The REAL story in 2010!

There are big issues affecting home buying right now.

• The government has developed new programs to help both buyers and sellers.  Substantial cash credits are available home buyers and tax relief is available to distressed sellers. Take advantage of these incentives since some have already expired.

• Dealing with lenders can be frustrating. The detail and redundancy in obtaining formally routine loans is disturbing. Many of the government programs are voluntary---the banks do not need to use them in many situations. Money is tight. Patience!

• Appraisals are falling short because of prices driven by distressed sales (short sales and REOs) and slightly rising prices and increased conventional sales are slow to help determine value. Right now, cash is king!

• With numerous options available, the worst thing a distressed homeowner can do is nothing and just walk away. As the economy improves, attractive options will disappear. They are limited in time and scope. During this year, many incentives will expire, so act now!

MORTGAGE LENDERS

Providing mortgage financing for real property, these lenders take on several forms. A mortgage banker (Chase for example) provides loans generally with its own funds or a mortgage lender or broker uses several lenders and investor capital to funds many loans. Since each individual borrower has specific needs, many lenders work with portfolio loans (held by the bank), government insured loans ("Fannie Mae", "Freddie Mac", FHA, VA) or with other lending institutions as well as their own.

With years of local experience and working with numerous locally based lenders on a regular basis, I would be happy to recommend the best to you.

Whether you are buying or selling, the key to the sale is financing. Helping you determine monthly payments, down payment options and closing costs, I can direct you in the right direction-NOT ALL LENDERS WORK ALIKE! 

Qualifying

First,  do not pre-judge your ability to borrow.  Most importantly, if you are considering a home purchase, do not change your financial condition before consulting with a lending professional. That means do not move money from one account to another, avoid big ticket purchases such as automobiles, try not to change jobs & make your home purchase the priority in your life

Working with a lender of choice, I will help you obtain the best possible terms that fit your needs. 

The lender typically weighs three criteria to determine your ability to borrow: CASH, CREDIT & INCOME.

CASH on hand can even be in the form of a gift or in a savings account or an investment account. However, no down loans are gone because of the abuses over the last several years.

CREDIT as reported and scored by authorized agencies reports how much you owe and to whom, whether you pay late or on time or not at all.  Major credit "dings" are charge offs, unpaid collection accounts, bankruptcies, repositions or foreclosures. Even major problems, if far enough in the past or "repaired" may NOT prevent you from obtaining a loan.

Credit repair simply means reviewing your credit report, correcting mistakes, settlement of problem accounts and good financial management.  If you are not able to obtain a home loan today, many borrowers often repair their credit sufficiently to obtain financing in as little as 6 months. Anyone may obtain their credit report for free once a year.

Credit Scoring is widely used by most lenders to quickly determine your credit worthiness. Many factors effect the score such as delinquencies, charge offs, payment history and numerous others factors including how often you apply for credit & how much you use.  If you order a credit report, make sure that it does not appear as a credit inquiry from a credit grantor. The inquiry itself may lower your credit score or trigger other inquiries. Be careful when granting authorization for a credit report.

The three primary credit reporting agencies are Experian, Trans Union and Equifax, all accessible through the internet.

INCOME, reported either by W-2's, tax returns or bank statements shows your ability to service a loan.  

LOANS

A Thirty-year, fixed-rate conventional loan consists of a mortgage with monthly payments of principal & interest that remain constant throughout the life of the loan.

The Federal Housing Administration (FHA) single-family loan limits have been revised as a result of the American Recovery and Reinvestment Act of 2009 (ARRA) and are now available. The new loan limits, reflecting an increase from $625,500 instituted in the last days of the prior Administration return to a maximum of $729,750 set earlier in 2008 to help mitigate the housing and credit crisis. This cap is effective for those loans for which credit is approved in 2009 and will remain in effect through 2010.

The standard conforming loan limit varies in many areas of the country depending on prevailing housing costs and to account for "High Cost" areas, including parts of California. Ventura County's loan cap is $729,750.

In 2009, Federal lending guidelines for primary residence conforming loans have returned to more traditional standards but with many conditions designed to deal with the current recession. With these changes, instituted by both the Bush Administration and the Obama Administration, lending practices are pushing toward a more stable future in the housing market. Once the housing and credit markets stabilize future lending practices will likely be modified further to respond to future market conditions.
 

Fifteen-year, fixed rate financing has a larger monthly payment than a 30-year loan, but a lower interest rate and smaller potential interest cost. As appealing as this loan may appear, it locks the borrower into higher payments which may become unaffordable at some future time.  Home buyers should always be careful when choosing a loan.  If the borrower has extra money, he/she may make additional principal payments and reduce the term of a 30 year loan without being locked into higher payments.

 An adjustable rate mortgage (ARM) is a form of financing which typically has an initial interest rate and then changes on a regular schedule. The initial "start" rate is now available for a number of years, but historic low fixed rates becoming available are now replacing the once popular ARM, although the ARM still has desirable qualities.

Because the interest rate changes, monthly payments can also rise or fall. The interest rate is based on an index; say the 10-year U.S. Treasury note and the lenders margin. The margin is essentially the lenders profit. Combined they equal the monthly interest rate to the borrower.  Most ARMs have annual and lifetime interest caps and monthly payment caps. These caps moderate the “ups and downs” of the variable rate, but do not eliminate it.  

Some ARM mortgages allow lenders to collect "negative amortization," an expression which means the interest cost is greater than the minimum monthly payment, so the borrower may make smaller payments, but the size of the loan balance increases. If the borrower pays more than the minimum interest payment in order to reduce the balance of the loan, the effect is to reduce the minimum monthly payment rather than reduce the term as in pre-paying a fixed rate loan. Self employed or commission sales people whose income varies from year to year may often prefer this type of loan.

A jumbo loan is, essentially, a 30-year mortgage but with a loan amount above the conventional conforming loan limit, currently $729,750.  Because a larger loan amount is outstanding, lenders have more risk and so interest rates are higher than for traditional conforming financing and conditions are tougher. Non-conforming Jumbo Loans are also ineligible for government backing, and thus excluded from nearly all mortgage modification and refinance programs.
 

A variety of other loans, convertible or interest only fixed, due in 3, 5, or 7 years offer a combination of rates and terms. As an example, if a borrower only plans to keep a home for five years, knowing that his job will change, he may prefer a loan with a lower rate for the first five years, although the loan is amortized for a full 30 years. Typically these loans then convert to a new rate calculation which may require refinancing.

Loan Modification Programs, designed to help a homeowner avoid  "preventable" foreclosure and create a "sustainable" long term payment plan are available. These loans typically require qualifying under more traditional terms and conditions although certain special terms addressing the current foreclosure crisis are being implemented. Many believe the key to ending the current financial crisis and stabilizing the economy in general is housing, so new laws are designed to expedite the housing recovery by reducing foreclosures and removing unqualified borrowers from the system. Refinance vehicles, short pays or other tools are all designed to turn a non-performing loan (liability) into a valuable financial asset.

As further explanation, a short pay is a pre-foreclosure process in which the lender takes a payoff less than the balance of the loan in the sale of the house, thereby replacing the unqualified borrower with a qualified buyer. Other tools are deeds in lieu of foreclosure (deeding the house back to the lender), forbearance agreements and informal delays in the foreclosure process (designed to give the borrower more time to possibly work out a solution). reducing the loan balance, extending the term from 30 years to 40 and reducing the monthly payment. Private companies, real estate brokers, nonprofit organizations and attorneys are offering to help the borrower, but beware when looking for help. Consumers can verify that a company’s contract has been approved by the California Department of Real Estate by visiting their site,  www.dre.ca.gov or by calling (916) 227-0770.

Contact your lender directly to determine the terms and conditions of the programs available and your eligibility.

When obtaining financing, even though a lender may be willing to loan you more, consider what payment you and your family are comfortable making each month.

Loans have a nominal interest rate and an annual percentage rate (APR). The APR is important because it includes not only the interest rate, but also such costs as points (loan discount fees), per diem interest, mortgage insurance and other expenses.

In summary, lending guidelines are now more comparable with those used for the last several decades and are now coalescing into a new set of common standards. Many conditions are used now to address the foreclosure crisis, but will likely be modified as the housing market returns to normal. Lenders are very demanding in making loans, so patience is required, but as a potential home buyer, this is a great time to buy. Prices have adjusted realistically and offer much more affordable housing again. Bank owned property is often available at "fire sale" prices, but patience is required because of the convoluted process in purchasing a property in foreclosure and obtaining financing. In today's environment, even highly qualified buyers will find difficulties in obtaining credit. Hopefully as we move forward, the credit markets will return to normalcy.

Get the Facts Directly from the Source

United States VA Home Loan Program

Federal Housing Administration (FHA)

Federal Housing Finance Agency

Fannie Mae

Freddie Mac

Wells Fargo Home Mortgage/Wachovia Bank/World Savings

Chase Mortgage/Washington Mutual

Bank of America/Countrywide

Citibank

Ocwen Financial/Downey Savings

One West Bank/IndyMac Bank

FDIC /PFF Bank, Security Pacific Bank

For a personal evaluation with an area specialist, contact:  

Dawn Peck 805-389-6800 at Guild Mortgage Company

    711 E. Daily Dr, Camarillo, CA 93010
 

  Ane-Marie Barbettini 805.240-1490 Wells Fargo Home Mortgage

   801 S Victoria Ave. Suite 1 , Ventura, CA 93003

Bank of America Home Loans  888.233.4124-Offices through out Ventura County

Send mail to hal.cutler@verizon.net with questions or comments about this web site. Surfside-Anacapa Real Estate is independently Owned and Operated. Harold "Hal" Cutler is licensed by the California Department of Real Estate #01138681.  Information contained herein is deemed reliable, but not guaranteed.  References to size or square footage is taken from public records but is not verified. If your property is listed with a Broker, this site is not intended as a solicitation of  the listing.  Property offered is subject to prior sale.  Consult a qualified specialist for legal or tax issues.
Copyright © 2001 HAL CUTLER - Realtor
Last modified: May 09, 2010 11:44