Bulls & Blogs

How does Freddie Mac handle student loans?

Loan Guidelines, Residential Mortgage Comments Off

Mar 112015

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

By G. Steven Bray

A few weeks ago, we examined the positive changes Fannie Mae and USDA made to their loan guidelines concerning the treatment of student loans. For deferred loans, both dropped the payment we must count when qualifying you for a mortgage from 2% to 1% of the loan balance.

But what about Freddie Mac? If the credit report doesn’t show the loan payment, Freddie says we can use 1.5% of the loan balance or ask the loan servicer to provide the payment. The guidelines don’t address the issue of graduated or income-based repayment plans, which don’t fully amortize the student loan based on the current payment. These plans may have payments less than 1.5% of the balance (or even 1% of the balance). I suspect Freddie will address this inconsistency soon.

Qualifying for a mortgage with student loans

Loan Guidelines, Residential Mortgage Comments Off

Feb 122015

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

By G. Steven Bray

If you have student loans, qualifying for a mortgage just got easier. Fannie Mae and USDA both have updated loan guidelines to reduce the loan payments that we must count when qualifying you.

For loans in deferment, the new guidelines cut the percentage of the loan balance we must use when calculating your total monthly debt from 2% to 1%. This is a big deal because it reduces the impact of student loan debt by 50%. Further, if the actual payment is less than the 1% calculation, the guidelines state that we can use that lower payment, but only if it fully amortizes the loan.

Unfortunately, if the lower payment is due to an income-based or graduated repayment plan, we have to use the 1% fixed amount. Under these payment plans, the monthly payment may rise, which means the current payment may not provide an accurate estimate of the loan’s impact on your finances.

While USDA already has implemented the new guidelines, the changes won’t apply to conventional loans until 4/1.

Minimum credit score for mortgage falling

Loan Guidelines, Owner-occupied, Residential Mortgage Comments Off

Jan 292015

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

By G. Steven Bray

It’s nice to be able to report some good news. Credit standards are relaxing just a bit. Our minimum credit score for using an FHA loan to purchase a home is now 600. This minimum applies to single-family homes and duplexes, assuming you plan to live in one of the units. The minimum score for 3- and 4-unit homes remains 620.

Even better, if you want to refinance an FHA loan, we can accept a credit score as low as 580. In some cases we’ll be able to use FHA’s streamline process, which means you can qualify regardless of your current income and debts. However, if your credit report shows a foreclosure, your credit score needs to be at least 600.

The minimum credit score for conventional loans remains 620.

Your 2015 loan limits are…

Loan Guidelines, Residential Mortgage Comments Off

Jan 222015

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

By G. Steven Bray

Every year, Fannie Mae and Freddie Mac release loan limits – the maximum amount you can finance with a conventional loan. FHA does the same for FHA loans. While the conventional loan limit didn’t change – $417,000 for a single-family home – FHA limits did change, mostly for the better.

In 3 of the 4 major TX metros, the loan limit increased by an average 9%. FHA sets an area’s loan limit based on 115% of the area’s median home price with a minimum loan limit of $271,050.

Austin’s limit rose by more than $25k to $331,200. Houston’s limit rose by $31k to $326,600, and the Dallas/Ft. Worth limit rose by $23k to $310,500. San Antonio’s loan limit remained $316,250. Remember that these limits apply to the entire metro area around these cities.

Click here for a link to the 2015 FHA loan limits.

Fewer financing options for flipped houses

Investment, Loan Guidelines, Loan Programs, Residential Mortgage Comments Off

Jan 192015

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

By G. Steven Bray

If you rehab homes, your pool of potential buyers decreased at the beginning of the year. Buyers using FHA financing now cannot contract to buy your rehab until you’ve owned it for at least 90 days. FHA has never been a big fan of house flipping due to fraudulent flips that saddled it with big losses in years past. During the housing recession, FHA waived its rule against property flips allowing rehabbers to flip properties in 30 days.

But, the waiver expired on Dec 31st. For any purchase contract signed after that date, the old 90-day rule applies. FHA says the dangers of house flipping outweigh the benefits for first-time and minority homebuyers – those dangers being that flippers will sell poorly renovated homes at inflated prices to unsuspecting buyers. Of course, FHA ignores the fact that it doesn’t take 90 days to rehab most homes, and the rule reduces the number of quality, affordable homes available for these same homebuyers.

On a positive note, you still can sell to buyers using conventional financing as Fannie Mae and Freddie Mac only require a seller to own a home for 30 days.