Bob Ware's Blog

Changes to be aware of for FHA loans

Bob Ware (Network Funding LP) — Thu, 25 Mar 2010 15:07:01 -0700

On April 5th the UMIP (up-front Mortgage Insurance Premium) for FHA loan will increase from 1.75% to 2.25%. Also a decrease in allowable seller's contributions from 6% down to 3%. Okay so this all sounds like more doom and gloom, but it's not the increased UMIP really doesn't translate to a large increase in monthly payment, and the monthly premium is still the same. We just need to remember these changes when we speak with our clients, and know that our industry is evolving and we really can't stop it, so what we can and must do is remain aware of the changes and keep providing our clients with the best service possible. This is why they choose to work with us, it's what they expect, and it's what we must deliver.

On another note, if your client is putting down a larger down payment and does not need FHA financing (meaning 5% or more and they qualify conventionally) make sure to compare the cost of a single paid MI plan. You may be surprised to find that the cost may be reasonable enough that it could be negotiated to be paid by the seller, and the monthly payment for the buyer would be lower since there would no longer be a monthly MI consideration.

Donations for Haiti

Bob Ware (Network Funding LP) — Fri, 15 Jan 2010 12:40:29 -0800

I'm sure we are now all aware of the terrible crisis in Haiti. I am sharing a link with you to AmeriCares - one of the many fine organizations that are helping Disaster Relief at http://www.americares.org

New Standardized Good Faith Estimate Effective January 1 2010

Bob Ware (Network Funding LP) — Wed, 09 Dec 2009 12:02:54 -0800

Via Loreena Yeo - Broker|Realtor(R) of www.Frisco-TX-Homes.com (214) 783-2210 (3:16 team REALTY):

For the longest time, there was no standardization in good faith estimates presented by Lenders when a loan application is made by a borrower. In efforts to facilitate a better shopping experience for the consumers, HUD requires all lenders use the new standardized format for Good Faith Estimates effective January 1 2010.

At first glance, the standardized format of the Good Faith Estimate is easy to read, understand and digest by the average borrower.

The summary of the loan is displayed on the 1st page with answers about the loan such as:

(1) Can your interest rate rise? (Indicates if it is an adjustable rate mortgage)
(2) Even if you make payments on time, can the loan balance rise? (Indicates if it is a negative amortization loan)
(3) Even if you make payments on time, can your monthly amount rise? (Indicates if the account is escrowed or not)
(4) Does the loan have a pre-payment penalty?
(5) Does the loan have a balloon payment?

Lenders are held to a higher standard of accountability with the use of the standardized Good Faith Estimate. "Good faith" in the past will now be more of certainty, especially when it comes to the Lender charges. HUD requires that Lenders be sure to know how much they intend to charge their borrowers based on the information the borrowers provided.

The new Good Faith Estimate also utilize the Lump & Dump concept whereby HUD feels that the borrowers have been provided too much information in the previous good faith estimates. Items "A" on Page 2 of the GFE includes all origination charges. They are no longer broken down into Loan Origination Fee, Processing Fees, Tax Service Fee, Funding, Lender Feeds, Doc Prep Fees, Broker Yield Spread Premium, etc. Only information that could affect the loan is broken down into 2nd part of "A". According to HUD, the "bottom line" numbers is what the consumers care about.

This section of the Good Faith Estimate must be the same (ie. Zero Tolerance for differences) and borrowers can expect them to be the same on the HUD-1 settlement statement - if the terms and conditions of the loan are the same. Should there be a difference, HUD considers this Breached Tolerance and this breach will be cured with a credit at the closing table or writing a check to the borrower within 30 days of closing.

This brings Lenders to more accountability towards the accuracy of their good faith estimates to their clients. It is a good thing.

Other considerations could be expected should there be changed circumstances on these No Tolerance items above (ie. Lender charges). A changed circumstance may include acts of God, war, disaster, new information not known by the Lender, other information found not to be inaccurate.

There are other charges associated in purchasing the property. These items are found as part of "B" on page 2 of the GFE.

The similar lump & dump concept for Title charges in Section 3, 4, 5 and 6. These charges can deviate up to 10% on the HUD-1 statement - assuming that the borrowers services identified by the Lender. The total of these charges of page 2 on the GFE constitutes the "B" total.

Along with the "A" total and "B" total, these costs add up to make the Total Estimated Settlement/ Closing Costs. However, this is NOT to be confused with Cash Needed for Settlement. Items A and B DOES NOT account for Seller's concessions, property tax and HOA prorations, etc.

Page 3 of the Good Faith Estimate is also known as the "finishing touches" for the loan. It gives borrowers instructions on what cannot be increased at settlement, what may increase up to 10% and what could potentially subject to change.

There is also a tradeoff table for borrowers to see the various choices as provided by the same lender. Same loan with lower settlement charges or same loan with lower interest rates.

Last but not least, the GFE also provides a section to allow borrowers to compare various loan offers in the Shopping Chart section.

The use of the form is MANDATORY. In the past, lenders have created their own formats and some not providing one at all. The new rules as directed by RESPA must be furnished to borrowers:

Within 3 days of loan application.
A loan application is deemed taken by a lender with the borrowers' names, social security numbers, incomes, estimate purchase value, loan amount, other information deemed necessary by lender and property address.
This form must only be utilized if there is a specific property address.
While home buyers have used the GFE to shop for lenders, they could no longer do that. Without a property address, the industry believes that lenders will come up with "preliminary" GFEs without the actual property address.

Without 10 days of GFE issuance.
The GFE will be good for 10 days after the borrower receives it. The borrower MUST express an intent to proceed with the terms and conditions of the loan based on the GFE provided within 10 days business. After 10 business days, the lender is no longer bound by the issued GFE.

This is HUD's effort in facilitating consumer comparison shopping of Lenders. It is not the most perfect version out there but it is a much simpler method for an average consumer to understand. What this new GFE does not address is it does not specify the loan product (FHA, Conventional, VA, etc.) and it also does not inform the borrower the actual monthly payments in Principal, Interest, Property Taxes and Home Insurance (PITI). It only addresses the Principal, Interest and Mortgage Insurance (if applicable). The lender may furnish these information on other documents.

Download the new GFE here.

Related Articles:

How to Compare Lenders and Good Faith Estimates

Mortgage Interest Rates Spiked Higher Than Normal

100% Home Loans

Time Value of Money in Closing Costs

Myths about Tax Assessments vs. Property Values

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Contact:

Loreena Yeo
Realtor®/ Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.com

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Copyright © 2009 by Loreena Yeo (3:16 team REALTY)
Originally posted on New Standardized Good Faith Estimate Effective January 1 2010.

$2000.00 DAP/MCC funds in Fort Bend County

Bob Ware (Network Funding LP) — Fri, 11 Sep 2009 13:06:24 -0700

IF YOU DO BUSINESS IN FORT BEND COUNTY TEXAS YOU WILL WANT TO KNOW ABOUT THIS:

Fort Bend County Housing Finance Corporation's Down Payment and Closing Cost Grant Program (the "DPA Program") is designed to assist households participating in their Mortgage Credit Certificate Program (the "MCC Program") with down payment and closing costs. There will be approximately $100,000 available on a first-come first-served basis. They will provide $2,000 per household for down payment and closing cost assistance. It must be used in conjunction with the MCC Program.

Program Highlights
A grant of $2,000 per household is available to eligible homebuyers.

Eligible grant uses include down payment and closing cost assistance associated with the

purchase of the home.

Must be used in with the MCC Program offered through the Fort Bend County Housing Finance Corporation.

Eligible Households
Must be utilizing the Fort Bend County Housing Finance Corporation's Mortgage Credit Certificate Program through a participating lender. Therefore, must meet the MCC Program guidelines listed below:
Purchase a home in Fort Bend County, Texas.
Gross income of all individuals executing the Deed of Trust cannot exceed the maximum income limits, for 1-2 persons is $76,560 and for 3 or more persons is $89,320.
The purchase price of the home cannot exceed the maximum sales price, whether the home you buy is new or existing, is $316,177.
Must occupy the property as their primary residence.
Meet standard mortgage underwriting requirements with FHA, VA, Fannie Mae, Freddie Mac or USDA-RHS, as applicable, demonstrating credit worthiness.
In addition to the normal MCC Program fees, pay a DPA Program Processing (the "Fee") of $150.00. May be paid by borrower, seller or lender, as allowable by FHA, VA, Fannie Mae, Freddie Mac and UDSA-RHS

AS ALWAYS I WOULD LOVE TO HELP YOUR TEXAS MORTGAGE CLIENTS, NO MATTER WHAT COUNTY THEY ARE IN

What is a pre-approval letter worth?

Bob Ware (Network Funding LP) — Wed, 12 Aug 2009 10:32:40 -0700

You would be surprised (or maybe not) by the lack of quality control when it comes to the almighty Pre-Approval Letter.

Most all Realtors require their client to come equipped with a Pre-Approval Letter before they will write an offer on a home, this seem on the surface to be a no-brainer, makes sense right? But what is the Pre-Approval actually?

Recently I provided my client (Mr. K) with a pre-approval letter. In order to provide this letter Mr. K provided me with his most recent two months bank statements, and most recent one month's pay stubs for both he and his wife. I also pulled a tri-merged credit report, and reviewed all of his documentation for accuracy. In turn I found these borrowers to be very well qualified, and was pleased to provide them the letter they were looking for conditional upon them selling their present residence.

Mr. and Mrs. K found a wonderful home, and were very excited to make an offer, and the best part in the meantime they found a buyer for their existing home, complete with a Pre-Approval Letter from another lender.

Both the sale of their present residence and their new home were to take place on the same day, August the 3rd. We completed our processing, meet all Underwriting conditions, and were clear to close a week early... you know where this is going right...

We are still not closed as we continue to wait for the buyers of Mr. and Mrs. K's home (even though they were "Pre-Approved") are not ready to close.

The other lender said the reason was that the Underwriters did not like the fact that the borrower had NSF's (Non-Sufficient Funds) transactions showing on their bank statements... duh! But weren't these banking statement need to be reviewed before they issued a Pre-Approval letter? Guess not with this lender.

Now we have a domino effect, at least two houses waiting to close (maybe more), I can think of three commission besides my own that haven't been paid, and allot of daily anxiety for Mr. and Mrs. K.

The moral to the story is; if as a Realtor you are going to emphasize the need for a Pre-Approval Letter, know the source, and if it takes an additional day to get it from the lender, it's not that they are lazy, or trying to be difficult, most likely they are making sure that the letter they provide is a real Approval, not a worthless piece of paper given to appease the clients request. There is no governing body that oversees the quality control of letters provided, and no real recourse if the transaction falls apart due to lenders incompetence. I can only stress if you are going to trust your source, you'd better know your source.

News updates on Tax Credit, etc, from The Wall Street Journal

Bob Ware (Network Funding LP) — Mon, 01 Jun 2009 11:27:36 -0700

I ran across this information today, and thought you may be interested.

http://blogs.wsj.com/developments/2009/05/27/what-happened-to-the-fha-plan-to-monetize-the-homebuyer-tax-credit/

HVCC, did you see it in the news?

Bob Ware (Network Funding LP) — Fri, 01 May 2009 08:06:48 -0700

Interestingly today represents a significant change in the real estate market, and will most likely effect every homeowner, but yet I've not seen anything about it in the news outside of the industry... why?

It's hard to understand that something this big is being roll in under the cover of the night, but it is.

Home Value The HVCC requirements have established a uniform set of appraisal guidelines to govern all loans sold to Fannie Mae and Freddie Mac (i.e., all conventional loans). The Code does not apply to FHA, VA, or USDA loans.

All appraisals will be ordered by the Lender via their approved Appraisal Management Companies (AMC's) and will be prepared in the name of the Lender

Borrowers are required to provide credit card information during the application process and appraisal fee will be charged to the Borrower
Brokers and Loan Officers are NOT permitted to pay for the appraisal
Brokers and Loan Officers are NOT permitted to have any contact with the appraisers (all communications are facilitated through the Lender or AMC)

Many people are predicting that property values will continue to go down due to inexperienced appraisers. The more expereinced appraisers will do the same work but for half the price. It will be interesting how this plays out with the real estate industry.

We need to make some noise, so that the average Joe Homeowner is aware, and begins to ask questions.

Untill it's Main Street news, we can not expect to see our elected officials investigate just who benefits from the new change.

wHAT DOES IT TAKE TO GET A LOAN THESE DAYS?

Bob Ware (Network Funding LP) — Wed, 25 Feb 2009 15:17:42 -0800

Mortgage Insurance Companies are raising the bar by no longer insuring borrowers with credit scores below 700, and many lenders have an up-charge for those same borrowers.

As a Realtor what advice do you give to your clients that plan to put less than 20% down on their dream home?

Now more than ever it's time to talk about FHA.

In the Houston Texas area the single family maximum sales price is $271,050.

Minimum down payment is currently 3.5%, and MI is still very reasonable.

If you are not giving your clients the right advice, you may be setting them up for frustration, and disappointment.

By setting realistic expectations you will be providing the best service to your client, and they will thank you for helping to make their home buying experience stress-free.

I am an experienced Mortgage Consultant with many years in FHA and VA lending in fact my company specializes in these programs with The FHA Fast Program.

It's time to add an expert in government lending to your list of preferred partners.

Call today! Bob Ware 281-961-4241 bobware.4mtg@gmail.com

HomeBenefitIQ

Bob Ware (Network Funding LP) — Thu, 18 Dec 2008 11:31:54 -0800

There is a better way to get in-front of more potential clients. HomeBenefitIQ allows businesses to bundle real estate services at no cost, to their employees. Buy working together with Bob Ware to sign up businesses you can become the exclusive Realtor for the entire company. Don't hesitate to contact Bob for more information about how you can become part of an exclusive dedicated team serving an entire company!

Bob Ware 281-961-4241