Green Bay Mortgage News

Harp Mortgage Program - Green Bay, WI

Home Affordable Refinance Program (HARP) was just extended to December 31, 2013.  This allows homeowners to refinance into low mortgage rates even if the property has decreased in value.

Established in 2009, for Fannie Mae and Freddie Mac, HARP provides an option for homeowners to refinance "Up Side Down Home Values".  A HARP refinance addresses situations where the homeowner's property value has fallen causing them to no longer qualify under traditional underwriting criteria.  Homeowners with a loan owned by Fannie and Freddie have the opportunity to refinance with any participating lender as long as the resulting loan is less than 125% of the current property's value.

Do you own a Fannie Mae or Freddie Mac mortgage?  Here is the online look up tool.  Just fill in the requested info.

Freddie Mac look up: https://ww3.freddiemac.com/corporate/

Fannie Mae look up: http://www.fanniemae.com/loanlookup/

The following criteria must be met to qualify for the HARP program:

• You must live in the home being refinanced.
• Only Fannie and Freddie mortgages are available through HARP.
• The homeowner must be able to afford the new lower payment with documentation of steady income.
• Minimum credit score requirements apply.
• Mortgage must be current with no late payments in the past 12 months.
• The maximum Loan to Value limits have been removed on home owners looking to refinance in to a fixed rate mortgage.
• For homeowners looking to acquire a adjustable rate mortgage the maximum Loan to Value is set at 105%.

Renting versus Owning - Green Bay, WI

Home prices have taken such a beating and the demand for rental units has increased so much that it's now cheaper to buy a two-bedroom home than to rent in most cases.

According to the real estate web site www.trulia.com , buying was cheaper than renting in 74% of the country's 50 largest cities in July.  In just 12% of the cities, renting was cheaper.  In the remaining 14% of cities, renting was less expensive but close to the cost of buying.  Why would you want to build your landlords equity?  Possibility of a bigger tax deduction and homeownership is the American dream.

In addition to a continuing decline in home prices, rock-bottom interest rates have added a lot of weight to the buy side of the equation.  The overnight average rate for a 30-year fixed was 4.19% on Monday, according to www.bankrate.com.  A 15 year fixed averaged just 3.43%.

With the perks of cheap home prices and record low rates, for those who can qualify based on; credit worthiness, debt to income ratio, and a down payment, it is certainly a buyers market.

Credit scoring is that mysterious number that is assigned to your when you apply for a mortgage, a car loan and your insurance company even runs one to determine your premium amounts.

So, there’s a new website, created by the Consumer Federation of America and Vantage Score Solutions if you’d like to know how credit scoring works.

www.CreditScoreQuiz.org

Thousands of people have taken the quiz—with the average score of 60%. People between the ages of 34 to 45 got 67% right and people with income over $100,000 got 66% correct answers. Consumer with lower income and the elderly scored lower. They just don’t use credit enough to know how the scores affect them.

The quiz has 25 questions—and the website will give you the answer to those questions that you missed.

There are new credit scoring disclosure rules going into effect in July 2011 where lenders and the credit bureau must provide you with detailed information when you apply for credit. It will help you understand your credit score and in finding errors on your report (that you may not even know about). So stayed tuned!

Avoiding Private Mortgage Insurance - Green Bay Wisconsin

I remember when I was younger and thinking of purchasing my first home.  My mom pulled me aside and said; "Son, you better save up your money before you even think about doing that.  If you don't put 20% down when you purchase a property you have to pay private mortgage insurance (PMI)."  My initial thought was what's PMI?  So I asked, and she said "PMI is added insurance on your loan that protects the lender in the event of a default, not you the borrower."

Now that I have been in the industry for some time.  There is a lot of truth behind that statement.  I have seen multiple loans in the past few months where the PMI was north of $100 a month on a typical $125,000 purchase price here in Green Bay.  This concerned me, especially for first time home buyers where their payment was being stretched to acquire the property they wanted.  I wanted to provide a information blog to let you know that there is alternative options on avoiding PMI with out having to wipe out your entire life savings and putting 20% down on a property.  Before I get into that, let's understand how long they charge PMI for as it doesn't go away fast.

For loans made after July 1999, lenders are required by federal law to automatically cancel Private Mortgage Insurance (PMI) when the loan balance falls below 78 percent of your purchase price — not when you achieve 22 percent equity, which will happen much more quickly with rising property values. (Certain "higher risk" loans are excluded.) But you have the right to cancel PMI (for loans made after July 1999) once your equity reaches 20 percent, regardless of the original purchase price.

Keep track of your principal payments. Also keep track of what other homes are selling for in your neighborhood. If your loan is under five years old, chances are you haven't paid down much principal — it's been mostly interest. But property values in many parts of the country have gone through the roof lately. And that can earn you 20 percent equity even if you haven't paid down much principal.

When you think you've reached 20 percent equity in your home, you can begin the process of freeing yourself from PMI payments! You will need to notify your mortgage lender that you want to cancel PMI payments and you'll need to submit proof that you have at least 20 percent equity. A state certified appraisal on the appropriate form (URAR- 1004 uniform residential appraisal report for single family homes) is the best proof there is — and most lenders require one before they'll cancel PMI.

Here is what is currently available with purchasing a property to avoid PMI without having to put 20% down.

• USDA Loans (Rural Properties) - No Money down and NO PMI.  This is a fantastic program to consider when purchasing a property in a rural community.
• VA Loans - All properties, must be active duty, retired, or in the reserves to qualify.  Also, must be able to provide a certificate of eligibility for the lender.
• Conventional Loans - You will want to work with a preferred lender who offers Lender Paid Mortgage Insurance (LPMI).  Typically, this program is a slightly higher rate then what you would normally qualify for put you don't have to pay PMI.  We currently have this program available for credit scores 700 or higher with 5% down.
• Home Path - This is Fannie Mae's purchase program.  Allows you the buyer to purchase a foreclosure with 3-5% down, with NO PMI and no Appraisal.  Currently there is a 660 minimum credit score requirement.
• Piggy Back Loan - You can still do a 80% first mortgage, and a stand a lone second mortgage up to 85%.  You would need to put 15% down to acquire this loan.  A strong option to consider if you are stretching the sales price acquiring the property you want and don't quite have that full 20% saved up.

Refinance Options to Avoid PMI.

• VA Refinances - Up to 100% of your homes value on a rate/term transaction.  This is a Federal VA funded program.  No cash out allowed, we just have the ability to pay off your current mortgage debt.
• USDA Streamlines - If you originally purchased your property through USDA, you can streamline your loan at anytime for a better rate either with or without appraisal.  If you don't have any cash to close, you can do the loan with a appraisal and roll in the third party costs.
• Piggy Back Loan - As mentioned above we can split the mortgage debt into a 80% first, and a stand a lone second mortgage for a maximum of the other 5%.
• Conventional Refinances - On a rate/term refinance where we are just paying off the initial loan we can go up to 95% of your homes value, and do the LPMI program.

Interest rates are still very low, and the inventory that's currently available in the market is priced to sell.  There has been no better time in the past 5 years to purchase or refinance to secure a very low interest rate on the biggest payment you make on a monthly basis then right now.

Fannie Mae Home Path - Green Bay Wisconsin

Why would you purchase a foreclosure versus any other regular property available on the market?  It's simple, these properties are priced to sell.  Granted, they may need a little work, but the end result is typically a property with instant equity.

Fannie Mae has special financing for the foreclosed properties, called Home Path.  You can see what's available in your area at www.homepath.com .  Home Path allows a borrower to purchase a Fannie Mae owned property with a low down payment, flexible mortgage terms, no lender requested appraisal and no mortgage insurance.  Expanded seller contributions to closing costs are allowed as well.

Benefits to You, the Borrower:

• Low down payment and flexible mortgage terms.  (Typically 3-5% down for owner occupied single family residence, and 10% down for investors on a single family residence.  10% down for 2-4 unit properties that are owner occupied and 15% down for investors on 2-4 unit properties.)
• Down payment can be funded by the borrower's own savings; a gift, or a loan from a nonprofit organization, state or local government, or employer.
• No appraisal.
• No mortgage insurance.  (PMI)
• Available for primary residence, second homes and investment properties.
• Home Path allows Investors to have up to 10 financed properties.

To sum it up, you can put only 3-5% down and purchase a Fannie Mae foreclosure with NO PMI & NO Appraisal Needed.  Some of these properties are in a distressed condition that will not pass a appraisal.  We understand this and hence the reason this program is available.

Buying A Home - Green Bay Wisconsin

If you know what to expect and you have a trusted team of real estate and mortgage lending professionals to guide you finding and financing your first home can be an exciting and rewarding experience.  Here is what you need to know:

Obtain a Mortgage Preapproval Before You Begin House Hunting

• Learn how much financing is available to you.
• Strengthen your bargaining position with sellers.

Choose a Real Estate Agent

• Ask your mortgage lender to recommend agents they work with.
• Select a reputable professional who knows the market and will listen to your needs.
• Ask agents for references from former clients.

Find the Right Home

• Determine the needs of you and your family.
• Create a wish list of desirable features.
• Take notes as you preview homes.

Make an Offer

• Your real estate agent presents your offer to the seller, who will accept, counter, or reject it.
• When the price is settled, you and the seller sign a Purchase Agreement, defining the terms of the sale.

Have the Home Inspected

• Hire a professional inspector after the offer has been accepted to provide and in-depth look at the basic systems of the house, to reveal any safety hazards and give you a chance to reconsider the deal.

The Home Will Be Appraised

• An appraiser, required by your mortgage lender, is a formal, written estimate of the home's current market value.

Obtain Title Insurance

• This guarantees that the property you are purchasing is free of liens or confusion in rights of ownership.
• The policy insures against any losses to the property that result from defects in the title or deed.

Close on the Property

• Ownership of the property is transferred.
• A closing agent coordinates and distributes all the paperwork and funds.

And you become the proud owner of your new home!

USDA Home Loans - Green Bay Wisconsin

Can you still purchase a property with no money down?  YES!  Despite the media continuing to pick apart the housing market and saying that we need at least a 20% down payment in today's day and age to avoid the recent turmoil with the foreclosure market. 

This is a great purchase option, and it's available for everyone, not just first time homebuyers.  It's a USDA Loan.  USDA loans are primarily used to help low-income individuals or households purchase homes in rural ares.  Applicants for loans may have an income of up to 115% of the median income for the area.  Here is the link to determine wether you qualify for this program or not.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=pageLoad&requestInfo=GuaranteedIncomeLimits&NavKey=incomelimit@12

Here is the highlights of the programs and qualification requirements:

• Property must be in a rural area.  You can also check the property eligibility at: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp&NavKey=property@11
• In the event you had a bankruptcy, the discharge date must have been three years or greater from today's date.  Same rules apply to a short sale or a foreclosure.
• This program is 100% financing with NO PMI.  Yes you read the right, you don't have to put 20% down to avoid the PMI.  This is a very strong option to consider when purchasing a property with the cheapest monthly payment possible.
• Interest rates are comparable to a traditional FHA or Conventional purchase.
• Their is a 3.5% funding fee at closing that rolls into the loan.  You will actually be financing 103.5% of your home's purchase price.  This protects the lender in the event of a payment default on your loan.
• Currently, there is a minimum credit score requirement of 620.

FHA 2/1 Buydown Program -

Let’s face it, we all buy based on a payment, right? Think about the last car you purchased. Were you more concerned about the price you paid or the payment you were going to pay each month? Home buyers are no different and if shown the payment vs. the purchase price, payment typically wins.

So, if payment is the question on most buyers’ minds, then a temporary rate buydown is the answer. Creative financing by way of the temporary rate buydown is a great solution to the common issue of let’s do multiple price reductions until your home is sold. The buydown is nothing more than a seller incentive in which the buyers cost is paid by the seller.

Let's take a look at some real numbers.

Seller has a home for sale for 200,000 and if rates were let's say 5% the buyer would be shopping for a payment of $1073.64 (P&I) on a 30yr loan.

So lets say the buyer wants a payment under $1000 they may ask for the seller to lower the price to $185,000 to get the payment down to $993.12 (P&I).

So your seller would be giving up $15,000 to meet the buyers offer.   However, you could work with your preferred lender to offer a FHA 2/1 Buydown to the buyer and here's how it would work: 

Buyer pays $200,000 for the property and gets a 3% Rate for the first year (2% lower for the first year - the "2" of the 2/1) and will have a payment of $843.21 for the first year.  Then a 4% Rate for the second year (1% lower for the second year - the "1" of the 2/1) and will have a payment of $954.83 for the second year.

The seller could include a 3% concession to cover the cost of the 2/1 Buydown (that's what it would cost) and keep the sales price at $200,000.  So in the example the seller would only be offering $6000 instead of $15,000 and would be keeping the sales price at $200,000.

Keep in mind this program is not a adjustable rate.  It's a traditional 30 year fixed loan, offering the buyer a payment in this scenario of 3% for the first year, 4% for the second year, and fixed at 5% for years 3-30.

This is a very good option not only to keep our homes value in check, but also meet the sellers and buyers goals.