fee for the mortgage insurance at closing and then there is no monthly premium added to the monthly mortgage payment.

For many purchase transactions, the borrower can possibly negotiate to have the home seller pay the one time LPMI fee so the borrower ends up with a more affordable monthly payment without paying any out of pocket expense.  Now that the monthly premium for mortgage insurance is not longer tax deductible, LPMI is looking even more attractive to many home buyers.  LPMI is also an attractive option when a borrower is refinancing their home.  Using LPMI gives the homeowner lower monthly payments from the first payment and it costs less than using monthly PMI if the borrower stays in the home for more than 3 years.  The cost for using LPMI is about the same cost of about 3 years worth of PMI monthly payments.  A borrower paying PMI typically has to make those additional monthly payments for about 10 to 14 years.

Larry Saunders
Mortgage Loan Officer
Mobile (434) 466-5662
Mahone Mortgage, LLC

Larry Saunders

A change that just started in the past week is an increase in the cost for conventional financing to pay for the temporary extension of the payroll tax cut that was enacted just before Christmas.  This new fee is supposed to go into effect on April 1 but it is for loans delivered to Fannie Mae and Freddie Mac starting on April 1.   That means banks are starting to add this fee to new loans that are being originated right now because by the time the loan closes and gets delivered to Fannie Mae or Freddie Mac, April 1 will be here.  The fee varies from 0.375% to 0.5% of the loan amount which is equivalent to an interest rate about one eight percent higher.  Some banks have not yet instituted this new fee yet so if are thinking about moving ahead, right now would be a good time to buy before this new fee hits.

Personally, I don’t understand the rationale for funding the payroll tax relief by raising costs for home buyers at a time when the housing industry is still trying to recover.  But they didn’t ask my opinion…

Larry Saunders
Mortgage Loan Officer
Mobile (434) 466-5662
Mahone Mortgage, LLC