Late last year the administration announced changes to the Home Affordable Refinance Program. These changes were designed to reach a greater number of families that had previously been denied from taking advantage of record low interest rates. Although the government sponsored programs have admittedly impacted fewer families than expected, these changes can help quite a few. More homeowners in states like Florida that suffered significant declines in value can now benefit from the program.
So what did they change? In a nutshell they have removed “loan to value” ratios from the equation. Whereas before your loan could not exceed 125% of the current value of your home, now that ratio is not even calculated. You can owe $300,000 on a $100,000 home and still possibly qualify. Homeowners must be current on their mortgage and have good payment histories to qualify, so this is no bailout. This is the much needed reward for those who have done the right thing and kept their payments current even though their mortgage rates were much higher than current rates.
There are certainly other limitations that will prevent this from benefitting as many homeowners as it should. Your loan must be owned by Fannie Mae or Freddie Mac. Also those who have second mortgages on their homes may find it difficult to qualify because those loans will have “re-subordinate” or stand down to the new refinanced first mortgage. Historically, and illogically, second mortgage lenders have not been accommodating. Also, many of the details to the program are still in flux. Income and credit standards (besides the on-time payment requirements) are supposed to be relaxed, but individual lenders can apply “overlays” (more stringent guidelines) in order to protect themselves from having to buy back loans that go bad. If you feel this program can help you, contact your current servicer or you can call 888-995-HOPE for the HARP hotline.
Rebekah shares some valuable info for our veterans that may be facing the need to sell their VA loan backed home. This info isn't just limited to her market area, it applies anywhere the VA guarantees loans.
If you are a veteran stationed at Ft. Carson, Schriever, Peterson or the Air Force Academy in Colorado Springs Colorado or any other qualifying veteran trying to sell your home, a VA compromise sale may be a solution worth looking into.
If you’re not familiar with the term, a VA compromise sale is designed to assist veterans who need to sell, but face taking a loss due to a declining housing market.
A VA compromise sale is designed for veterans that have a VA mortgage and need to sell in the current market for various reasons. You might be moving overseas as a change of station or going through a divorce. Whatever the case, taking a loss on the sale of your home could be financially devastating.
Fortunately, you may qualify for a VA compromise sale.
How a VA Compromise Sale Works
The benefit to a veteran approved for a VA compromise sale is simple. The VA will pay the difference between what you owe and what you are able to sell your house for.
Rather than take the loss on your own and possibly lose your VA eligibility in the process, VA assists in redeeming your remaining balance after the sale.
How to Begin the VA Compromise Sale Process:
Provide proof of your financial trouble and an explanation as to why you need to sell the home.
Provide a VA appraisal to prove the market value of your home at the time of sale.
Closing costs must be common and typical for a VA loan.
No second liens are allowed. However, VA does say they will make an exception if the total is not significant.
Another important part of the approval process is that the VA compromise sale must cost the government less than if the property went through foreclosure.
So in essence, if the cost to foreclose on the home is greater than a VA compromise or "short sale" on home, then there is a greater chance of getting a VA compromise sale approved.
You may also be required to sign a promissory note if your VA loan originated before December 31, 1989. This would involve you entering into a payment plan to pay back a portion of the loss that VA is taking on your behalf. This sum would end up being less than what you would owe if you did not originally have a VA loan, and the payment plan itself is formulated around what you would reasonably be able to pay.
If you think you are eligible for a VA compromise sale, don’t hesitate to contact me for further information.
Back in December of 2009 we were coming to the realization that new mandated mortgage disclosures where likely hurting more than they would help. Check out this link for some of that history, The road to hell and the new mortgage disclosures.
Fast forward to May, 2011. The now famous Consumer Financial Protection Bureau (CFPB) has just released copies of two forms being considered to replace the Truth in Lending (TIL) and Good Faith Estimate (GFE 2010) forms currently being used. The "know before you owe" effort is laudable since the forms we have now are nothing but cumbersome, unfortunately it would appear we are only getting two options to pick from. Check out this link to pick between the two forms, but don't look for any place to comment on them because there is none.
Why do we need new forms when we just got new versions of both these forms? Because our government spent years determining the forms we are using now would better serve and inform the consumer in shopping for a mortgage.
Do you mean the current GFE 2010 and TIL don't adequately serve and inform the consumer? Damn straight, that's exactly what we mean.
But HUD's research regarding the viability of the GFE 2010 resulted in over 300 pages of documentation proving the forms would save the average consumer over $600 when shopping for a mortgage loan.Yea, and they were very wrong! The GFE 2010 doesn't even total the monthly payment for a borrower who has taxes and insurance escrowed into their loan payment.
So why does this CFPB feel they can do a better job? Thankfully they are doing a much better job in communicating the change with the help of the internet. Also, considering the forms we have there is little doubt they could make things worse. In their defense they have taken 5 pages of confusion and proposed to replace them with only two pages- a commendable start.
I could easily get into how the proposed forms don't allow for disclosing real costs a borrower/buyer may have for certain inspections, Home/Condo association fees, etc. How about the fact neither the current forms or the proposed forms require a customer's signature. Indeed I won't belabor the fact that these new forms STILL don't total your monthly payment including escrows. Should we even get into trying to define what the "origination fee" is on the proposed new forms (does it include yield spread premiums or are we smartly taking a logical step backwards on that?)?
The point I would like to make is why do we keep trying to redefine all these documents when the industry already has some very good working models? The old Good Faith Estimate has been retained by the industry and is commonly referred to as the Itemized Fee Worksheet (IFW) now. If this form was so detrimental and cumbersome, why has our industry kept it? Because it works.It details ALL the costs a consumer can reasonably expect to spend in the acquisition of their mortgage. It's not fancy, it has all the numbers and some states even require it be initialed by the borrower! Most mortgage companies use one of two computer programs, Calyx or Encompass. Their IFW's are very similar and effectively breakdown EVERY expense (yes they even total your monthly payment). They do so in a format that matches the signature page of the mortgage loan application and clearly AND ACCURATELY show the total cash you will need to close. What it does not show is loan terms -that is what the Truth in Lending disclosure was for.
But the Fed decided the TIL needed to represent the "true cost of credit" so they created this fictional term, APR or Annual Percentage Rate. Is that the rate of interest you are charged? No. Is it indicative of all the fees associated with getting a mortgage loan? Kind of. It was supposed to represent a shortcut consumers could use to shop rate AND fees by just comparing one number, but like most shortcuts it fell woefully short. Highlighting particularly important features of a loan program- like prepayment penalties- and simplifying the TIL into a second page of a slightly modified, easier to read Initial Fee Worksheet; now that might just actually make mortgages easier to understand...
Might it be possible we have a good, clear alternative to all these confusing mortgage forms in hand? Yes it is, and we can make them work well by taking the suggestions of street level mortgage loan originators to improve them. Please accept that challenge Elizabeth Warren and CFPB!
This is too good not to share. If you haven't listened in you are in for a treat. Ken Cook and crew truly are on the edge of social media and the tips, suggestions, etc. they offer up will keep you on top of the game.
It has come to my attention that Social Media Edge has had only about 100,000 listeners because it is not widely understood what it is. When questioning a few people I trust who are not regularly listeners it was soon obvious they had no idea what the 3 year old podcast is about.
When I stared naming some of the guests people were stumped at why they did not know and how they could have missed 3 years of some of the best social marketing training, for free, available in the world. In fact let me drop a few names: Laura Fitton author of Twitter for Dummies, Chris Brogan author of Trust Agents, Jay Baer author of Now Revolution, Shel Isreal author of Naked Conversations, Shane Gibson author of Guerrilla Social Media Marketing with Jay Conrad Levinson and the list goes on and on and on ...
It's my fault you don't know. I have never really posted here in Active Rain about what Social Media Edge Radio, the podcast, is all about. After three years it's probably time. So here is all you need to do.
Save time on Tuesdays at noon eastern to listen live and get in the chatroom or listen later at iTunes
The short history of Social Media Edge
I founded the podcast in August of 2008 as "Twitter Tuesday". In December 2008 Jason Crouch joined me as a guest and I invited him back to co-host the show regularly. In March we switched to the name Social Media Edge (which belonged to my friend Brian Person) and we've had 100's of truly amazing guests since then. The list, in fact, is much too long to publish here but you can see all of their faces at the Facebook page.
In summer of 2009 I invited Mike Mueller to bring a regular tech report about some tip or trick with social media. For a while he hosted his own show on Monday's on our same JCKC network.
Our first big time regular listener AND show sponsor was Clint Miller of Real Estate Client Referrals.
Later I invited Jeremy Blanton to contribute as a community builder and he still does to this day.
We have now had over 100,000 listens and most shows have listens in the 1000s. So, why haven't you subscribed and started listening? Should we call it a weekly live webinar featuring some of the very VERY top names in Social Media Marketing and Technology or can we just leave it as Social Media Edge?
Social Media Edge Radio - seriously true professionals who won't misguide you with some crap they made up to sell more books and seminars. Every Tuesday at Noon eastern.
REtechRadio - part of the REtech family. Great tech information and updates from people who have the answers, people who speak and product and service users.
Ken Cook - Community Outreach Leader Southeast Region (I make friends, handle social media, SEO/SEM/SMO that's my job :) - We do FHA, USDA, VA and Conventional Home Loans (678) 439-8683 NMLS ID 208452
My employer: AmericaHomeKey, Inc., 2300 Windy Ridge Parkway, 8th Floor North Tower - 840N, Atlanta, GA 30339. NMLS ID 102930. Georgia residential mortgage licensee 23191. Equal housing lender.
Beginning October 1st the USDA will implement a change that will effectively result in "monthly private mortgage insurance" for this valuable program. Do you know how it will affect you?
Amid much talk about a real estate "double dip", shadow inventory, and a continuing crush of foreclosures; the market seems to be reacting with a mind of its own. Here in the middle of Florida, a state hit hard by foreclosures, we are seeing what may be a new equilibrium.
Sure there is a lot of inventory, but not nearly as much as we've had. It's true that the vast majority of sales are still under $180k, but more high end properties are selling and showing. Investors are having a field day with distressed properties and they are rehabilitating these homes into rentals or "flipping" them. What do the numbers look like? Well let's see...
After the stimulus
We all know the "post homebuyer tax credit" world is a different one. The rush to close those deals which resulted in an artificial spike in sales numbers is now gone, and five good months since then have seen inventory levels falling each month. According to Trendgraphix.com, Lake County inventory levels have trickled down to 4139 total units. Although that's only down from 4214 in August, it represents a decline from 5539 in December, 2008. Loosely translated, if you are a buyer this means you now have 1325 less homes to choose from when looking for your dream home.
Let's look at the pace of sales. December gave us 359 sales in Lake County, FL which was the best month since the expiration of the tax credit. The average number of sales, however, has been holding in the low 300 unit level. If we take current inventory and divide it by the average monthly sales we have a little more than a 13 month inventory of homes. That's high, and generally represents what we all know- it's a buyer's market. But what happens when we look at lower end homes?
If you are in the market for a home under $150k, know that at the current rate of sales there is an 8 month inventory for you to pick from. This number is down from 13 months in December, 2008 and represents the lowest level of inventory since the end of the tax credit. In short, buyers are buying and they are buying lower priced homes pretty fast.
So what of the higher end market? The $500k plus market yielded 44 sales in 2010. Although that compares well with the 47 sales in 2009 it must be noted that in December, 2008 there were 475 homes for sale in this price range. Now there are only 244. Clearly there is less inventory to choose from at all levels.
So what does this all mean?
Coupled with still great mortgage rates this makes a compelling argument to buy now rather than wait if you are considering a home purchase in the near future. If you are convinced that prices will continue to fall I will leave you with this fact:
If you bought a $150k home in October at 4% interest rate that was prevalent then, your payment could have been $716.87/mo. If you waited until that same home lost 10% of its value but bought at the more current rate of 5.25% your $135k purchase would be $746.07. Yep that's about $30/mo more that you are paying for having waited, and don't forget most predictions are that rates will be in the 6% range by end of year...
So you may not be best served by listening to the media hype and remember real estate is all about location. There are many other factors that can contribute or detract from you getting a great deal these days, but one thing is sure- if you are in the market to buy, now is a good time!
With 2010 behind us, there are many tax related considerations for those fortunate enough to have bought last year. From property taxes to income taxes and even home buyer tax credits- purchasing a home can have a huge positive effect on your tax bills.
Property Taxes
The start of a new year always marks the imminent deadline to file for homestead exemptions in Florida. Here in Central Florida the exemption can add up to $700/yr or more of savings, but it's important to know how and when you can file.
Each County in our area has a different procedure for filing so you will want to check with your local Property Appraiser office. The links for the various counties are:
You must file by the end of February to receive the exemption for 2011 and remember you must have purchased your home in 2010 to qualify, and the home must be your primary residence.
Chances are your tax payment is escrowed (included with your mortgage payment) if you have financing. It's important to note that if you fail to file homestead your monthly payment will not immediately increase, but it will take an inordinate jump a year or more later. This jump in your monthly payment can easily exceed $100/mo so to avoid a costly mistake, make sure you file on time.
The documents usually required to file are your recorded deed, tax bill or property record card; Social Security Numbers for applicants and spouses; Florida Driver's License or if you do not drive Florida Identification Card; Florida Vehicle Registration; and your Florida Voter's Registration Number. Again some counties may have different requirements so check their websites.
Don't forget if you had a previous homestead in Florida you may qualify to transfer some of the "Save our Homes" benefit to your new property. Amendment 1 passed on January 29, 2008 allows "portability" of certain tax benefits from a previous homesteaded property, even if it hasn't been sold. For more information about this check your local Property Appraiser's link as well.
Federal Income Tax
Remember that mortgage interest is generally still tax deductible (make sure you talk to your tax preparer!) and some other costs associated with a mortgage may be deductible as well. Advise your tax preparer that you purchased a home and provide them with your HUD1/Closing statement to maximize your potential write offs.
Homebuyer's Tax Credit
Many of you qualified for the tax credit but did not file or amend your 2009 return to receive it. Your payday has arrived! For most people this credit of up to $8,000 was contingent on having your contract dated by 04/30/10 and your purchase closed by 09/30/10. Service members who were on official extended duty outside of the United States for at least 90 days between Jan.1, 2009 and May 1, 2010, may qualify for a one-year extension.
Another great post by my friend and colleague Jeff Belonger that needs to be shared. Every circumstance is different and every situation unique in it's own way so make sure your lender explores all your options and shares them with you. It's the only way to make an informed decision.
When shopping for a mortgage, one needs to know and understand their specific goals, and this should be done even before you start to look at a home or speak to a loan officer. The reason being is because there are several ways of looking atzero points, in which some advertise with no points or no costs, and if you should pay points for your interest rate.
The first step is to have a list of your short term and long term goals. Not only should you know your goals, but your loan officer should be asking about your goals.
Below is what I consider to be the most important questions that should be asked in the first 5 to 10 minutes.
What mortgage payment would you feel comfortable with. (not the max amount that you could be approved for)
What are your goals, short term and long term.
And I ask questions about their assets. Ie. : checking account, 401-k, or if they could get a gift.
Having answers to these questions, I can formulate some game plans on how to utilize the borrower's assets to best help them out now and in the future. Keeping in mind that things do change later on in life, that we don't have crystal balls. I also make sure the borrower is aware of this.
I do want to point out one thing. There are some borrowers that just know what they want. Some will call up and say, "I want Zero points" and or "those no cost loans". Just because the borrower says that they want this type of loan, doesn't mean that it fits their needs. I love to explain, to educate, and to show in comparisons.
Here is an example of paying points or not paying points, aka no points or zero points.
In this example, there are $930 in standard lender closing costs. You would be paying these out of pocket with the lower interest rate of 4.75%, so I included these fees in the total points. With the higher rate, I am including the fees in the interest rate. This means that you are paying the lender fees in the rate and not extra monies at the closing table. I could show you this example with the fees outside the rate, but I wanted to make a point on how to get the best bang for your buck.
As you can see, comparing basic apples to apples, it would take you 7.76 years to recoup the points just from the monthly savings. What some loan officers fail to show are the total savings from different categories. You need to look at :
Your monthly savings
Difference in principal remaining
Tax write off on the points paid at closing
Tax write off on the interest
.
Here are why goals are important. In my example below, let's say your goal is to live in the house for 5 years. I am also using a tax bracket of 28 percent for income tax purposes.
Your real break even point after all the variables is 5 years.
Sometimes these scenarios are tough to show, because the interest rates have been ever changing. And because the spread between each 1/8 th of a percent is normally 3/8 th's of a point, but the interest rates have not been reflecting that in the last few weeks to a month. For example purposes, I am not going to get into the details. The main focus point should be that your loan officer should compare several scenarios on your behalf, making sure that you are using your money wisely.
Conclusion : Over the years, I have heard many rumors that paying points to lower your interest rate costs you more money, which is why some lenders talk you into a higher rate. Some times they can make more money on the back end. If you have the money or can get a gift, know your goals, and have a very good idea on how long you will be in the house... as you can see, it pays off down the road.
Disclaimer - Everything mentioned above is of my opinion and knowledge with 18 + years experience in mortgage lending. Please consult your CPA or Tax Accountant.
Colleen Craig wrote this excellent post on no cost mortgages. Myths on No Cost Loans - The bottom line is that every lender and or bank will get it from you one way or another. Hence why I prefer having the borrower pay points and no lender costs.
UPDATE : @ 6:47 pm - You need to read the whole post and the charts. On the surface, it looks like you break even in 7.76 years, but after reviewing all of the categories to look at, your actual break even point is 5 years... and that I am including the lender costs in the total scenario. I will say this.. if you went back about 6 months and longer, the breakeven point usually comes out to 3.5 to 4 years. Why? Because some coupons for lower rates would be cheaper. But it's to expensive to drop to 4.625% right now. FYI..
A great and timely post from fellow Mortgage Myth Buster Jeff Belonger regarding the advantages of Energy Efficient Mortgages. Though they have been around for a while, only 3700+ were done last year. Look for that to change in the months and years to come as the recently announced "Recovery through Retrofit" program works it's way into our industry.
Energy Efficient Mortgages aren't talked about much, which some might think they aren’t as good as a regular FHA loan. In my opinion, it’s because many loan officers and or lenders don’t know much about them. Yet there is no huge difference between the two. And one could easily associate an energy efficient mortgage with a FHA 203-k loan. But that would be a very bad assumption, because there isn’t much more to an energy efficient mortgage, known as an EEM loan, as opposed to the paperwork and understanding that goes into a 203-k loan.
Do you have high energy bills? Unless you are having a new home built that could be an energy efficient home, in many cases, the older home probably won’t be up to the current standards, which could cost you hundreds of dollars monthly. So how can you over come this problem? Very easily with an EEM loan.
Quick history about EEM’s - Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEM’s. (Energy Efficient Mortgages) EEM’s recognize that reducing utility expenses will allow a homeowner to pay a higher mortgage payment to cover the cost of the energy improvements that were financed into the mortgage. A main reason is because it offers homeowners who couldn’t initially afford the cost of these energy saving improvements out of pocket, giving them the chance to finance them. These loans can be both done when purchasing a new home or when refinancing.
FHA has adopted this into their financing options which allows a borrower to :
save money monthly
incorporate the improvement costs into the mortgage
these improvements are installed after the loan closes
this program allows you to use normal FHA guidelines with FHA mortgages
How does the Energy Efficient Mortgage program work?
The maximum amount of the portion of the EEM for energy improvements is the lesser of 5% of:
the value of the property
115% of the median area price of a single family dwelling
150% of the conforming Freddie Mac limit.
Eligibility Requirements
Properties that are eligible are One to Four unit existing and new construction properties.
Borrowers are approved through the normal FHA mortgage guidelines for obtaining a mortgage.
The cost of the energy-efficient improvements that may be eligible for financing into the mortgage is the lesser of 5 percent of the property’s value, depending on 3 different equations. Please refer to these changes above.
To be eligible for this mortgage, the energy efficient-improvements must be cost effective, meaning that the total cost of improvements is less than the total present value of the energy saved.
The cost of the energy improvements and the energy savings must be determined by a home energy rating report which is done by a home energy rating system (HERS) or energy consultant. The HERS report usually costs from $250 to $350 and can be paid by the seller, the buyer, or sometimes included into the mortgage.
The energy improvements are installed after the loan closes. The money is placed into an escrow account and is released once an inspection verifies the improvements are completed and that the savings will be achieved.
Because of this program, the final loan amount can exceed the maximum mortgage limit by the amount of the energy-efficient improvements. Here is a list of the FHA max mortgage limits.
EXAMPLE :
***I am not using a particular credit score and all closing costs are the same for either loan example.***
As you can see, it’s not a huge savings, but it does add up. Just in 1 year you saved $1,135.20. And the cost of the energy improvements that were added onto your mortgage now become a tax write-off.
**** My examples in the cost of improvements and your monthly bills, will vary depending on several different factors, such as age of air conditioner or heating, lighting fixtures, etc, etc. And also depending on what you pay per month. I only used these figures as examples.****
Reminder : There are special and certain tax credits both nationally and locally. For tax purposes, there is a $1,500 tax credit until the end of the year. Not sure if the government is going to extend this. There are also state credits and sometimes credits given by your utility companies. Just be careful though, because sometimes you have to use those they recommend when doing the energy inspection report.
Realtors : If your referring mortgage partner or in-house lender doesn't educate you on this kind of mortgage, either ask questions or possibly seek someone that understands this type of financing and who is very creative. An excellent loan officer is not always one that can close your loan or who calls back, but one who can do all of the above and provide excellent education and program scenarios. This will not only make happy buyers, but possibly provide more referrals. For more education and creative financing, please vist FHA loans & other mortgage options
HUD has created three videos to help home buyers, especially first time buyers, understand the process better. The videos are very informative and run about 10 minutes each. Check them out at the link below
Local information regarding Mortgage lending in Central Florida including Orange, Seminole, Osceola, Lake, Volusia and Marion Counties. Also providing up to date information on HUD and government loan programs, and first time buyer programs. I'm required to tell you I'm not acting on behalf of HUD/FHA or the US Government!
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
So what did they change? In a nutshell they have removed “loan to value” ratios from the equation. Whereas before your loan could not exceed 125% of the current value of your home, now that ratio is not even calculated. You can owe $300,000 on a $100,000 home and still possibly qualify. Homeowners must be current on their mortgage and have good payment histories to qualify, so this is no bailout. This is the much needed reward for those who have done the right thing and kept their payments current even though their mortgage rates were much higher than current rates.
Back in December of 2009 we were coming to the realization that new mandated mortgage disclosures where likely hurting more than they would help. Check out this link for some of that history, 
Amid much talk about a real estate "double dip", shadow inventory, and a continuing crush of foreclosures; the market seems to be reacting with a mind of its own. Here in the middle of Florida, a state hit hard by foreclosures, we are seeing what may be a new equilibrium.
Coupled with still great mortgage rates this makes a compelling argument to buy now rather than wait if you are considering a home purchase in the near future. If you are convinced that prices will continue to fall I will leave you with this fact:
With 2010 behind us, there are many tax related considerations for those fortunate enough to have bought last year. From property taxes to income taxes and even home buyer tax credits- purchasing a home can have a huge positive effect on your tax bills.
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