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Friday, November 21, 2008

Its intent was to regulate the rate of interest and the terms of mortgages that it insured. The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. That would avoid taking out a credit line or second mortgage for the improvements. As you will with most all of them.

An apparent underpricing of risk was revealed first in mortgage markets, and later in a variety of credit markets. Therefore, GMAC Mortgages privacy policy will not apply. Dont wait any longer, our form will take less than 2 minutes. The ceiling is lower in lowcost housing markets. Find your perfect mortgage Learn About Refinancing FHA loan refinancing lowcost, no minimum income or credit. As in the GIloan program, the applicant for the loan must make arrangements with a lending institution. Vocal minority of Congressional Leaders are now calling for the end of FHA. The benefit to you, as the borrower, means less money at closing.

FHA insures loans for lenders against defaults. FHA Home Loan is a governmentsubsidized loan that is popular with firsttime homeowners. Refinancing was not available, and many borrowers, now unemployed, were unable to make mortgage payments. An eligible borrower can receive approximately 97 financing. Because of the credit crunch that began last summer, lenders have made conventional loans tougher and tougher to . If you have expertise in the field of FHA and would like to contribute, we want to know. Get the refinancing answers you need, and learn about the best refinance loans for your situation. It can be a fixedrate loan or an FHA loan. However, the FHA does not insure nontraditional loans such as payment option adjustablerate loans. Can you save money with an ARM.

Find out on the Quicken Loans blog. GMAC is a registered service mark of Intuit Inc. The FHA makes no loans, nor does it plan or build houses. It has helped with purchases of both single family and multifamily homes. Author of The Common Sense Mortgage a book with unit sales well into six figures Mr. Subprime alternative FHA reform deal close Mar. Make it easier for borrowers in highcost loans to refinance.

Buying or selling a home Why use a real estate agent. Dont most lenders require verification of income and full appraisals. They once did and are increasingly demanding them.

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Friday, November 21, 2008

Soft Market + Motivated Seller + 6% Seller Contribution = 5.50% Fixed Rate 30 Year Mortgage Rate Buydown
By: dalerogers32

An anomaly is defined as a deviation from the normal order. At this very moment in many real estate markets in many parts of the country a soft market can lead to opportunities for many buyers.

With many 30 year fixed rate loans with an 80% Loan To Value (LTV) the mortgage program guidelines will allow a seller to pay up to 6% of the buyer’s closing cost. For example if there is a negotiated sales price of $500,000 with an 80% LTV of $400,000. A seller contribution would be allowed up to 6% on $400,000 mounts up to $24,000. This would need to be a very motivated seller who needs to sell now. Unless a borrower tolerates total gouging on closing costs, this would be a heavy amount. However, a sum of $8,000 to $10,000 or less would handle the closing costs for this property, not including prepaids such as insurance and tax escrows. On the surface, it would seem the difference between $24,000 less say $10,000 would allow $14,000 in additional costs. With today’s rates, a one percent (1%) lender discount could buy the rate down from say 6.25% to a rate of 5.5%. Thus, $400,000 x 1% = $4,000.00. A buyer borrower would need to be armed with the facts prior to negotiating a real estate contract so that the seller can determine their bottom line at closing.

For the benefit of the buyer, if they are going to stay in the home for a long-term period then there will be great benefits for the buyer to get a lower rate. Looking at the principal and interest payment for $400,000 at 6.25%, 30-year term the payments then is $2,462.87/month for principal and interest. With the same terms with a rate of 5.5% the payment is $2,271.16/month for principal and interest. That would result in a monthly savings of ($2,462.87- $2,271.16) is $191.71/month in savings versus a 6.25% interest rate.
Example of payment at 6.25% shows $2,462.87/month x 360 months = $886,633.20
Example of payment at 5.50% shows $2,271.16/month x 360 months = $817,617.60
Life Time Mortgage Savings------------- $ 69,015.60

A borrower simply being armed with the information on a rate buy down can enter negotiations that may lend some long term benefits. Six months ago, seller help was just a dream. Today, it’s a real consideration of any purchase. Will it last forever? No, it’s an anomaly. Temporary and fleeting. So…buyers need to get it while they can.

Where are these opportunities to be found? In any area look for vacant homes, on a lock box with some sort of sales pressure. If the lender allows for a 6% seller contribution of the contract price on say an 80% Loan To Value loan then why not go for it. Many of these potential properties can be searched and identified using a Realtor and the local MLS system. Builders who are setting on a huge inventory of homes may be willing to grant major concessions in order to keep the price levels consistent until the home prices firm up. This would be a situation where a borrower would need to determine that the market in that particular subdivision is at a “temporary” lull and not a trend. Otherwise it would be a case of throwing good money after bad. Working with a Realtor who knows the market will go a long way in avoiding those kinds of pitfalls in builder subdivisions where resale homes are less than the new homes on the market. In that case, the builder is upside down on pricing. This will need to be avoided. What we are talking about here is temporary anomalies that a buyer will want to exploit, like now in the current market. The best evidence of a buyer’s market is where there are more homes for sale than ready buyers and there is a glut of homes on the market just sitting. A forest of for sale signs.

With lower priced homes with say FHA and VA loans there be an opportunity where the seller in addition to paying all the closing cost and prepaids could pay say 2 points to buy the rate down on a “2-1 Buydown” Program. The beauty of this program allows a buyer to buy using a FHA mortgage with as little as a 3% investment and a VA mortgage with zero down. This is a great program of for Debt To Income challenged borrowers who are just squeaking into the property.
If the rate were 6.75% on a mortgage of $205,000 on a thirty-year basis the payment would normally be $1,329.63/month for principal and interest. If the taxes are $300/month, the hazard insurance is $220/month and Mortgage Insurance Premium (MIP) of $85.42/month then the total payment is $1,935.05 per month with $1,050 in installment and credit card debt for a total monthly debt load of $2,985.05 including the new housing expense. If the income were $6,395/month the Debt To Income (DTI) ratio would be around 47%. Let’s assume, due to credit history and other factors, the underwriter is not willing to accept this level of DTI nor will any Automatic Underwriting system accept it. An alternative would be to consider the 2-1 Buydown Program with the first year interest rate of 6.75% - 2% = 4.75%, the second year would be 6.75%-1%= 5.75% with the third year and beyond 6.75%. With this program the borrower can qualify at the start rate of 4.75%. The principal and interest payment with this start rate is $1,069.38/month or $260.25/month less at the fully loaded rate of 6.75%. The DTI than is 42.60% and the underwriter will sign off on that. The theory is that the borrowers will have two years to cut debts and increase their income and get their ratios in a more satisfactory position.

What’s the point of all this. If the home is selling for $208,200 and the seller is willing to pay up to closing costs and prepaids which would be $208,200 x 6% = $12,492 and the costs add up to say $9,500, why not use the allowable seller contribution to buy down the loan rate. The main benefit is to get the borrower’s DTI in line and lower the payment in the early years all funded with the seller contribution. VA loans can go much higher and in certain areas, FHA loans can go a lot higher as well.

This anomaly will not last. It is a buyer’s market so why not maximize the buyer’s benefits by applying part of the 6% seller’s contribution to buy the loan down and not leave any money at the closing table which can be utilized for the buyer’s benefit. Negotiation is king.

Dale Rogers
http://www.sellerhelpsbuyer.com
http://www.brokencredit.com

About The Author:
Dale Rogers is a thirty-year mortgage veteran and frequent contributor to the Broken Credit Blog. The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending.

www.BrokenCredit.com
www.sellerhelpsbuyer.com

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