Mister VA's Mortgage News

Buy A Poppy. Thank A Veteran.

It is almost Veterans Day.  Hardly any, if any, veterans remain from WWI and the beginning of Veterans Day which is referred to as Armistice Day in some areas.  The Eleventh Hour of the Eleventh Day of the Eleventh Month.  The ceasefire which ended the war to end all wars began at that time.  Although there was fighting up until that time.  Who knows why THAT was? 

Many Veterans and Auxiliary Groups throughout the nation and abroad are selling poppies which raises proceeds for ailing veterans.  Why poppies? What is the connection with veterans?  A poem which was required memorization work in days of yore holds the answers to those questions.  I will post the poem below and urge you all to read the background on its origin. Thank you to all veterans!

And to all of you.  Buy a poppy.  And thank the veteran who is selling them.

In Flanders Fields
By: Lieutenant Colonel John McCrae, MD (1872-1918)
Canadian Army

In Flanders Fields the poppies blow
Between the crosses row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

What If The Tax Credit Went Away?

Would it be the end of the world?  Would it mean that the hopes and dreams of buying a home would be forever dashed?  Would anyone ever qualify to buy a home again? The way that many are talking would lead us to believe that the answer to all 3 questions would be 'yes'.  But that is not necessarily the case.  The broader outlook is that the economy has to improve and that does not mean Ben Bernanke telling us it has improved.  It means that consumers have to have confidence that their jobs remain stable.  And if a home purchase is to be made, that it will not be a bad decision.  The 'cash for clunkers' auto purchase program was a red herring.  Some people bought cars who might not have without the program.  But, now they have higher payments, insurance costs, etc. And now car sales are hurting once again.

Buying a home is serious business.  And having a housing budget is the most important consideration in buying a home.  The presence of a tax credit that is going away in 7 weeks should not be a factor.  If your rent is $700 a month and you are saving $500 a month, that does not mean you should plan to spend $1200 for housing.  And certainly not more than that.  Home repairs and unforeseen expenses that the landlord presently covers will now be your responsibility.  I always ask prospective home buyers what is the comfort level in writing that monthly check to cover housing [principal, interest, taxes, insurance, mortgage insurance] expenses.  What the maximum qualifying number might be could be higher than the comfort level.

Buying the wrong home just so you get the tax credit is not a good reason to put down a deposit to purchase.  Buying before you are ready is also a big mistake.  It is much better to find the right home at the right time than the wrong home right now.  Not every mortgage professional or real estate professional will give you that advice.  So it is important to be in a position to make a decision based on well thought out logic than to succumb to pure emotion.  Buying smart will always be the best way to go.

FHA Streamlines: Now Would Be A Good Time

The FHA streamline refinance has been around for a long time.  It is about to get a major facelift.  And when I say 'major', I really mean it.  Presently for a non-cash out streamline without an appraisal, you may have some minor credit hurdles regarding the payment history on the present FHA loan.  Most people jump those hurdles with ease.  The rationale behind this loan is that if the borrowers find it easier to make the payments, there is less likelihood of a default.  So, no additional qualifying was needed.  The new loan could be written for the original loan amount plus the new Up Front Mortgage Insurance Premium.  That was often enough to cover the closing costs and many borrowers brought next to nothing to the closing table.  Or they might bring their escrow balance to closing knowing a check would head their way in a couple of weeks from the old lender.

Not after January 1st.  The only way to NOT have to pay closing costs on a streamline will be to have an appraisal done on the property.  In some states, this may mean bringing $2500 to closing.  In others, that amount could be much higher.  An appraisal may not help in some areas of the country.  If values have declined since the purchase, the borrower is stuck.  So, saving 1% or more on the note rate may not be within the reach of many consumers.  And that is just another straw on the camel's back.  Helping the consumer does not appear to be in the cards for many of the sweeping changes that are taking place.

SO, if YOU have an FHA mortgage that is at 6% or above, and you have wondered about refinancing, please do not procrastinate any longer.  There will be a huge rush to get these closed by the year's end.  Around the 25th of the month is the optimal closing date.  And you all know what falls around that date in November.  And ON that date in December.  Another 'feature' kicking in on January 1st is the 6 month rule--if your loan is not 6 months old, you cannot streamline.  You can read about more of the details in HUD's Mortgagee Letter.  There are abundant rumors about even more changes with the program so stay tuned.

The Site Condo and FHA

When FHA announced sweeping changes in its condominium policies back in June, there were some negative changes such as the elimination of the Spot Condo approval, which allowed for a single unit approval based on a one page questionnaire even though the complex was not as approved as a whole.  Approval of condo complexes is now a streamlined affair as proclaimed by HUD.  But, the new news has to do with the cross-breed known as the Site Condominium as defined below:

Site Condominiums are single family detached dwellings encumbered by a declaration of condominium covenants or condominium form of ownership. Condominium Project approval is not required for Site Condominiums; however, the Condominium Rider must be included in the FHA case binder submitted for insurance endorsement.

The guidlelines of ownership is the key element.  These are homes on their own lots in a development that have condo ownership in some common elements and may have some common care covenants.  Here in Pinellas Park, FL, one such area had lost its FHA condo approval status for several of the 'units' which consisted of dozens of single family ranch style homes.  But, since they are considered 'Site Condos', they can be financed using FHA just like a single family home. So, the Mortgagee Letter in this case, gave the nod for more possibilities, not less.  Condo master policies are still needed and there is the HOA dues amount to factor into qualifying, but things sure got a lot easier for folks buying and selling in The Mainlands.

FHA Makes Changes

In a flurry of Mortgagee Letters issued in the past couple of weeks, HUD has changed the landscape of FHA loans--both forward and reverse.  How those changes will be interpreted is anybody's guess.  Some have already been implemented.  Some have a start date of January.  The elimination of brokers needing to get FHA approved by HUD is juxtaposed against lenders being responsible for all in the origination channel.  Will lenders who wholesale to brokers eliminate that channel altogether?  Will those who wholesale exclusively change their business model?  [Wholesalers generally have no contact with the consumer.]  Will this mean the end of brokers being able to do FHA loans?  Will this mean fewer consumer choices?

Well, certainly if wholesalers are concerned about the lack of control over brokers, they may turn to retail and they may sign up brokers as employees to do what they have always done--work directly with the consumer.  But, the broker, or former broker, will now only have one lender to choose from.  The Account Executives or AEs as they are commonly referred as will need to adapt to become loan officers if there are no brokers to interact with in the future. [Bear in mind that this is merely speculation on my part, but my nearly 30 years in the business have given me a lot of insight.]  Brokers without the FHA product will be severely hampered.

The FHA streamline now has more defined terms with respect to payment histories, benefits to the borrower, etc.  Many consumers were streamlined even if there was little benefit to doing so.  It is not all about the rate.  If it takes 5 or 6 years to re-capture closing costs in terms of payment savings, the consumer may very well have been better off not refinancing.  Mortgagee Letter 09-32 outlines many of these and other changes in the program.  Slowing the default rate is the impetus behind these changes.

If you have a pre-approval that is more than a few weeks old, things may have changed for you, too.  Especially if your credit scores hovered around 620.  Many lenders are moving those minimums to 640 or higher.  And that can mean your approval is no longer an approval.  So, it is important to continue to do things to improve your scores.  Making payments on time, reducing revolving balances to aggregate of less than 50%, and even watching to make sure credit card companies have not increased your minimum payments.  Be diligent and pro-active and be in constant contact with your mortgage professional.

Reverse Mortgage Cutbacks

HUD has just announced cutbacks on the principal limit factors for HECM reverse mortgages.  Although, this announcement has just come out in the past couple of days, it does have some negative effects--especially for those looking to pay off debts.  A 10% reduction in the factors will mean less money available for seniors to use to pay off debts or to have available for future expenses.  While it is not yet clear as to if a factor of .80 [80% of the value is the gross loan amount in such a case] is reduced by 10% to .72 or reduced by 10% of the appraised value to a factor of .70, it still is a concern for seniors who have not yet had their counseling and are looking to proceed with a reverse mortgage.

For a home appraised at $200,000, this could mean a reduction in the gross loan amount available by $16,000 to $20,000 in the example factor listed above.  Already, in some areas of the country, seniors are faced with declining property values, which diminish the ability to utilize the HECM for future living expenses.  Whether this is the first in a series of reductions, a temporary reduction or a permanent reduction, no one knows.  What is important is that if you are considering this product, there has been a change that will affect you.  No matter what your age or circumstance.

The recent decision is highlighted in a HUD Mortgagee Letter issued to lenders late last week.  The exact details are being worked out and the effect of these changes will become more well known in the coming days and weeks.

Repairing Credit

It is getting more and more important to have good credit scores.  FHA lenders are moving the minimum score requirements higher and higher.  And if you are below the threshold of 620, by the time you increase your score to that level, the minimum could be 640 [as it is with many lenders], or even 660 [where some lenders are holding the bar].  There are a lot of credit repair services out there who can help you.  But there are some who will only take your money.  You have to be careful. 

You can find some tips at my website and it may be good to review those tips before you begin the repair process.Legitimate items cannot be removed.  It is the illegitimate ones that can harm your score and that is where a credit repair service can help.  Time is the best cure for closed accounts that have had a late history.  And scores do not improve immediately after paying or satisfying a charge-off, judgment or collection.  It is the reporting date that is the key.  And it will report as a recent account once paid.  So, a dip in the score could actually happen.

Make sure you add up all balances on your credit cards and try to keep them at 50% or less of the total credit available.  Do not apply for new accounts unless it is a secured credit card or savings account secured loan to build your credit. Whether you are applying for a VA loan in Florida, or an FHA loan in Minnesota, or a conventional loan in New Mexico, it is important to be sure your credit score is in good shape.  If not, contact a mortgage professional to find out the steps needed in repairing credit.

Of course, you may contact me, no matter where you are for questions and I can refer you to a credit repair service and or mortgage professional in your area.

Closed Shops

There is not a sign on the door that says 'CLOSED'.  There is not a prohibition to use someone else.  But, these days, a growing number of Real Estate offices are including space for a mortgage originator on the premises.  There may [and SHOULD be] a separate entrance.  And it may seem like it is separate.  But these closely affiliated businesses may not be in your best interest as a home buyer.  It may feel like you HAVE to use those services.  But you DON'T!  Especially if you already are working with a mortgage pro that you trust.

The inside guy may not have your interest at heart.  He may be looking at the relationship with the Realtor first.  And that is not a good thing.   I avoided opening up offices within Realtor buildings for that very reason.  To avoid the appearance of a conflict.  Not to say that all loan officers with that type of setup are the same.  But you should be very wary of those kinds of setups.  RESPA prohibits certain practices such as steering and compensation for referrals.  The reason is simple:  it is not in the best interest of the consumer.

It is always good to get pre-approved before you even start shopping.  And you may get referred by the loan officer to a Realtor.  I usually knew the personalities and specialties of Realtors and suggested 2 or 3 based upon how I thought the agent and home buyer would work together.  It doesn't always happen that way, of course.  But, the important thing to remember is that YOU choose your lender.

A Matter of Trust

One of the most unsettling things about moving to a new area is developing trust.  Especially, when it comes to automobile repairs.  To find someone that will not take advantage is a real chore.  My car had developed a problem with wheel bearings, so I knew that it could be a huge repair bill and that dollar signs could be an issue if I ended up at the wrong repair shop.  I went to a recommended shop in St Petersburg and had two bearings replaced, some brake work and a new hub cap for a much smaller price tag than I envisioned.  That was in early June.  The noise returned a couple months later.  I feared another large bill for repairs and a battle over defective bearings.  So I went back last week.  About 4500 miles since the previous repair, and probably 1500 miles since the noise had started up again.  The repair was done while I waited.  I asked how much the bill was and the reply was that it was under warranty and the labor was gratis.  Bob Lee Tire now has a customer for life.

As a mortgage officer, developing trust with potential clients is the same in reverse.  With all of the bad press, it is unsettling for potential clients or Realtors to take a chance on someone who is untested.  It is not easy to be a stranger.  But when the opportunity to excel presents itself, an exponential chance to develop trust among multiple parties exists.  And once that bond of trust is developed, additional opportunities will be present.  Just as I trust Bob Lee Tire for my car, I want my clients to trust me with their mortgage.  Treating people right and with respect is the best way to develop that trust.

Time Running Out On First Time Home Buyer Tax Credit

You may think there is plenty of time to take advantage of the first time homebuyer tax credit.  After all, December 1st is a long ways away, right?  Let's take a look at the timeline in reverse.  We have the Thanksgiving Weekend that will mean many lenders, closing agents, and others crucial to closing a loan will be closed.  We will have Veterans Day, Columbus Day and Labor Day, too.  Given the crunch to beat the deadline, there will be an onslaught on providers during the final two weeks.  A veritable deluge.   And no doubt there will be some who miss the deadline.

If you do not have a pre-approval in place within the next week to ten days, you will probably not make it.  Especially, if you have not started home shopping.  Tight deadline mean mistakes will be made, pressure will increase, more stress will abound, and there may not even be enough appraisers to get all of the work done in time.  There are no guarantees that the program will be extended.

So, if you are thinking of buying, now is the time to contact a mortgage professional.  Now is the time to contact a Realtor.  Now is the time to stop procrastinating.  Because time is running out on the First Time Home Buyer Tax Credit.