Bulls & Blogs

More low down payment options

Loan Programs, Residential Mortgage Comments Off

Aug 222018

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

By G. Steven Bray

Fannie Mae and Freddie Mac have 3% down conventional loan programs that target low-to-moderate income folks. We used to call these community lending programs because they’re designed to fulfill Fannie and Freddie’s mandate to provide assistance for mortgages to low and moderate income families and underserved areas. The programs go by the monikers HomeReady and HomePossible.

Unlike the programs we discussed yesterday, you don’t have to be a first-time homebuyer to qualify. However, if the buyers are first-timers, one of them must complete a homebuyer education course for the HomePossible program. For HomeReady, one must complete homebuyer education regardless of first-timer status.

The programs are income-limited. By that I mean your total income cannot exceed a limit, which can differ even within a given county. For both programs, the limit typically is set to an area’s median income. However, the programs waive the limit in disaster areas and in certain areas Fannie and Freddie consider to be underserved. Call me if you want some help determining the income limit for your area.

So, given the programs we discussed yesterday, who cares that we have another 3% down program? Three reasons:

– Conventional low down-payment programs require mortgage insurance, which can bump up your housing payment quite a bit. HomeReady and HomePossible have lower mortgage insurance rates than the other low down payment programs.

– Second, the programs’ easier guidelines may make it easier for you to qualify.

– Finally, you don’t have to be a first-time homebuyer. For HomePossible, you can’t currently own other real estate, but Freddie carves out some exceptions to that in cases of divorce or inheritance.

The programs have other features and restrictions that may make one more appropriate for you than the other. Give me a call to see what’s the best fit for your situation.

Freddie adds another low down payment option

Loan Programs, Residential Mortgage Comments Off

Aug 202018

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

By G. Steven Bray

Freddie Mac recently joined Fannie Mae in offering a 3% down conventional loan program with no income limitations. Freddie calls its program HomeOne, and like Fannie’s program, it targets first-time homebuyers.

A lot of folks hear that, first-time homebuyers, and tune out, but you may be a first-time homebuyer and not realize it. Fannie and Freddie define a first-time homebuyer as someone who hasn’t owned real estate in the last 3 years. Freddie expands that definition to allow folks who owned a home with their ex-spouse to qualify.

If you’re buying a home with another person, only one of you has to be a first-time homebuyer. And if all of you are first-time homebuyers, one must complete a homebuyer education course prior to closing. The cost is minimal, and most folks complete the course online.

The programs are limited to single-family homes and condos and have a min credit score of 620. The 3% down payment may come from your own funds or from an acceptable gift source, such as a family member. It can’t come from the seller, but the seller can contribute up to 3% of the price towards your closing costs.

With this offering, Freddie and Fannie finally have comparable low down payment programs. The two have nuanced differences, so give me a call to see if one program is more appropriate for you than the other.

Next time, we’ll look at conventional low down payment options that specifically target low-to-moderate income folks.

USDA shrinks areas eligible for RD mortgage

Loan Programs, Residential Mortgage Comments Off

Jul 012018

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

By G. Steven Bray

The USDA Rural Development loan is a great option for homebuyers in rural locations. It requires no down payment and has lower monthly mortgage insurance than an FHA loan.

The loan is only available in areas that USDA considers “rural,” but USDA’s rural includes some areas you might not expect. USDA provides an eligibility map you can use to determine if a particular property is eligible, and a new map went into effect on Jun 4th, which narrowed the eligible area just a bit.

The biggest changes I noticed in the map are around Austin. Most of the fast-growing suburbs of Hutto, Buda, Kyle, and Leander were eligible under the previous map. Now, they’re ineligible. However, more distant suburbs, like Dripping Springs, Liberty Hill, Bastrop, and Taylor remain eligible.

In the Houston area, the expansion of the ineligible areas occurred mainly to the south and southwest and around Conroe. The I-10 corridor to the west and east, and the I-69 corridor to the northeast appear unaffected.

Around the Dallas-Ft. Worth area, more of the fast-growing 380 corridor is now ineligible, but otherwise the metro escaped mostly unaffected.

In the San Antonio area, more of the 281 and I-35 corridors are ineligible as is the suburb of Boerne. However, the boundary to the west appears unchanged.

We’ve got a link to the eligibility map on our Web site or in the text version of our blog.

USDA Rural Development eligibility map

No down payment loan for hurricane victims

Loan Programs, Residential Mortgage Comments Off

Oct 302017

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

By G. Steven Bray

Government reports show Hurricane Harvey completely destroyed almost 13k homes and damaged more than 200k. As folks continue to recover from this destructive storm, some may be able to take advantage of a special FHA mortgage program specifically designed for disaster victims.

The program, called 203(h), allows a disaster victim to purchase a new home with no down payment. While the damaged home must be located in the federally declared disaster area, the new home can be anywhere. The damage to the existing home must be to such an extent that reconstruction or replacement is necessary.

As this is an FHA mortgage, it will have both up-front and monthly mortgage insurance. You can roll the up-front mortgage insurance into the loan. However, you cannot roll the closing costs into the loan. Check out my Can I Qualify video on our Web site for ideas how to cover closing costs.

The program’s guidelines provide flexibility. While you’re still responsible for any mortgage on your damaged home, we don’t have to count it when qualifying you if you provide evidence of insurance coverage. We also can ignore any late payments or other credit hiccups that resulted from the disaster as long as your credit was satisfactory before the disaster.

If this program sounds like it could help you, it’s important not to let too much time pass. You must apply for the new mortgage within 1 year of the disaster declaration date, which was 8/25. An equally important consideration is your credit. While lenders can ignore credit dings resulting from the disaster, the credit bureaus won’t, and late payments could depress your credit scores. You will find most lenders apply their standard credit score limits to the program. If you’re finding it hard to balance your finances post-disaster, it may make sense to take advantage of the program before your scores sink too low.

Feds extend special refinancing program

Loan Programs, Residential Mortgage Comments Off

Sep 202017

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

By G. Steven Bray

The Federal Housing Finance Agency (FHFA) announced that it’s extending the Home Affordable Refinance Program, or HARP, through next year. The program was set to expire at the end of Sep. FHFA estimates more than 143k homeowners still could benefit from the program.

HARP was created to allow homeowners to refinance to lower interest rates regardless of their financial situation as long as they were current on their mortgage payments. Of the myriad rescue programs adopted by the Feds during the depths of the financial crisis, it was one of the safest because a homeowner willing to make a mortgage payment at a higher interest rate is quite likely to continue doing so at a lower rate.

Remember that HARP only applies to mortgages owned by Fannie Mae and Freddie Mac and closed before June 2009. You can determine whether Fannie or Freddie owns your mortgage by visiting their Web sites, links to which are the end of my blog.

Fannie Mae: Click here
Freddie Mac: Click here

Fannie sweetens HomeReady mortgage program

Loan Programs, Residential Mortgage Comments Off

Mar 272017

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

By G. Steven Bray

In an effort to encourage homeownership for lower-income consumers, Fannie Mae has expanded its HomeReady loan program. The program allows as little as 3% down payment and sweetens the interest rate for those who qualify.

The program has income limits in most areas, and until recently the limit was 80% of median income in many areas. Fannie raised the limit to 100% of an area’s median income, and in special low-income census tracts, the program has no income limit.

Fannie also changed the program to allow borrowers to own another home. This may be appealing for those who currently own a home and don’t want to wait for it to sell before closing on their new home.

The program is attractive for a couple reasons:

– First, the program allows for a higher debt ratio, up to 50% of a borrower’s income. In addition, the income of a roommate or significant other can be considered for qualifying even if that person is not on the loan.

– Second, Fannie absorbs some of the risk premium usually associated with low down payment loans. Fannie requires a lower mortgage insurance rate and allows a lower interest rate than is usually associated with these loans.

HomeReady borrowers are required to complete a homebuyer education course, and one naturally wonders whether that compensates for the lower risk premium assigned by Fannie. Time will tell whether the default rate on these loans justifies the favorable treatment.

Why canceling the FHA rate reduction was the right move

Loan Programs, Residential Mortgage Comments Off

Feb 042017

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

By G. Steven Bray

I’m sure you know by now that the Trump administration cancelled the FHA mortgage insurance rate reduction put forward in the waning days of Obama’s term. This caused moans from most of my housing industry friends, but I think it was the right move.

First, keep in mind that FHA MI provides insurance against defaulted FHA loans. By law, the insurance fund must be at least 2% of the FHA’s loan exposure. The fund last year exceeded the 2% threshold for the first time in many years. Given that economists are predicting a housing slowdown this year, wouldn’t it make more sense to let the fund grow a little before chopping the premium?

Second, I don’t believe the premium reduction would have resulted in many additional homebuyers. Instead, I think it simply would have transferred business from private mortgage insurance companies to FHA. I’ve never seen an honest analysis from HUD to justify its MI rates based on its risk exposure. Moreover, FHA also has up-front MI and never cancels its MI, unlike conventional loan mortgage insurance. If FHA wasn’t just trying to increase its market share, maybe it could have tweaked those characteristics.

In conclusion, I’m not convinced the move by the outgoing administration wasn’t intended to make the incoming team look bad. Personally, I think it makes them look prudent.

Get ready for larger conforming loans

Loan Programs, Residential Mortgage Comments Off

Dec 012016

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

By G. Steven Bray

The maximum conforming loan limit is going up in 2017. This is the max loan size for a Fannie Mae or Freddie Mac mortgage, what we sometimes call a conventional loan. The new limit will be $424,100, up from $417k.

This is the first increase since before the financial crisis. The Housing and Economic Recovery Act of 2008 established $417k as a baseline and directed the Federal Housing Finance Agency to adjust the limit each year to account for changes in the national average home price. However, the Act required that the limit not rise until home prices had recovered to their pre-crisis level.

The FHFA set third quarter of 2007 as the official pre-crisis price level, and the price level in the third quarter of this year exceeded it by 1.7%. The increase in the loan limit matches that increase.

The new loan limit is effective Jan 1st.

USDA makes refinancing easier

Loan Programs, Residential Mortgage Comments Off

Jun 202016

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

By G. Steven Bray

The USDA announced that effective 6/2, it is making its pilot streamline refinance program permanent. The program allows homeowners who currently have a USDA loan, like a Rural Development loan, to refinance that loan without going through the usual loan process.

As long you’ve been current on your mortgage for the last 12 months, meaning you’ve made the payments within 30 days of the due date, your lender won’t have to order a credit report and won’t have to analyze your income to see if you qualify. It will be assumed that if you’re making your payments on time now, you certainly can continue to make them if we lower the payment.

In addition, you won’t need an appraisal to determine the current value of your home.

Not only will the program save USDA borrowers money, it should make the refinancing process much faster.

USDA to make its loans more affordable

Loan Programs, Owner-occupied, Residential Mortgage Comments Off

May 072016

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

By G. Steven Bray

The USDA recently announced that for fiscal year 2017 (which begins on Oct 1st) it’s dropping the fees it charges for its guaranteed rural housing loans. Currently, USDA charges an upfront guarantee fee of 2.75% of the loan amount and an annual fee, or monthly mortgage insurance (MI), of 0.5%. On Oct 1st, those rates drop to 1% and 0.35%. That really is a huge change.

So, how would that affect a potential homebuyer? Let’s say you’re trying to buy a $180k home. Remember the USDA program doesn’t require a down payment, and most folks roll the upfront guarantee fee into the loan, so we have a roughly $185k mortgage. Using today’s fees, the monthly principal, interest, and MI payment would be about $908.

Okay, what if the fees are at 2017 levels? The monthly payment drops to $869. Over the life of the 30-year loan, that $39/m adds up to more than $14k in savings.

I find the timing of the announcement interesting. Based on our experience, USDA has lost of lot of market share to FHA, which lowered its mortgage insurance rates last year. While I suspect the announcement will shut down use of the program for the summer, maybe it will build some anticipation for it again in the fall.

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