Category Archive: ‘Mortgage Qualifying’

Reduce the Down Payments?

When the day comes that you hear the big banks pushing for reduced-doc loans, you’ll know that the top of the market is near:

http://www.reuters.com/article/us-bank-of-america-mortgages-idUSKCN18E37J

The head of Bank of America Corp, the United State’s fourth-biggest mortgage lender, said on Thursday banks would be able to supply a bigger share of funding for home purchases if the standard down payment for buyers was cut to 10 percent from 20 percent.

The vast majority of mortgages are underwritten to strict standards set by the U.S. government or quasi-government entities Fannie Mae and Freddie Mac. While down payment requirements can vary, they offer fairly little latitude to lenders that do not want to take all the risk themselves. As a result, many prospective homebuyers who cannot come up with a 20 percent down payment are unable to get a loan.

“Our goal – going back to regulatory reform – is should you move the down payment requirement from 20 percent to 10? It wouldn’t introduce that much risk but would actually help a lot of mortgages get done,” Chief Executive Officer Brian Moynihan told CNBC in an interview Thursday.

Bank of America was the top U.S. mortgage lender ahead of the 2008 mortgage crisis, causing it to face greater losses, both from defaults and litigation, than any other bank. Under Moynihan, who took the helm at the start of 2010, the bank has tightened lending standards and executives regularly use the motto “responsible growth” in public speeches.

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Futuristic Mortgages are Here

The Gaylord-Hansen Team of Caliber Home Loans had a seminar yesterday to discuss the details of their mortgage of the future – and they have it now!

The goal is to make the obtaining of a mortgage completely digital, and gather the documentation needed to fund a loan without the borrower having to cough up loads of paperwork.

Here is how they’ve improved the requirements of getting a mortgage:

1.  Income from your tax returns has been verified with the IRS for years.   But now Caliber not only pulls your income from the IRS, but they also conduct an automated cash flow analysis.  If the computer says the borrower qualifies, no other underwriting is needed.  Yes, we have had DU for years (designated underwriting), where the computer give the preliminary approval.  But those are based on income that was inputted by the lender.  With the new system, once the borrower has authorized the process, it goes untouched by human hands, making it fraud proof – a big plus!
2.   The borrower’s credit history is pulled from the three bureaus, and the credit behavior gets analyzed automatically.  If the computer signs off, that’s it – no other human touch needed.
3.  Equifax and other companies do the employment verifications, where they contact your employer directly to verify that you still work there.  Lenders usually handle those themselves, but much better to have a third-party be responsible.
4.  Your down payment/cash-to-close is verified automatically by Yodlee.  The borrower is emailed a verification form that authorizes Yodlee to check the balances of your designated accounts automatically.
5.  If the automated appraisal system scores the house at 2.5 or under on a scale of 1-5, then no formal appraisal is required in person.  The house may get looked at by satellite or drone to prove it’s still there.
6.  Everything from start to closing is signed electronically, and stamped by a virtual notary who pops up on your screen.  They are using thumbprint verifications too, and anticipate going to retina scans.
7.  The funding of your loan can happen in eight days!

The mortgage underwriting process has always been the one-size-fits-all package, which wasn’t really fair to the best qualifiers.  Now those borrowers with sterling histories won’t be dragged through the same rigors  – instead, you are rewarded with speed and simplicity!

Teacher Loan

Changes this month by the California Housing Finance Authority will help more K-12 public school employees land their first home.

The Extra Credit Teacher Home Purchase Program — once restricted to teachers — is now available to all administrators and support staff such as aides, bus drivers and custodians in public schools, charter schools and district offices.

Education professionals can now receive down-payment assistance of up to $15,000 in “high-cost” counties such as Riverside and San Bernardino. The loan, at 2.5 percent interest, does not require payments until the home is sold, refinanced or the principal loan has been paid, explained finance authority spokesman Eric Johnson.

“People always think government programs are for low income people, but we’re really for low and moderate income residents,” Johnson said. “It’s the missing middle – people with good jobs who have sometimes been priced out of the housing market.”

Applicants must have a minimum credit score of 640. Those making more than $91,000 per year are excluded from the program. The home sales price cannot exceed $400,000.

Read full article here:

http://www.pe.com/articles/home-817823-riverside-teachers.html

CalHFA has several assistance programs:

http://www.calhfa.ca.gov/homebuyer/programs/

Condo Owner-Occ Ratio Lowered

Dropping the required owner-occupied ratio from 50% to 35% should open up more opportunities for condo buyers and sellers, but yes, the mortgage guidelines are getting easier and easier.

Owner occupied units are defined as principal residences, secondary residences, or units that have been sold to purchasers who intend to occupy them as a primary or secondary residence. A principal residence refers to a dwelling where the owner maintains or will maintain their permanent place of abode, and which the owner typically occupies or will occupy for the majority of the calendar year. A secondary residence refers to a dwelling that an owner occupies in addition to their principal residence, but less than a majority of the calendar year. A secondary residence does not include a vacation home.

Conditions to Lower Owner Occupancy Percentage to as low as 35 percent

Existing projects (greater than 12 months old) with an owner occupancy percentage of at least 35 percent and less than 50 percent are eligible for approval under the following circumstances and subject to the following conditions:

1. Applications must be submitted for processing and review under the HUD Review and Approval Process (HRAP) option.
2. Financial documents (see Section 2.1.6) must provide for funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 20 percent of the budget; and
3. No more than 10 percent of the total units can be in arrears (more than 60 days past due) on their condominium association fee payments (as defined in Section 2.1.5 of the Guide; and
4. Three years of acceptable financial documents (see Section 2.1.6) must be provided.

http://portal.hud.gov/hudportal/documents/huddoc?id=16-15ml.pdf

Mortgage Rates Drop

Home sellers – if you aren’t getting offers this week, you are missing out on what will be the closest thing we will see to frenzy conditions the rest of the year!  Lower your price a little to get in the game!

California 30-year fixed mortgage rates go down to 3.22%

Saturday, July 30, 2016

The current average 30-year fixed mortgage rate in California decreased 1 basis point from 3.23% to 3.22%. State mortgage rates today ranged from the lowest rate of 3.20% (VT) to the highest rate of 3.34% (AK, NE). California mortgage rates today are 3 basis points lower than the national average rate of 3.25%.

The California mortgage interest rate on July 30, 2016 is down 11 basis points from last week’s average California rate of 3.33%.

The current average 15-year fixed mortgage rate in California remained stable at 2.54% and the current average 5/1 ARM rate is equal to 2.62%.

https://www.zillow.com/mortgage-rates/ca/

Skimpy-Doc Gets Higher Rate

Hat tip to eddieironmaiden89 for sending this in:

http://www.ocregister.com/articles/percent-714878-credit-mortgage.html

There was no such animal as a credit score for mortgages backed by Fannie Mae or Freddie Mac until about 1995. Well, it’s back to the future. Good going Fannie Mae.

On June 25, Fannie Mae will be rolling out the automation of a manual process for mortgage applicants without credit scores, according to Mindy Armstrong, senior product manager at Fannie Mae.

Here’s how it will work: A loan officer takes your application and runs your credit, but the credit bureaus Equifax, Transunion and Experian have no credit scores for you. This usually happens because you don’t have any or don’t have enough traditional credit (credit cards or auto financing, for example).

In the past, that meant that we loan officers were unable to qualify you for a loan backed by Fannie Mae. But in seven weeks, you will qualify, opening up a vast new array of borrowing options.

You are eligible for purchase as well for a no cash-out refinance loan if the lender can gather at least two pieces of credit information that covers the last 12 months. One must be a verification of rent. The other can be anything from a utility bill to on-time payments to your local gym.

You must put a minimum of 10 percent down (or have 10 percent equity when refinancing), all of which can be a gift. It has to be a single unit primary residence and, for Orange County, your loan amount cannot exceed $417,000.

Call me cynical, but I think credit scoring is just a “gotcha” way for creditors in general to upcharge borrowers that don’t have the very best credit scores.

“Thirty percent of bureau data is inaccurate,” said Stan Baldwin, chief operating officer at Garden Grove-based credit report seller Informative Research.

Where Fannie’s no-score gets ugly is the pricing. Fannie Mae is going to assume that your credit score is in its lowest allowable FICO score bucket of 620. That adds 0.625 percent to your mortgage rate for well-qualified borrowers.

“We price for the risk,” said Andrew Wilson, Fannie Mae spokesman.

Out of all seven mortgage insurance companies, so far only Radian and Arch told me they are willing to insure these loans.

Radian’s pricing looks very competitive compared to other standard mortgage insurance rates, adding 1.10 percent to your base interest rate. They also assume a 620 middle FICO score. Arch pricing was not available.

Assume you buy a $450,000 home and get a $405,000, zero-point 30-year fixed-rate mortgage at 4 percent, with a homeowner’s association fee of $350 a month. Your total payment with impounds would be about $3,159.

None of my piggy-back lenders (avoiding mortgage insurance by providing a 10 percent second behind an 80 percent first mortgage) will go behind a no-score loan. At a minimum, a 680 middle score is required.

Fannie needs to rethink their one size fits all pricing. They assume all no-score borrowers are high risk, just like the “before score” olden days.

They should consider job stability, cash reserves, and payment shock (industry jargon for how much your house payment will go up from your current rent).

Better risk borrowers deserve better pricing, score or not.