All posts in Guideline Changes

Cash Out Refinance Within 6 Months of Purchasing

by Justin Miller on August 22, 2011 in Guideline Changes with No comments

Fannie Mae previously had seasoning requirements for a borrower to own the home for 6 months before they could take the cash out of the property.  They have now made an exception if you bought the property using cash.  This could potentially create more sales and we could certainly use it in the Fort Lauderdale and South Florida housing market as more than 50% of sales are cash.

Here are my guidelines pertaining to his change:

Borrowers who purchased the subject property less than six months ago are eligible for a cash-out refinance if all of the following requirements are met:

·         Desktop Underwriter and Manually Underwritten loans only. Loan Prospector and Jumbo loans are not eligible.

·         The LTV/CLTV/HCLTV must be based on the lesser of the original sales price or the current appraised value.

·         The new loan amount must not be more than the actual documented amount of the borrower’s initial investment in purchasing the property plus the financing of closing costs, prepaid items and points.

·         The purchase transaction was an arms-length transaction.

o    If seller of property was an LLC, the principals of the LLC must be documented.

·         The purchase transaction is documented by the HUD-1 Settlement Statement, which confirms that no mortgage financing was used to obtain the subject property.

·         The source of funds for the purchase transaction must be documented.

·         The preliminary title search or report must not reflect any existing liens on the subject property.

·         If the source of funds to acquire the subject property was an unsecured loan or HELOC secured by another property, the new HUD-1 Settlement Statement must reflect that source being paid off with the proceeds of the new refinance transaction.

·         All other cash-out refinance eligibility requirements and cash-out pricing apply.

 

How To Determine How Much Home You Can Afford In Fort Lauderdale

by Justin Miller on July 19, 2011 in Guideline Changes with No comments

The Blog on Trulia from Dan Green does a great job of explaining some of it but let me add some of my own commentary too.

He is 100% correct when he mentions interest rate fluctuations which is kind of funny because about an hour ago I got off the phone with a client and told them the maximum they can qualify for is $300,000 paying off a car but one of the big banks said they can go to $315,000 without that.  I explained that we are really governed by the same guidelines it’s just I am more conservative when it comes to property taxes and insurance.  I use what I feel the real numbers will be, not what we hope they will be along with taking into account a 1% higher of an interest rate.

I know you will hear some experts say you shouldn’t be above 28% or 31% or what have you on your mortgage payment but that is a generalization which is not correct and the correct answer is that it depends.  Every borrower is different no matter how much alike some people think they are.  This is where a true Mortgage Professional comes into play that will guide you and help you use your mortgage as a financial tool to building wealth.

Make sure you know as a buyer what you are qualified consists of and take all of that into consideration when looking at homes.

Fannie Mae’s Seasoning Change

by Justin Miller on July 7, 2011 in Conventional Loans, Guideline Changes with No comments

I just saw the article from CNBC so I wanted to make sure that I wrote something on it as clarification.   The article said that there wasn’t an announcement emailed out but there in fact was since it has been sitting on my desk for over a week since receiving the announcement.

Fannie Mae requires someone who bought a home with cash to have to wait 6 months in order to refinance the property based off of the purchase price or appraised value, whichever is lessor.  After 12 months it would go off of the appraised value.

Their Selling guide was updated and the full announcement is below.  However, I haven’t seen any investors implement the change in their guidelines so we will see if there are any overlays (additional restrictions).

Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower purchases a home and subsequently applies for a cash-out refinance. The Selling Guide has been updated to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction under the following parameters:

The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).

The purchase transaction was an arms-length transaction.

The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The preliminary title search or report must also confirm no liens on the subject property.

The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.

All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.
In addition, the multiple financed property policy is being updated to allow cash-out refinances that meet the delayed financing exception.

FHA’s Increased Monthly Mortgage Insurance Goes Into Effect Today

by Justin Miller on April 18, 2011 in Conventional Loans, FHA Loans, Guideline Changes with No comments

Now more than ever it is better to go with a Conventional loan than an FHA loan.  In the State ofFlorida, an FHA loan requires 3.5% down and a Conventional loan requires a minimum of 5% down.  The only problem some may run into with getting a Conventional loan is that you need a minimum of a 680 credit score.

The debt to income ratio requirements on a Conventional loan are more strict limiting it to a maximum of 41% and sometimes as high as 45% but really you shouldn’t be any higher than that anyway.  Just based upon what the mortgage insurance companies are doing you can see more liquidity is coming back to the market.  You can now get financing on attached housing in Florida and go up to 45% debt to income ratios where before no one was going over 41%. 

With a Conventional loan the monthly mortgage insurance is less than that of an FHA loan.  Typcially a Conventional loan only requires you to keep the mortgage insurance on for a minimum of 2 years AND until you have 20% equity in the property where FHA is 5 years AND 22% equity.  It is your responsibility as the borrower to contact your mortgage servicer to get it removed.

In addition to an FHA loan having a higher monthly mortgage insurance premium there is also a one time Upfront Mortgage Insurance Premium (UFMIP) of 1% of your loan amount.  This does get wrapped into your loan amount but is a charge nonetheless. 

MGIC, one of the mortgage insurance companies, has a great illustration comparing a Conventional loan to an FHA loan http://mgic.com/education/mi_better_option.html. 

I am not a real estate agent nor do I pretend to be but my experience has been that a seller is more inclined to accept a Conventional loan over an FHA loan because there is a misconception that a Conventional loan is more likely to get approved.  The appraisal guidelines are a little less strict than FHA but that is about it. 

Both loans are good loans but as you will see a Conventional loan is less expensive.  No matter what I would always suggest looking at putting less money down if you do not have a lot of money leftover after closing and if you are not maxing out your retirement.

Fannie Mae Guidelines Changes Coming Up

by Justin Miller on November 23, 2010 in Conventional Loans, Guideline Changes with No comments

It’s funny because I was just thinking to myself the other day that if they loosened the guidelines for those who have had foreclosures and short sales a little more it could help correct the housing marketing.  I am sure many do not what to hear this but the fact of the matter is people are human and make mistakes.  Many have learned from this housing downturn and will making much smarter financinal decisions, smarter than they ever have before, going forward.  Also, because lots of time the consumer has a lack of self control the banks need to put rules in place so someone isn’t able to overextend theirself. 

Well, Fannie Mae just released that they are extending the waiting period that must elapse after a borrower experiences a foreclosure to 7 years from 4 years.  Fannie goes onto say that if there are extenuating circumstances you can follow their new rules but it will be a manual underwrite which in general means stricter rules. 

On a positive note, Fannie Mae is decreasing their maximum debt to income ratio down to 45% from 50%.  This is a good thing because you shouldn’t be any higher than that and really shouldn’t even be that high but there are different circumstances that can allow for higher ratios especially with compensating factors such as high credit scores, assets, etc.

Fannie Mae & Second Credit Reports

by Justin Miller on May 25, 2010 in Guideline Changes with No comments

There are a lot of rumors out there about this right now.  Here is what the HousingWire reported.

A source at Fannie tells HousingWire that reports in the press are misstating the actual provisions of the LQI1, coming into force June 1. The source says that a second credit report on the borrower needn’t be pulled near to closing on the mortgage, although “a lender may choose to do so,” he said.

As I learn more I will let you know but remember, the lender may choose and guess what?  I am sure we will be choosing to pull.  We have to protect ourselves.  The best thing to do is to tell the borrower not to use any credit cards or take on any debt until the loan is closed. 

http://209.236.64.240/2010/05/24/fannie-will-not-require-second-credit-report-pull-for-mortgage-approval/?utm_source=rss&utm_medium=rss&utm_campaign=fannie-will-not-require-second-credit-report-pull-for-mortgage-approval

Fannie’s Guidelines On Preforeclosure Events

by Justin Miller on April 17, 2010 in Conventional Loans, Guideline Changes with No comments

Fannie Mae has adjusted their underwriting criteria for borrowers who have experienced a “preforeclosure event.”  This is for preforeclosure sales, short sales, or deeds-in-lieu of foreclosure.  Starting in July, Fannie Mae has changed the waiting period after the event and based it on the loan to value for the transaction and any extenuating circumstances.  In addition, Fannie is updating the requirements for determining that borrowers have re-established their credit after a significant credit event.  To summarize it, the more money you put down the less time you have to wait. 

http://r20.rs6.net/tn.jsp?et=1103308098656&s=1892&e=001a2QeXhFsydOL46gRJEL6kp1zM9Ipbb_On_dvfYmrAaw9DvtD59Krs6Q6H-vyHM9wOxPDItHGFEzHfl3AZp7HSbwM73nCKx1zNHmuYk0NMVgdHyjhdWOKA4LqUOEwsZfDFBQI5ehiAqXCb-fLrRhLFKTVyWWGgXZyW7emIeDcTbU40XzwCPrWRVMpHUcVsou2

The 10 Best Places For 2nd Homes

by Justin Miller on March 9, 2010 in Guideline Changes with No comments

Florida grabbed 3 of the 10 spots.  This really shouldn’t be a surprise as the weather in Florida is great and the prices have come down so much.  It is affordable if you can afford to have the luxury of a second home.  Not everyone can and you need to make sure it is the right purchase for you. 

“Prices are way down–40% off the peak in some locations. Seemingly at or near bottom, they are starting to attract the first wave of bargain hunters–and not just families in need of R&R. Hard-nosed investors also are on the prowl, says Jan Reuter, head of residential real estate at U.S. Trust Bank of America Private Wealth Management: “We’ve seen an uptick in buying in just the last couple of months.”

http://online.wsj.com/article/SB10001424052748704869304575109461496208030.html?mod=djemRealEstate_t 

Fannie Mae’s “Special Approved Designation” For Condos In Florida

by Justin Miller on January 22, 2010 in Conventional Loans, Guideline Changes with No comments

If you want to see what projects have been added to the list you can click on this link https://www.efanniemae.com/syndicated/documents/dps/condopud/FL_Spcl_Aprvl.pdf 

I found the FAQ’s very informative on the process for approving the condos.  Here is what stuck out to me:

Can a homeowners’ association (HOA), property manager, or lender submit a project for consideration?

No. Fannie Mae determines the projects for review. Lenders can suggest projects, but Fannie Mae retains the discretion to decide which projects are reviewed.

If a project meets all of Fannie Mae’s standard project eligibility requirements, can the project receive a Special Approval designation?

No. The Special Approval process is for established projects that do not meet Fannie Mae’s standard project eligibility requirements. For projects that meet our standard eligibility requirements, there are several review options available, including: “Limited Review,” “CPM™ Expedited Review,” and “Lender Full Review.”

To read the FAQ’s in their entirety, click on the link below. 

https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/condogls/pdf/specialappfaqs.pdf 

FHA Mortgagee Letters On Changes Announced

by Justin Miller on January 22, 2010 in FHA Loans, Guideline Changes with No comments

Here is what HUD put out to all of their email subscribers which is the exact language you want to read. 

FHA Announces Policy Changes to Address Risk and Strengthen Finances:
New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities

FHA Commissioner David Stevens announced on 01/20/10 a set of policy changes to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The changes announced are the latest in a series of changes Stevens has enacted in order to better position the FHA to manage its risk while continuing to support the nation’s housing market recovery.

The FHA will propose to take the following steps: increase the mortgage insurance premium (MIP); update the combination of FICO scores and down payments for new borrowers; reduce seller concessions to three percent, from six percent; and implement a series of significant measures aimed at increasing lender enforcement…

To read this press release in its entirety please visit: http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016

Effective for FHA loans for which the case number is assigned on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent. This policy change will increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions…

To read these mortgagee letters and any attachments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2009 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.

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