Bulls & Blogs

FEMA and IRS rescue shutdown victims

Jan 112019

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

By G. Steven Bray

As the government shutdown lingers, let’s do a quick update on the effects it’s having on the mortgage world.

As I reported before, the mortgage products experiencing the greatest impact are those offered through the USDA. USDA will not issue commitments during the shutdown, meaning if you’re using a USDA loan, you’ll probably experience a delay.

But we have some positive developments. Under intense pressure, FEMA reversed its position on new flood insurance policies. The new guidance means insurers can sell new policies and renew existing ones during the shutdown. Given that the ban on new policies lasted only a few days and over Christmas, it’s unlikely it created any significant backlog. If the property you’re buying requires flood insurance, you shouldn’t experience any shutdown-related delay.

Note that despite the reversal, the National Flood Insurance Program still is living on life support – a temporary extension that expires in May.

Another positive announcement came from the IRS. As I reported before, lenders often verify an applicant’s income tax return with the IRS during the loan process. The IRS previously stated it would not process any verification requests during the shutdown. On Monday, however, the IRS announced it would resume processing requests. The IRS says it has a significant backlog, so if your loan requires an IRS verification, you still may experience a delay.

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

Rising home prices lead to higher loan limits

Loan Guidelines, Residential Mortgage Comments Off

Jan 172018

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

By G. Steven Bray

Rising home prices have prompted regulators to increase loan limits for standard loan programs. Fannie Mae and Freddie Mac raised the limit for their conventional, conforming loans by almost 7% to $453,100. This limit applies to all areas of TX and is in effect now.

FHA also raised its loan limit, but the limit varies by county. FHA sets the limit to 115% of the median home price in an area with a ceiling of $679,650 and a floor of $294,515. The floor applies to areas where 115% of the median home price does not reach that level.

TX home prices haven’t reached levels at which the ceiling would apply; however, four TX metros do have a limit greater than the floor. Austin’s limit rose $23k to $384,100 for a single-family home. The DFW limit rose about the same amount to $386,400, still the highest in the state. San Antonio’s limit rose by the greatest amount, over $32k, to $359,950. Houston, still recovering from the oil industry downturn, didn’t see any change, with the limit remaining $331,200. Remember that these limits apply to all the counties in the metro, not just the cities themselves.

The limit for the VA program mirrors the Fannie/Freddie limit at $453,100. USDA programs shouldn’t be affected because loan size is driven by annual income limits, not median home prices.

These limits apply to single-family homes. Higher limits apply for two- to four-unit properties.

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.

USDA makes qualifying for a mortgage a little easier

Loan Guidelines, Owner-occupied, Residential Mortgage Comments Off

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.

USDA making housing loan a bit more expensive

Loan Guidelines, Loan Programs, Residential Mortgage Comments Off

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.

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.

Act quickly if using USDA home loan

Loan Programs, Owner-occupied, Residential Mortgage Comments Off

Nov 122014

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

By G. Steven Bray

If you’re using a USDA RD loan to purchase a home this fall, Fri, Nov 21st is a very important date. At the close of business that day, USDA will stop accepting applications for the remainder of Nov. If your loan has not been approved by USDA, you will need to sign new application documents, and the effect could add a week or two to your loan processing time.

USDA has adopted new regulations for its RD program, and it doesn’t want to maintain two processing systems. Thus, it will stop taking applications after next Fri and clear out its queue. This may not be a trivial task given the backlog of applications in some areas. On Dec 1st, USDA will start accepting applications under the new regulations.

If you have a pending application, check with your lender on its status. If your lender needs any documentation from you, act on that request urgently. The new regulations aren’t likely to harm your chances for approval, but if you have an early Dec contract date, the delay in processing could bust your closing.

USDA delays new rural maps

Loan Programs, Owner-occupied, Residential Mortgage Comments Off

Sep 262014

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

By G. Steven Bray

The federal government’s fiscal year ends on 9/30, and as is typical in recent years, Washington passed a Continuing Resolution (CR) rather than pass the various spending bills necessary to fund the government. In that CR is a provision that extends the use of the current USDA maps that define property eligibility for its housing programs. So, if a home is eligible today, it will remain eligible until the CR expires. And it’s entirely possible that when Congress finally passes a USDA spending bill, some legislator will slip in a provision to extend the current maps again. That said, if you’re eyeing a property that would have been ineligible on 10/1, I wouldn’t wait. Start the homebuying process now so you can take advantage of the benefits of a USDA mortgage.

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