FHA loan limit going up in 2017

 Loan Guidelines, Residential Mortgage  Comments Off on FHA loan limit going up in 2017
Dec 052016
 

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

By G. Steven Bray

FHA also is raising its area loan limits in 2017, primarily affecting the 4 largest metro areas. FHA sets the limit by county and calcuates the limit based on 115% of the county’s or metro area’s median home price.

Median home prices rose in Texas last year, so loan limits rose in the Austin, Dallas/Ft. Worth, San Antonio, and Houston metro areas. Austin’s limit rose almost $30k to $361,100 for a single-family home. The DFW limit rose about the same amount to $362,250, still the highest in the state. San Antonio’s limit rose about $10k to $327,750. Houston, given its flagging market due to the oil industry downturn, rose only slightly to $331,200. Remember that these limits apply to all the metro’s counties, not just the cities themselves. The limit for the rest of the state rose about 2% to $275,650.

These limits apply to FHA case numbers assigned on or after Jan 1st. The case number typically is assigned at the beginning of the mortgage process, so if you need these higher limits, you’ll need to be patient.

More leverage for investment properties

 Investment, Loan Guidelines  Comments Off on More leverage for investment properties
Oct 312016
 

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

By G. Steven Bray

Since the financial collapse almost a decade ago, rental property buyers have been stuck with a minimum 20% down payment for conventional financing. Not only had Fannie Mae and Freddie Mac not forgotten about all the high-leverage loans they purchased that went bust, but the mortgage insurance companies also got burned. And for conventional financing, you need mortgage insurance to go higher than 80% leverage.

That has changed. Mortgage insurance companies have an appetite for rentals again. At this time for buyers with 680 or better credit, we’re able to accept a 15% down payment.

Of course, you’ll pay a premium for the mortgage insurance. Your MI rate would be roughly 50% higher than what one would pay when buying a primary residence. On a $200k loan, that equates to a monthly MI payment of about $102 assuming good credit. However, it only takes about 5 years to pay the loan down to 78% of the purchase price, at which point the mortgage insurance gets cancelled.

FHA makes it easier to get a condo loan

 Loan Guidelines, Owner-occupied, Residential Mortgage  Comments Off on FHA makes it easier to get a condo loan
Oct 032016
 

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

By G. Steven Bray

The FHA loan program once was a major source of financing for condo purchases, but due to regulatory changes, its volume dropped by almost 75%. The changes disqualified thousands of condo projects, and in turn limited the housing choices for first-time homebuyers and others with limited credit, a target market for the FHA program, and limited the pool of potential buyers for condo owners in those disqualified projects.

Well, it seems FHA may have seen the light. New rules FHA adopted this summer loosen up some of the more onerous restrictions. The two biggest changes affecting TX condos are:

– FHA agreed to include second homes that are not rentals in its calculation for owner-occupied units. A condo project qualifies for FHA financing only if at least 50% of the units are owner-occupied. This change could make a huge difference for projects in vacation areas.

– FHA also has simplified the recertification process that condos must go through every two years to remain approved. Some condo associations allowed their FHA approvals to lapse because the old process was so burdensome. Lenders often pursued the recertification process for the project because of a buyer’s interest in a condo, but imagine the number of potential buyers who didn’t apply because the project wasn’t already approved.

The new rules are only good for a year, but that gives FHA time to listen to feedback and enact permanent rules that don’t unfairly restrict lending for condos.

FHA makes it easier to qualify with student loans

 Loan Guidelines, Residential Mortgage  Comments Off on FHA makes it easier to qualify with student loans
Apr 292016
 

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

By G. Steven Bray

Last fall, FHA changed its loan guidelines to require lenders to include a homebuyer’s deferred student loans in the buyer’s debt calculation. The change made FHA consistent with other loan programs. If a creditor didn’t report a payment for a student loan, FHA instructed lenders to use 2% of the loan’s balance. Unfortunately, this was twice the percentage other loan programs required and made it more difficult for many first-time homebuyers to qualify.

Well, apparently FHA heard our complaints. For FHA loans registered on or after 6/30, FHA has changed the guideline to 1%, consistent with other programs. (I can’t explain why they didn’t make the change effective immediately.)

So, how does this change affect one’s ability to qualify? Consider a homebuyer who earns $4000/m. She has a $500/m car payment and $20k in student debt. She wants to buy a $200k home, which requires an estimated FHA mortgage payment of $1432.

Under the existing 2% guideline, the ratio of her debt to income would be 58%, and she would not qualify. However, under the new guideline, the ratio drops to 53%, and she could qualify.

One way to cash out an LLC-held rental property

 Investment, Loan Guidelines, Residential Mortgage  Comments Off on One way to cash out an LLC-held rental property
Apr 162016
 

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

By G. Steven Bray

Yesterday, we discussed how Fannie Mae has rescinded a portion of its loan guidelines concerning investors’ ownership of properties in LLCs. Specifically, according to conversations with Fannie, the change means an investor must move a property into his or her name 6 months prior to being eligible to take cash out of the property.

However, Fannie left open one avenue for cashing out a property in an LLC. It’s called the Delayed Financing program. If an investor purchases a property using cash, and holds the property in an LLC, the investor may pull out up to 75% of the equity within the first 6 months of ownership as long as all the members of the LLC will be on the cash out loan.

Note the two important conditions: It must be a cash purchase, and the cash-out refinancing must close within 6 months of purchase.

I suspect Fannie may eventually realize how silly the conflicting guidelines are, but the inertia that must be overcome to correct them is pretty grand.

In the meantime, please don’t forget that neither Fannie nor Freddie allow you to close a loan with an LLC holding title to the property. You must close in your name. Many investors move properties to their LLCs after closing, but be aware that doing so could trigger the loan’s “Due on Sale” clause.

Fannie makes it harder to cash out rental properties

 Investment, Loan Guidelines, Residential Mortgage  Comments Off on Fannie makes it harder to cash out rental properties
Apr 152016
 

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

By G. Steven Bray

Investors who choose to hold their properties through LLCs need to be aware of a recent change Fannie Mae made to its loan guidelines. The guideline in question was called Continuity of Obligation, and Fannie enacted it in response to the financial crisis to combat fraud. The guideline established a timeframe a party must have owned a home prior to being eligible for refinancing.

For investors, the guideline specifically identified a property held by the investor in an LLC as meeting the requirement as long as that same investor was refinancing the property in his or her own name.

Earlier this year, Fannie rescinded the guideline in whole. The problem for investors is that means Fannie also rescinded the specific carve out for LLCs. Based on recent conversations with Fannie, without the carve out, an investor must first move the property into his or her own name prior to refinancing.

This becomes a big deal if the investor is trying to cash out the equity in the property. Fannie Mae still has a 6-month “seasoning” requirement for cash out loans. Without the LLC carve out, the investor now must move the property into his or her name 6 months prior to being eligible to take cash out of the property using a Fannie loan.

There still is one option available to investors using LLCs, and we’ll look at that tomorrow.

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.