Mortgages prefer sunshine

 Homebuyer Tips, Loan Guidelines  Comments Off on Mortgages prefer sunshine
Feb 212016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

I’m not sure what to make of this, but I felt I needed to share. Check the weather forecast before you apply for a mortgage. Mortgage approval rates are higher when it’s sunny.

That’s the result of a study by the Cleveland Federal Reserve. It studied data from 1998 to 2010 and found that sunny days boosted approval rates by almost 1% while overcast days reduced approval rates by almost 1.5%. That may seem insignificant until you consider that the extra credit provided on a sunny day is about $150 million. Now, it seems significant.

But the result for gloomy days has a silver lining. It turns out sunny-day borrowers aren’t as financially responsible. Loans approved on sunny days have significantly higher default rates. Maybe that’s explains bankers’ penchant for golf.

USDA makes qualifying for a mortgage a little easier

 Loan Guidelines, Owner-occupied, Residential Mortgage  Comments Off on USDA makes qualifying for a mortgage a little easier
Feb 202016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

USDA offers one of the few no-money-down loans, but its credit restrictions have disqualified some first-time homebuyers who don’t have established credit histories. USDA required a loan applicant to have at least 3 credit accounts with a 12 month or longer payment history.

That changed last week. USDA dropped the number of required accounts to 2, which makes it a little easier.

For homebuyers who don’t use traditional credit that appears on a credit report, USDA still allows the use of non-traditional credit accounts to achieve the required 2. Non-traditional credit includes rent, utility, and insurance payments.

However, good payment histories on non-traditional accounts cannot be used to replace accounts that appears on your credit report. In other words, if your credit score is low because of negative items on your credit report, USDA won’t ignore these items just because you have good payment history for rent and utilities.

Take advantage of new loan limits

 Loan Guidelines, Residential Mortgage  Comments Off on Take advantage of new loan limits
Jan 092016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

While Fannie Mae and Freddie Mac left the conforming loan limit for single-family homes at $417k in 2016, HUD raised the FHA loan limit in 4 TX metros. Remember that FHA sets an area’s loan limit based on 115% of the area’s median home price.

Median home prices rose in Texas last year, so loan limits rose in Austin, Houston, Dallas/Ft. Worth, and Midland. Austin’s limit rose slightly to $333,500 for a single-family home. Houston’s limit also rose only a little to $330,050. The DFW limit took the prize for the largest increase, rising $24k to $334,650, now the highest in the state. Midland also had a sizable increase, rising to $285,200. The limit in San Antonio didn’t change, remaining at $316,250.

Remember that these limits apply to the entire metro area including surrounding counties. The FHA loan limit remains at the minimum, $271,050, for the rest of the state.

Can you buy a home before you sell your existing home?

 Loan Guidelines, Residential Mortgage  Comments Off on Can you buy a home before you sell your existing home?
Nov 062015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

In today’s housing market, you need to act quickly when you find a home you want. This can put you in a bind if you need to sell your existing home so you can afford a new one because if your existing home doesn’t sell first, your income would have to be sufficient to support both housing payments.

But a recent change in loan guidelines could help. If you have an executed contract for the sale of your existing home, we can exclude your current housing payment no matter when the sale will close. If the contract includes a financing contingency, we will need a loan approval from the other lender to satisfy the guideline, or the buyer can waive the contingency.

The same change applies if your employer is relocating you and has a relocation plan that covers your existing mortgages.

FHA changes may hurt homebuyers with student loans

 Loan Guidelines, Loan Programs, Residential Mortgage  Comments Off on FHA changes may hurt homebuyers with student loans
Oct 082015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

New FHA loan guidelines may make it harder for you to qualify for a mortgage if you have student loans.

Previous to the new rules, FHA allowed us to ignore student loans that were deferred greater than 12 months. The new rules eliminate this exemption. All student loans must be considered as part of your monthly debt.

If your student loan servicer won’t report a monthly payment, the new rules say we must use 2% of the loan balance. Fortunately, loan servicers typically will provide an effective payment based on the loan’s current balance if you ask, and this payment typically is closer to 1% of the loan balance.

The change makes FHA more consistent with conventional loan programs. However, Fannie Mae allows us to use 1% of the balance if the servicer won’t report a payment.

FHA still provides one advantage over conventional loans. It allows the use of the actual payment for income-based student loan repayment plans. These plans often have payments that are less than 1% of the loan balance.

Buying real estate using a trust

 Loan Guidelines, Residential Mortgage  Comments Off on Buying real estate using a trust
Sep 232015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

For financial planning purposes, homeowners occasionally choose to hold their property in a trust. I’ve had this situation arise several times recently, so it’s a good time to review some of the conventional loan guidelines concerning ownership in a trust.

Fannie Mae and Freddie Mac are in the business of lending money secured by real estate. Thus, they must be able to foreclose on the real estate in case the borrower defaults. Thus, a trust used in connection with a conventional loan must be a revocable trust, also known as a family trust. This guideline, revocable as opposed to irrevocable trust, probably stops more loans involving trusts than any other.

Also of consequence is that the grantor of the trust must be a natural person and must be a trustee, and the primary beneficiary must be the grantor. The income and assets of the grantor are used to qualify for the mortgage, and the grantor is liable for repayment of the mortgage.

Finally, it’s important to remember that Fannie and Freddie still do not allow borrowers to title property in a corporation’s name, even a single-member LLC. This is true even if the borrower agrees to be personally liable for the mortgage.

Fannie Mae changes make it easier to qualify for a mortgage

 Investment, Loan Guidelines, Residential Mortgage  Comments Off on Fannie Mae changes make it easier to qualify for a mortgage
Aug 262015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Let’s look at some recent changes to loan guidelines that make it easier to qualify for a mortgage. These changes apply to Fannie Mae conventional loans.

– First, many folks, especially those employed in sales, have been penalized when applying for a mortgage if they write off business expenses on their tax return. Underwriting rules said we had to deduct the written-off amount from qualifying income. Fannie has changed that. For salaried borrowers or those with commission income that’s less than 25% of total income, the new rules say we can ignore the expenses.

– Second, with recent home price appreciation, some homebuyers are choosing to keep their current homes and rent them. Previous underwriting rules required that the current home have at least 30% equity in order for us to count the rental income and required the homebuyer to have extra cash or reserves to cover up to 6 months of housing payments on the current home. The new rules eliminate the 30% requirement, but the homebuyer still may need reserves depending on the financial strength of the borrower.

– And, finally, if reserves are required, a borrower now can use 100% of vested retirement account balances to satisfy the requirement. The previous rules required that we use a discounting factor of 60%.

Investors: Freddie raising number of homes you can own

 Investment, Loan Guidelines, Residential Mortgage  Comments Off on Investors: Freddie raising number of homes you can own
Aug 122015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

After the financial meltdown, Fannie Mae and Freddie Mac decided they would limit their loan programs to folks who had no more than 4 mortgaged properties. Freddie finally is raising its limit to 6. The change becomes effective 10/26.

Over at Fannie Mae, it has created a special loan program that allows up to 10 mortgaged properties, but not all lenders offer the program, and it comes with slightly higher interest rates. Freddie’s change is to its conventional loan program, so a borrower who uses the program won’t face higher rates or other hurdles.

Freddie also is removing its requirement that an investment homebuyer have a two-year history of managing investment properties and is removing the requirement that the homebuyer maintain rent loss insurance in order to qualify.

These are huge changes that should make it easier for investment property buyers to qualify for conventional financing.

Changes to conforming mortgage loan limits?

 Loan Guidelines, Residential Mortgage  Comments Off on Changes to conforming mortgage loan limits?
Aug 072015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Could the conforming loan limit change this year? The Wall Street Journal seems to think so. If it’s right, this would be the first time in a decade.

The conforming loan limit is the maximum amount you can borrow on a loan financed by Fannie Mae or Freddie Mac. In all areas of TX, that limit is $417k. (In the early 1970’s, the limit was $33k.) A loan amount above the limit is called a jumbo loan, and those loans typically have stricter qualifying criteria, such as higher down payment requirements, and traditionally have carried higher rates. By contrast, the minimum down payment for a conforming loan is 3%.

The limit is based on median home-sale prices reported by the Federal Housing Finance Agency (FHFA) with some wiggle room for higher-priced areas. The Journal notes that home prices in many housing markets have climbed back to pre-recession levels.

We’ll know this fall if FHFA makes a change, which would become effective on Jan 1st.

USDA making housing loan a bit more expensive

 Loan Guidelines, Loan Programs, Residential Mortgage  Comments Off on USDA making housing loan a bit more expensive
Aug 052015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

USDA is raising its guarantee fee for the Rural Development home loan program on Oct 1st. The Rural Development program is one of the few no-money-down loan programs. It’s only available in areas USDA considers rural in nature, but that definition includes a lot of exurbs of major TX cities.

The guarantee fee is up-front mortgage insurance due at loan closing. Most borrowers choose to roll the fee into the loan amount rather than pay it at closing.

The fee is rising from 2% to 2.75% of the initial loan amount. On a $150k home, that will raise the monthly payment by about $5.50 at today’s interest rate.

USDA is not changing its monthly mortgage insurance rate, called the annual fee, which remains 0.5% of the loan balance.

Please note that USDA will apply the change based on the date it commits to the loan, not the date the borrower applies. In order to beat the change, you really need to find a home this month as it generally takes about 30 days from contract signing to USDA loan approval.