Get ready for larger conforming loans

 Loan Programs, Residential Mortgage  Comments Off on Get ready for larger conforming loans
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.

Will your credit score improve with trended data?

 Credit Scoring  Comments Off on Will your credit score improve with trended data?
Apr 252016
 

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

By G. Steven Bray

Fannie Mae has announced that this summer it’s going to require that lenders start using “trended” credit data to qualify borrowers. What in the world is trended credit data and how will its use affect your ability to qualify for a mortgage?

Currently, your credit report is a snapshot in time of your credit usage. The report shows your current account balances, limits, and minimum payments. A trended credit report shows how those amounts have varied over the last two years. Thus, it augments usage with insights into your credit habits. Do you pay off your credit cards each month? Do you pay more than the minimum balance? A trended report will reveal these habits.

TransUnion claims credit scores based on trended data will increase the number of what it calls prime and super-prime consumers by more than 3 million. Analysts expect those who pay off their credit card debt every month will see their scores rise. Other winners may include folks whose trended data shows their revolving balances decreasing over time.

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.

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 wants to give you money

 Loan Programs, Residential Mortgage  Comments Off on Fannie Mae wants to give you money
Sep 182015
 

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

By G. Steven Bray

If you’re a 1st-time homebuyer, Fannie Mae wants to give you money – that is, if you buy a HomePath home. Fannie uses its HomePath program to dispose of properties it has recovered through foreclosure. Fannie will give qualified 1st-time homebuyers up to 3% of the purchase price to pay for closing costs.

In order to qualify, homebuyers must not have owned a home in the last 3 years (which Fannie defines as a 1st-time homebuyer) and plan to live in the home. Additionally, homebuyers must complete on a homebuyer education course. The 4-1/2 hour course is completely online and covers the complexities and responsibilities of homeownership.

If you want to take advantage of the assistance, keep in mind you must complete the course before you make an offer on a HomePath home. The course costs $75, but Fannie will reimburse the fee at closing.

Click here for the course sign-up and additional program information.

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.

HARP refinance program extended again

 Loan Programs, Residential Mortgage  Comments Off on HARP refinance program extended again
May 192015
 

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

By G. Steven Bray

The Home Affordable Refinance Program or HARP has been a boon for homeowners wanting to refinance. The program targets underwater mortgages, but its reduced documentation requirements and favorable interest rates make it attractive to all homeowners.

The Federal Housing Finance Admin reports the program has helped 3.3 million homeowners refinance their mortgages since its inception in 2009, and it was scheduled to end at the end of this year. However, Mel Watt, Director of the FHFA recently announced a one year extension through 2016. Watt claims an additional 600,000 homeowners still could benefit from a HARP refinance.

Keep in mind the two most important restrictions of the program. To be eligible:

– Your mortgage must be owned by Fannie Mae or Freddie Mac. (Fannie and Freddie have a tool on their Web sites to help you determine that or give me a call for help.)

– And, your mortgage must have closed prior to June 1st, 2009.

If you still haven’t been able to refinance, you may want to give this program one more look. The expanded eligibility requirements might allow you to qualify even if you’ve run off the road a couple times in your financial past.

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