The Wealthy Are Still In On Real Estate

Andy Davis

According to a recent report, Tiger 21, a large group of wealthy investors with combined net worth in excess of $75 billion, has been increasing it’s holdings in real estate. During the last quarter the share of their portfolios dedicated to real estate has grown 2%. Also of note, the cash on hand by this group has increased drastically in order to have liquid assets available. As seen in the graphic below, the groups largest piece of the pie, making up over a quarter, is in real estate.

Fannie Mae Condo Financing and Reserves

Bob Vaughan
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Condos which are being financed   by Fannie Mae are subject to not only borrower qualification, but   also condominium association approval by the lender. The lender must   determine the association’s soundness by performing a condominium review of   the project.  There are two types of condo reviews; a full condo review and   a limited condo   review. The determination on when one review is used over the   other rests primarily on occupancy type and down payment. If the buyer is   purchasing a primary residence and is putting less than 25% down, or the   buyer is purchasing a second home and is putting less than 30% down, or the   buyer is purchasing an investment property, the purchase is subject to a full   condominium review. On the flip side, if the buyer is purchasing a primary  residence with at least 25% down or a second home with at least 30% down, the   purchase will be subject to a limited condo review. One of the biggest   differences in the two types of reviews is the lender’s responsibility to   analyze the Association’s budget and to see if it is setting aside sufficient   reserves for future replacements – in a full condo review, this is required,   in a limited condo review, this is not required.

When determining if reserves are sufficient, the lender must review the HOA   projected budget to determine that it:

  • is adequate (i.e., it        includes allocations for line items pertinent to the type of condo        project), and
  • provides for the funding of        replacement reserves for capital expenditures and deferred maintenance        that is at least 10% of the budget.

How is the 10%   reserve allocation in the budget calculated?
To determine whether the association has a minimum annual budgeted   replacement reserve allocation of 10%, divide the annual budgeted replacement   reserve allocation by the association’s annual budgeted assessment income

Lenders are permitted to use a reserve study if the association does not   budget replacement reserves of 10%, but must meet the following   criteria:

  • The lender obtains a copy of        an acceptable reserve study and retains the study and the lender’s        analysis of the study in the project approval file;
  • The study demonstrates that        the project has adequate funded reserves that provide financial        protection for the project equivalent to Fannie Mae’s standard reserve        requirements;
  • The study demonstrates that        the project’s funded reserves meet or exceed the recommendation made in        the study; and
  • The study meets Fannie Mae’s        requirements for replacement reserve studies listed in the Fannie Mae        Selling Guide.

Fannie Mae Joins Freddie Mac in allowing Appraisal Free Purchase Mortgages

Bob Vaughan

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Freddie Mac announced two weeks ago that beginning September 1, 2017 they will allow certain purchase mortgages to not require an appraisal to complete the transaction. One week later, Fannie Mae followed suit in allowing appraisal free purchase mortgages on certain transactions beginning immediately. Transactions are limited to loans that have LTV ratios (loan to value) of 80% or less and most transactions with a down payment of 20% or more are still expected to require an appraisal. Transactions that do not require an appraisal are given a PIW (Property Inspection Waiver) which are granted by valuing the property through algorithms and databases of existing data compiled by millions of existing appraisals. The percentage of homes that will be granted a PIW is still up in the air to the general lending community and more information will become available over the upcoming months.

Wait, that’s all I need to buy a home???

Bob Vaughan

Our world is evolving, advancing and surging forward at a rapid pace. Are mortgage loans the same as they used to be? Believe it or not, many buyers today still believe they need 20% down to purchase a home, but as our world evolves so do loans. Today, there is an arsenal of loan programs with down payment options less than 20%! For instance, if you’re serving, or served in the military, it’s possible you can get into a home with 0% down (VA Loan). If you’re a first-time home buyer, it’s possible you can get conventional financing with as low as 3% down (conventional loan) and if you’re a repeat buyer you can buy a home with as little as 3.5% down using an FHA loan or 5% down with a conventional mortgage loan!

There are two main categories which impact how much cash a buyer needs for closing: down payment and closing costs. How much are closing costs? Generally, a good rule of thumb for estimating closing costs is between 3 – 3.5% of the purchase price. If you’re a repeat buyer and are going with a down payment option of 3.5%, you’ll need to add roughly another 3.5% for closing costs bringing the total to 7% of the purchase price.

However, if there is something nice about closing costs, it’s that the buyer doesn’t necessarily have to pay for them. It’s possible for a buyer to negotiate in an offer that the seller will pay for all, or a portion of closing costs. On an FHA loan, the seller can pay for up to 6% of closing costs and on a conventional loan with less than a 10% down payment, the seller can pay up to 3% of closing costs.

So, what is the minimum amount of money you need to purchase a $150,000 home with an FHA Loan? The answer is $5,250. The seller can cover all the closing costs for the buyer, which means the buyer would only have to cover the minimum 3.5% down payment!

What if a buyer doesn’t have money for a down payment, but a family member will give them the money? This would be considered a gift and is potentially an acceptable source of a down payment.

 

Call today for more information on mortgage loan programs with low down payments!!

FHA Lowers Mortgage Insurance Premiums

Bob Vaughan

The United States Department of Housing and Urban Development (HUD) announced Monday that the mortgage insurance premiums on loans insured by the Federal Housing Administration (FHA) will be reduced by 25 basis points for loans closing on or after January 27, 2017. The most popular down payment for an FHA mortgage loan is 3.50%, which currently carries MIP of .85% annually. With the new change, MIP will be reduced to .60%, saving someone with a $200,000 mortgage approximately $500 annually. This will result in huge savings for FHA borrowers and will also help lower debt-to-income ratios, ultimately leading to higher affordability for FHA borrowers.

Are you eligible for a VA loan?

Bob Vaughan

A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The VA loan was designed to help eligible veterans purchase a primary residence with long-term financing by offering more flexible credit terms. Veterans can qualify for a VA mortgage loan with up to a 103.3% loan-to-value ratio without paying private mortgage insurance and interest rates are lower than conventional loans. There is an up-front funding fee for a VA loan which ranges from 0 to 3.3% of the loan amount and is paid to the Veterans Administration. The up-front-funding fee for the VA loan can be financed into the loan amount, resulting in a higher loan to value ration than 100%; this fee is waived for veterans who are receiving 10% disability or more for their time in the service. In addition to the low down payment, debt-to-income ratios on a VA loan can go higher than a conventional loan. This means that a buyer can qualify for a higher monthly mortgage payment in relation to their monthly income than they could for a conventional loan. The maximum VA loan guarantee varies by county. Currently, in Lee County, Collier County and Charlotte County the maximum guarantee is $417,000 at a 100% loan to value. VA loans are the most lax when it comes to credit history: no foreclosures or short sales within the last 2 years (opposed to 7 and 4 for a conventional loan respectively) and bankruptcies must be 2 years from discharge of chapter 7 (opposed to 4 years for a conventional loan). Credit scores can go below conventional loan, but most lenders require a minimum credit score of 620.

Veterans who are looking to purchase a condo must make sure the condo is approved for financing by the VA. A list of approved condos can be found at: https://entp.hud.gov/idapp/html/condlook.cfm.

D&V Home Mortgage offers VA home loans, FHA home loans, conventional home loans and jumbo home loans in Lee, Collier and Charlotte counties. If you are looking to get a mortgage loan in the Southwest Florida market, give us a call today to see if you qualify!

 

 

What does the Fed Interest Rate Hike Mean for Mortgage Rates?

Bob Vaughan

It had been nearly a decade since the Federal Reserve increased the target rate and seven of those years had been spent near zero percent. This historical length of accommodative monetary policy all came to an end on Wednesday, December 16th, when the Fed announced a quarter of a point increase to their target rate, increasing it to .50%.

Mortgage interest rates don’t directly follow the fed funds rate and are not expected to shoot up in the short term, but experts are calling for a 1% – 1.5% increase over the next 12 months. The average homebuyer isn’t quite aware of how low mortgage loan interest rates really are right now. According to CNBC, sixty-seven percent of prospective homebuyers surveyed by Berkshire Hathaway HomeServices, a network of real estate brokerages, categorized the level of today’s mortgage rates as “average” or “high.” The current rate of 4 percent on the 30-year fixed is less than 1 percentage point higher than its record low; this is drastically lower than the 18% the market saw in the 1980’s.

So is now the time to get a mortgage loan? Doug Duncan, senior vice president and chief economist at Fannie Mae may have put it best: “The rule for when is it time to buy is always the same: given your household budget and where current interest rates are, if it makes good financial sense to take out a home loan today, then today is the day to do it.”

 

 

Fannie Mae Survey Reveals Consumers Unaware of Requirements to Qualify for Mortgage

Bob Vaughan

A recent survey performed by Fannie Mae on a significant number of consumers revealed there is large gap in consumer knowledge when it comes to qualifying for a mortgage loan. Of the consumers interviewed, 40% did not know the minimum down payment required to qualify for a loan, 54% did not know the minimum credit score required and 59% didn’t know the maximum back-end debt to income ratio. “There is a significant lack of understanding about minimum mortgage qualification criteria not only among consumers in general but, more importantly, among renters who plan to purchase a home within the next five years” according to Fannie Mae. It is extremely important to know the guidelines and requirements when looking to get financing, or are working towards improving your situation for financing in the future. If you don’t know the correct guidelines today, how can you know how to prepare for the future? Call us today so we can answer any questions you may have about the mortgage loan process and help you get on the right track.