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Category Archive: ‘Mortgage Qualifying’

Credit Loosening?

The politicians, talking heads, and NAR pitchmen think that tight credit is to blame for a lackluster housing recovery, but those of us on the street know the local market has been red hot with demand.  The strict underwriting is more of an annoyance that anything, with underwriters requesting every document they can imagine in order to minimize the threat of buybacks.

Has it loosened up?  Will low rates and looser credit spearhead another big year in 2015?  I think so.

Here is an excerpt from this article to demonstrate the loosening:

http://www.mortgagenewsdaily.com/channels/pipelinepress/12122014-super-liens-respa-tila.aspx

Let’s see what some random companies, small and big, have been up to lately to gauge lending trends.

Banc Home Loans has expanded its Jumbo guidelines. Its “Program 55″ highlights include  up to 85% LTV no MI (to $2M), Loan amounts to $5 million, Minimum 660  FICO to $1.5M, 1st time home buyer- loan amounts to $2M, and Primary  Residence: Cash Out Refinance now to 75% LTV (Cash-out up to $1  million).

Caliber’s enhanced Fresh Start Program was rolled out. The two biggest features are bank statement option for self-employed  borrowers, and no seasoning or mortgage payment history required for  Short Sale, DIL, Foreclosure or Bankruptcy.

BluePoint Mortgage has Jumbo IO products with 89% LTV up to $1,500,000 with NO MI Loans up to $3,000,000 and 80% IO to $2,000,000, Up to $500,000 Cash Out, Second Home and NOO options, Cash out for second homes and NOO.

Carrington Mortgage Services, LLC announced the national availability of “The Carrington Loan,” offering  borrowers a more transparent, simplified home loan process with no  closing costs or upfront financing fees. The Carrington Loan can  facilitate home purchases for borrowers in the sub-640 FICO score range.

Wells Fargo Funding improved its refinance adjusters for all non-conforming products as of  November 10th, adjuster improvements are listed on the daily rate  sheets. In addition, its minimum down payment requirement has been  removed from its conventional conforming loans.

Stearns Wholesale is now offering new FHA FICO options 600-619 FICO score program.

Next year should bring in more demand from those who have been shut out previously from getting a mortgage, and those types aren’t known for patient decision-making.  It might feel more like 2006 all over again?

Posted by on Dec 12, 2014 in Market Buzz, Market Conditions, Mortgage Qualifying | 7 comments

Underwriting Guidelines

Rob Dawg brought up how discriminatory the underwriting guideline is for those who use interest/dividend income to qualify – they have to prove that the income will extend three years into the future.  Yet those homebuyers on salary or hourly pay don’t have to make any such assertion, and they could get fired the next day after closing.

There are other underwriting guidelines that make you scratch your head too.  Here are some examples:

1. ‘Gift’ for down payment – The previous standard was that as long as your down payment was at least 20% of the purchase price, the entire amount could be a gift.  But now the Fannie/Freddie automated underwriting is allowing 10% down payments to be all-gift too.  Is that really ‘skin in the game’?  Sellers can still pay all buyer closing costs too.

2. Reserves – If you are buying a rental property, you have to use at least a 20% down payment (25% on 2-4 units), AND have at least six months’ worth of payments in the bank at closing – which includes your PITI payments on current residence and the new rental property.  It makes sense too – you could get hit with a quick vacancy, and the bank would want you to have ample reserves.

However, when buying a residence as an owner-occupier, the required reserves are much less.  The guideline states that the buyer should have two months’ worth of payments in the bank – which isn’t much – and a lender told me he has been closing FHA/VA loans recently with less than one payment’s worth of dough left in the bank!

3.  Appraisals - With the new rules that isolate appraisers from influencing agents, you’d think the inflated-appraisal problem would be solved.  But they still give appraisers the actual sales price and tell them to hit it, which takes out some of the objectivity.  Even so, today’s article (LINKhat tip T&W) included this quote, “If you thought what was happening before was an embarrassment, wait until the second time around”.

Think of these questionable guidelines when you hear how the ’tight credit’ is mucking up the market!

Posted by on Dec 2, 2014 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 5 comments

Mortgage Qualifying for Retirees

Seniors can have trouble qualifying for a mortgage, in spite of having ample assets.  Here are some tips, from the wsj.com (their comments are good too):

http://online.wsj.com/articles/jumbo-loan-challenges-for-retirees-1416413430

High-net-worth individuals often will argue that they clearly have enough money in assets to pay off a loan at any time, says Bill Banfield, vice president at Quicken Loans. “They may be thinking that they have a big IRA and they could use that to take a distribution to make the loan payments,” he adds. “That’s all good and fine, but we’d like to see that all set up before they apply for the loan.”

The key to qualifying is to demonstrate that a retiree’s assets translate into income via tax returns, bank statements and other documents, he adds. “The lender is going to want to make sure you have receipts for distributions and a schedule for receiving them,” he adds.

Retirees also need to show proof that the payments will continue in the same amounts for at least three years into the future, Mr. Banfield says. If a borrower is an early retiree under 59½ years old, the threshold for taking withdrawals from IRAs without tax penalties, the lender will adjust income estimates accordingly, he adds.

For retirees who don’t want to increase their distributions, another possible option is a nonqualified jumbo mortgage, which offers flexibility on the federal DTI rule, Mr. Wind says. Lenders have to waive liability protection to issue nonqualified mortgages, but some lenders will take that risk with retirees who have substantial invested assets they don’t want to liquidate, he adds.

To calculate an income estimate in such cases, EverBank will assign a conservative earnings rate to the total dollar amount of the assets and amortize the amount to the loan’s term length, Mr. Wind says. Wells Fargo uses a similar method to calculate DTI for nonqualified mortgages for borrowers with multimillions of dollars in assets, Mr. Blackwell says.

The first step for any retiree or person approaching retirement is a financial adviser, Mr. Blackwell says. An adviser can look at a retiree’s overall financial picture and advise whether to pay cash or borrow when buying as home. The adviser can also calculate retirement-account distributions that will help the borrower qualify for a loan, he adds.

http://online.wsj.com/articles/jumbo-loan-challenges-for-retirees-1416413430

Posted by on Nov 21, 2014 in Mortgage Qualifying | 6 comments

EZ-Doc

From the wsj.com:

A new mortgage lender is loosening documentation requirements, allowing applicants to provide less paperwork on income and assets than is typical to get a home loan.

Social Finance, a peer-to-peer lender often referred to as SoFi, rolled out mortgage lending in five states—New Jersey, North Carolina, Pennsylvania, Texas and Washington—and the District of Columbia on Tuesday. The San Francisco-based lender began offering mortgages in California in August.

The firm has specialized in student loans since it launched in 2011. The move into mortgages comes as SoFi prepares to file to raise $200 million to $250 million in an initial public offering early next year, according to its chief executive Mike Cagney.

SoFi’s mortgages will be geared toward borrowers with high credit scores, though other criteria will be less onerous than what most other lenders require. The firm isn’t requiring tax returns to verify applicants’ income or proof of funds to verify the source of borrowers’ down payments—requirements that most lenders have had in place since the housing downturn. Instead, SoFi is accepting applicants’ most recent paystub or W2 as proof of income. It will also take all applicants at their word that their down-payment funds aren’t coming from a loan they have taken out elsewhere, says Mr. Cagney. Borrowers will have to make a minimum 10% down payment.

Read the full article here:

http://blogs.wsj.com/totalreturn/2014/10/07/new-mortgage-lender-demands-less-documentation/

mortgage rates Oct 10 2014

Posted by on Oct 10, 2014 in Mortgage News, Mortgage Qualifying | 8 comments

‘Affordability Shock’

Hat tip to daytrip for sending this in from cnbc.com:

The sharp rise in home prices in 2013 caused two conflicting results: The return of positive home equity for hundreds of thousands of borrowers and considerably weaker affordability for an equally large pool of potential homebuyers.

While positive equity allows more borrowers to move, weaker affordability keeps them in place. So which will be the greater driver of housing this spring?

  “There’s going to be a reality check in the spring in terms of realizing that what we saw in 2013 is not a real market,” said Daren Blomquist of RealtyTrac, a real estate sales and data website. “It’s a nice bounce-back market, but ultimately you need the biggest pool of potential homebuyers out there to be able to afford those homes.”

In an analysis of housing affordability, RealtyTrac found that the estimated monthly house payment for a median-priced, three-bedroom home purchased at the end of 2013 was a whopping 21 percent higher than it was at the end of 2012 in more than 300 U.S. counties. That includes mortgage, insurance, taxes, maintenance and the subtracted income tax benefit.

The rise is the result of higher home prices and higher mortgage rates. RealtyTrac used a 30-year fixed-rate mortgage with an interest rate of 4.46 percent and a 20 percent down payment. That is versus a 3.35 percent interest rate the previous year.

Some metro regions, especially in California and parts of Michigan, saw monthly house payments rise about 50 percent from a year ago.

Read full article here:

http://www.cnbc.com/id/101431244

Using the same calcs, the difference was closer to 30% higher around NSDCC.

Posted by on Feb 21, 2014 in Interest Rates/Loan Limits, Mortgage Qualifying, Sales and Price Check | 9 comments

Defaulters Get Another Chance

Housing foreclosure authorities LoanSafe.org and YouWalkAway.com have created a new website to help people re-enter the housing market after having been through a previous foreclosure. The website is called AfterForeclosure.com and helps those most affected by the housing crisis take charge of their financial future and own their own home again.

Read More

Posted by on Dec 29, 2013 in Mortgage Qualifying, Short Sales, Short Selling, Strategic Defaults | 2 comments

New Mortgage Rules/Pricing

Fannie Mae and Freddie Mac are too big, and changes are coming.

moneypitBeginning on January 10th, the new QM rules take effect – limiting the debt-to-income ratios to 43%, and capping points and fees charged by lenders to 3% of the loan amount.

Because lenders will be subject to repurchasing any mortgages that don’t comply, some lenders are talking about limiting the DTI to 39% to provide a margin of error.

In the past, borrowers with compensating factors have been able to stretch their D-T-I ratio as high as 50%.  Now they won’t.

Is it a big deal?

It is for lenders, but to home buyers and sellers all it means is that there will be fewer people in the buyer pool for each house for sale.  Buyers may need to lower their sights, which will make the cheaper homes in each market more competitive.

The other change is how Fannie/Freddie will add more fees depending on your down payment and credit score.  It is rather arbitrary too, where borrowers with 680-740 FICO scores get hit the worst.  They can look forward to a nasty choice; to pay 1/4% to 3/4% higher in rate, use a 30% down payment, or manipulate your credit score downward to pay less fees.

The gritty details can be found Here.

For home buyers who are looking for more to reasons to stay on the fence, this is a truckload of fun.  But for the highly motivated buyers (the ones making the market), all it means is being more determined to fight for the best deal you can find, and hope that home prices will reflect the new era.

For anyone selling a great house on a great street, these changes won’t mean a thing.  For those trying to sell an inferior home for retail-plus, don’t be surprised if 2014 brings a more-measured response.


Posted by on Dec 20, 2013 in Interest Rates/Loan Limits, Mortgage News, Mortgage Qualifying | 10 comments

NSDCC Affordability

While we are kicking around that affordability thing, let’s note that by the traditional measuring of the Housing Affordability Index that we are still better than the last peak.

The San Diego index got down to 8 in 2005, and today we are at 27:

http://www.car.org/marketdata/data/haitraditional/#

But that is using today’s San Diego County’s median sales price of $485,040, for which it takes an income of $99,670 to qualify for an 80% LTV mortgage.

Have you seen many houses around NSDCC selling for $485,000?  Me neither.  In the last 60 days there have been 403 NSDCC detached-home sales closed, and only three of those were under $485,000!

The NSDCC median sales price for the last 60 days? $1,010,000.

In the same stretch last year we sold 500 houses, median SP = $837,243 with mortgage rates in the low 3s.

Income needed to qualify for 80% LTV mortgage:

2012: $126,500

2013: $175,000

Logically, this affordability issue should start to matter at some point.  Could we run out of buyers?  There have been 1,425 houses sold this year over $1,000,000 between La Jolla and Carlsbad!

Posted by on Dec 19, 2013 in Jim's Take on the Market, Mortgage Qualifying, North County Coastal | 12 comments

Investor Activity in 2014

investors2014The Trulia predictions earlier this week included several references to less investor activity in 2014, due to higher prices.  In particular was his #2 point:

2) The Home-Buying Process Gets Less Frenzied. Home buyers who can afford to buy won’t be as frantic as buyers in 2013. That’s because there will be more inventory to choose from, less competition from investors, and somewhat looser mortgage credit in 2014.

Investor activity is less than what the media will have you believe – at least in San Diego. According to this article by the Fed, investors made up less than 4% of total sales in San Diego in 2012.  Flippers came on strong this year, so the 2013 investor count is likely to be higher than last year’s, but probably still under 10% of the overall market.

I don’t think investors are done.

They will only quit when they’ve been burned – and it will probably take a few big losses to run them out of the business.

Instead, I think we will see increased competition for the deals – the standard listings that are priced at the comps or under.  There should be a solid floor to the market.

But investors/flippers will be under increased pressure to pay more than they are comfortable paying – everyone is!

They will try to pass it on to the retail buyer, and bump their list prices even higher.  Because of their confidence from recent successes, they will main contributors to the OPT pool (over-priced turkeys).

It’s already happening - there are flippers sitting on OPTs everywhere, confident that once the holidays are done, the buyers will be back.

However, the market has been extremely active the last couple of months – there hasn’t been much of a holiday dip in buyer interest, there just aren’t many quality homes for sale at decent prices.

Coming off a boisterious 4Q12 and fueled by mortgage rates in the low-to-mid 3% range, the spring selling season went gangbusters this year.

But now that the hyper-frenzy is done, buyers aren’t jumping at everything any more.

The current environment is much more cautious, which is ideal for a standoff.  With (over) confident flippers continuing to push their list prices, and regular sellers tacking on an extra 5% to 10% just to make sure they get all their money, we are ripe for the Big Stall in spring.

P.S. Trulia’s other comment about ‘somewhat looser mortgage credit in 2014′ is suspect too.  We haven’t covered the QM yet, but back-end ratios will be limited to 43% starting January 1st - and they have been as high as 50% this year.

fed investor share

Posted by on Dec 13, 2013 in Forecasts, Interest Rates/Loan Limits, Jim's Take on the Market, Mortgage Qualifying | 8 comments

The Effect of Higher Rates

Talking heads discussing the impact of higher rates – one being more ARMs:


The guest commentator said that we will lose 20% of the buyers if rates go over 5%, which sounded like a guess.  We don’t have to lose any buyers if they were just willing to look at smaller homes or a cheaper area.  It’s the buyer psychology and ego that will cause people to drop out.

Posted by on Jun 26, 2013 in Interest Rates/Loan Limits, Market Conditions, Mortgage Qualifying | 2 comments