This month in Mortgage--- As  published in the Home Ideas Magazine, November 2009-- by Wanda Promes

Most Mortgage Loan Officers have full time jobs just keeping up with the ever changing guidelines handed down by Fannie Mae, Freddie, HUD and new regulations passed down by Congress.

When you apply for your next mortgage loan you may see these changes affecting the application and closing process.

The most recent changes in mortgage lending include the areas of appraisals, the self employed borrower, the need for tax transcripts.  These changes have also affected the disclosing process for Good Faith Estimates and Truth-In-Lending disclosures.  Changes in minimum credit scores, Debt-to-Income ratios, and the ability to get Mortgage Insurance on your loan are shifting to a conservative level.

Let's talk about some these individual changes. 

The new HVCC (Home Valuation Code of Conduct) rules affect appraisals. Along with the new HVCC guidelines that prohibit loan originators to talk with the appraisers prior to the property inspection, the new guideline also requires the appraisal to be delivered to the borrower at least 3 days prior to close.

The new Regulation Z states that a correct Truth in Lending be given at least 7 days before closing. This means that if any of the terms of your loan change, including loan amount, interest rate, fees, your closing may be delayed, as much as a week.  This protects you as the consumer from having hidden fees show up at the closing table.

For the Self-Employed;  we will have to look at your tax returns and possibly your year-to-date financials.  I am asked, "Why do you need so much of my personal information?  I have an 800 credit score and 20% down?  I could buy this place for cash if I wanted to liquidate my 401k or stocks?  Last time I bought a home they just wanted my pay stub, why do you want my tax returns?  Are you out of your mind?"  My response as a lender, "YES-we are out of their minds, dealing with fraud and new government regulations."  This new underwriting guideline was put in place to prevent fraud in the over disclosing of income facilitated by "stated income". It certainly used to be an easier way to go for the self-employed, however, it has also created room for over-extension to non-qualified applicants.  Do all self-employed need tax returns? Yes!

A question from the W-2 wage earner- "Do all buyers need tax returns?"  Actually  YES!!!  they do. Here's Why. On almost every file an underwriter is pulling a copy of the borrowers tax returns by using the 4506.  The 4506 is a form signed at the application, by an applicant, which allows an underwriter or investor to pull tax records, or tax transcripts from the IRS.

Credit Scores - As minimum credit scores increase, considering credit repair or simply increasing your score. With the minimum credit scores at 620, but inching up to 640, and minimum credit scores for premium pricing at 740, certainly cleaning up items on your credit, or simply making changes necessary to raise your score can have long term benefits. Increasing your score means you can take advantage of the best rates.  For instance, borrowers with scores over 750 being offered better rates or incentives because of their high scores.

 Extension of the $8,000 tax credit-  On Oct. 5, White House Press Secretary Robert Gibbs acknowledged that "there has been quite a bit of success" with the $8,000 tax credit, and added that President Obama is considering extending it to help strengthen the economy and create jobs. There is a push for higher incentives in 2010 for New Construction Homes.-- UPDATE-- Congress passed a bill extending not only the $8,000 tax credit for First Time Home Buyers, but also a $6,500 tax credit for "move up" buyers, Buyers that have owned a primary residence for 5 years that would like to purchase a new home.

More papers to sign, more info required from the buyer. 

Very often when I hear someone complaining about the new restrictive underwriting guidelines, I stop and correct the, stating "traditional" not restrictive. That is that the guidelines are closer to what they were years ago.

Lender's may still put you through the heavy wash cycle on high heat before approving your mortgage loan, a shift perhaps necessary to preserve our housing market.  On the bright side, we are seeing improvements and stabilization in the housing market.  Home ownership is affordable and still a great investment! If you are considering buying a home, talk with your lender and get pre-qualified.

As many of you have heard, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the original deadline for the home purchase tax credit from Dec 1st to April, as well as extending a tax credit to "move up buyers'.  This means that potential home buyers other than those that have not owned a home in the last 3 years will also get a tax credit for purchasing a new home from now into June 2010. 

Of all the bills that have passed to attempt to stimulate commerce and the economy, I like this one the best because of the trickle down effect of business to others within our industry and downline from the transaction.

With every home purchase, most home buyers employ a Realtor.  The Realtor will get a commission based on the purchase price of the home.  Commerce has then taken place.  The home buyer will then in most cases get pre-qualified for a mortgage loan at their bank for the financial transaction of the purchase. Commerce takes place.    The bank in turn will utilize an appraiser to find the value of their property.  Commerce takes place, and so on as the bank will also employ a title company to check on potential liens attaching to the property, previous owners, the new buyers.  The title company will then guarantee a clean title for the bank on the property by charging an insurance fee.  The bank or home buyer may then require or request inspections to be done on the property. An inspector is hired. Inspections for termites may be required.  A home warranty may be purchased by the new home owner.  If radon is detected within the home, the homeowners will employ someone to install mitigation. If water, termite or other issues arise, the owners or purchasers will employ a servicer to treat or to install new appliances, equipment, repair work, ect.   The new homeowner will need homeowners insurance from their insurance agent.  An attorney or title company may then close the Real estate Transaction, of which they are paid a fee to facilitate. Commerce takes place again and again.

After the closing you might guess that new Mr. Homeowner will want to make the house "their home", therefore potentially purchasing paint from a paint store, Carpet from a Flooring Company, Window Treatments, Decorations, New Furniture, improvements, purchase of a lawn mower or other equipment, have repair work done, additions, ect.   You can see how the trickle down continues to vendors, servicers and retail stores. 

I have included an exerpt from the IRS website with some basics on the new Tax Credit for Purchases in 2009 and extending into 2010 below.

From the IRS Website:

New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:

• Extends deadlines for purchasing and closing on a home.
• Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the credit.   Under the new law,  For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.  

For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived  in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

House and Senate conferees completed work on final elements of the stimulus legislation early this morning. I want to provide a synopsis to provide an overview of what is in the final legislative package, specifically as it relates to the housing community. I hope this is beneficial information for potential new homeowners, Realtors and other Mortgage Lenders.

House and Senate conferees have agreed upon a compromise stimulus package at a total cost of $789 billion. The House is scheduled to vote on the package today (Friday, Feb 13th)  and the Senate will follow suit shortly thereafter, with expectations that the legislation will reach the President's desk by Monday, Feb. 16. 

There are several provisions in the overall stimulus package that will be beneficial for many of us, and help stimulate demand for housing. 

Chief among these is an $8,000 home buyer tax credit for new home buyers. While we are disappointed and would have preferred a more enhanced tax credit like the Senate version, the conferees did retain some key elements from the Senate and made other modifications that are beneficial to home buyers and home builders. For qualified home purchases in 2009, the legislation: 

•·         Stipulates that the $8,000 tax credit does not have to be repaid, unlike the tax credit passed last summer; currently this is a $7,500 refund for New homeowners and has to be repaid at the rate of $500 per year over 15 years.

•·         Keeps the tax credit refundable, or claimable regardless of tax liability;

•·         Extends the ending date of the home buyer tax credit from July 1, 2009 until Dec. 1, 2009 so that consumers can utilize it during the critical summer and fall buying months;

•·         Allows tax credit home buyers to participate in the mortgage revenue bond program; currently, participants of state bond programs do not qualify for the tax credit; as SD Housing Loans as they are called here in South Dakota

•·         Permits state housing finance agencies to help buyers at closing by advancing the credit amount as a loan using tax-exempt bond proceeds; 

          Income guidelines are $75,000 for a single person, and $150,000 for a married couple.

          The tax credit applies to the homebuyer whom has not owned a property in the last 3 years.

This is only a first step in stimulating the housing economy, and I feel, that along with a little better consumer confidence in the job market, this will be effective in spurring new home purchases in 2009.

It is my hope that we will see more folks taking advantage of this new tax break and step out to purchase homes again!

It would also be my hope that we will see interest rates stay low, at least for the next year to help move this entire stimulus bonus for new homeowners along and make it look even more attractive.

I am so glad, that at this time of year, I have seen so many express their Thanks, for what they have, for who they have, for who they are. Thanksgiving, a time to reflect, look inside ourselves.  The spirit of this season naturally brings an intraspect to life.  Perhaps one positive result to tougher economic times is that people take the time to reflect what is important in their lives.  Happy Thanksgiving to all. Peace, Happiness, and Laughter be yours.

South Dakota, A great place to live, work, grow (edit/delete)

South Dakota, A great place to live, work, grow (edit/delete)

Hello All!!  

The reason for this post is that I hear from so many of my friends across the country about the perception of South Dakota, and of South Dakotans. In traveling to various parts of the country, particularly the East Coast and California, most people are under the impression that we wear straw hats, overalls, our daily dialogue is filled with "you betcha's", and that we may even travel and live daily life much like people did in the Pioneer days.

South Dakota is a great place to live, grow, raise families, and work.  We still have a steady housing market here, our primary employment here is in the medical and financial industries, we have a growing medical community with the funding of a new Sanford hospital research center and children's hospital. We have become a medical hub for the tri-state area.  Because of the tax breaks for corporations, South Dakota has been very attractive for business.  If you like the outdoors, this is your place. Drive just minutes outside of Sioux Falls for open prairies and rolling hills. Hunting, fishing, hiking and adventure abound in our great state.  On another note, we actually wear and can purchase designer clothes, drive cars, and live in homes that are not prairie mud homes as seen on TV. OK, well, I am being a little sarcastic, but, the truth is that this is a great place to be.

Come check us out!  IF you know of anyone considering moving here to our great state, have them contact me. I can get you in touch with local professionals for employment, housing, temporary lodging, banking and networking, ect as you either visit for leisure, or as you consider moving.

Wanda Promes

605-977-9000

With the constant changes in the economy and the changes in Mortgage guidelines  (sometimes taking place on a daily basis), my challenge was to give some informative content that would not change before this information was in your hands.

The frenzy of the economy has made everyone skittish about investing and transacting business, especially for such a large transaction as purchasing a new home.  I believe it is still a great time to buy and sell in Sioux Falls and surrounding areas.   I also believe that we will see some changes locally in the next year, with the slight trickle down from the national trend.  Our market, from a housing standpoint, is not immune to what is happening on a national scale, but I do believe we are doing well yet here in our area. 

The Housing Market in our area

As of September 2008, median prices for homes in our market have not changed more than an average of 5% in the last year, and are actually up an average of 2% from 2 years ago, according to figures produced from the local Realtors Association. Looking back 5 years, we are still staying fairly consistent with the normal market ups and downs; number of closed sales, pending sales and number of new listings.  It would surprise most people to find that we have less homes in inventory this year over last, which contributes to home price stability our market.  Housing in our market here in the Sioux Falls area is 60% more affordable than the average US Housing Market.  Although new construction has decreased, we are still seeing building and construction activity.

What are rates going to do?

This is a question I am asked multiple times every day.  Although I would question whether anyone has a crystal ball, I believe that being cautious and waiting for rates to dip down to the lows of 2003 and 2004 may not be a wise choice if you are waiting to purchase or refinance.  Some financial analysts predict that we will see rates gradually increase over the next 6 months by .50% and in the next year we will be up 1% over this year. Other analysts have predicted rates dropping .50% in the next 6 months and then gradually increasing again.   With the bailout of souring mortgage securities, increased Treasury yields will consequently result in higher mortgage rates. History shows us that market volatility will cause many days with dips, dropping rates below the gradual trend upward, but for the longer term, mortgage rates likely will edge higher.   

How does a bailout influence mortgage rates?

As credit guidelines have tightened in the last year, a bailout affects mortgage loans by making credit more available.  The other side of this is that it may also make interest rates higher. One analyst explains it this way. A bailout of faltering mortgage securities and other assets from banks will affect rates in the following manner.  One objective of a bailout plan is to calm the credit markets and stretch the difference between mortgage rates and rates on treasuries. The Treasury Department made a recent announcement that it would buy mortgage-backed securities in the open market. We as a country will have to borrow the money to do this by way of selling treasuries. With the expected rate increase in treasuries, the net result is likely that the mortgages supported by underlying treasuries will see a rise in their rate.

What recent changes have we seen in Mortgage Guidelines?

As of mid-October, we are still seeing credit guidelines tightening. As a result, FHA loans have become more popular.  As higher credit score requirements and rates for credit risk increase on conventional mortgages, as well as the subprime loan product going away, we are qualifying many home buyers into FHA loans. There are some benefits of FHA loans. •FHA loans carry a lower monthly insurance premium. (Some premium is paid up front)  •These loans tend to be offered at a lower rate. This is because FHA loans are federally insured; they tend to trade at a higher premium in the secondary market. •FHA loans are not credit-score driven. Borrowers can have a lower score than other products and still qualify for a good rate. •In some cases, higher monthly debt-to-income ratios are allowed.  • FHA loans require as little as 3% down.  •For sellers; you can offer concessions that make marketing your home much more attractive without having to lower the price of your home again. •Homeowners can take cash out up to 85 or 95% of the home's value; or consolidate a first and second loan up to 95% of the home's value. • FHA loans are assumable, which can be an attractive selling point when you turn around and sell your home when the interest rates are higher.

FHA has changed its appraisal and fee negotiating guidelines. In the past, many sellers steered clear of FHA loans because the appraisals were too strict and certain fees were non-negotiable. The FHA has greatly loosened these guidelines to make it easier for both buyers and sellers.

Don't Panic

This all may mean that as a prospective buyer you may need to purchase a home that is priced slightly below where you may have considered a year ago, but, you can still purchase, and purchase at a great rate. Dating myself, but making a point, I recall when I bought my first home in 1990, my first homebuyers rate was over 10%.  Borrowers who bought homes in 1990 would have gotten the worst rates of the decade. The loan adjusted after 3 years, and eventually found its' way down to 8%.  I remember thinking it was a great rate at the time!   Borrowing at 6 or 7% on a mortgage is still affordable. As well, there is a great inventory of homes out there. The housing market will continue to move.

Thinking toward the future

What should you do now to insure the best position to purchase a new home in the near future?  Get your credit situation in order.  Start saving down-payment money.  Improve your "profile" from a credit standpoint so that you may qualify for the best possible loan and rate available.  If you have things to clean up on your credit, your Mortgage Lender would be happy to help you analyze that credit and give you instruction on what needs to be done to improve your score, or correct items that need to be corrected.  Start a savings account if you have not already done so, and come up with a savings plan.

In conclusion

The doom and gloom in the media everyday is alarming and has made many of us reconsider our financial situation and spending habits.  We still however, live in the land of great opportunity. Commerce is taking place every day. There are still good mortgage options available.  We are still able to take advantage of good rates. We have a beautiful city here in Sioux Falls, and surrounding communities, which continue to grow, and the dream of home ownership is still alive and well here in South Dakota.

Rolling with the changes in Home Financing

Our world is much different than it was 20 to 50 years ago when our parents were busy blazing a trail to the American Dream, and Home Financing is no exception to the changes. With swings in the Economy and Real Estate market in America, the Information Highway coming of age, and the shift in the Socio Economic makeup of our Consumer, Banks and Finance Companies are on a fast paced road to stay abreast of the demands of Home Buyers and competition in the industry.

Remember when our parents had one job, one car, a savings account, Mom stayed home, and one of their biggest financial goals was to pay off the mortgage?   They knew Social Security was going to provide some retirement as well as the employer they had been working for the last 30-40 years.  That has all changed.  In most families today, both parents work, or a single parent juggles the household, sometimes with more than one job; we have two cars, credit card debt, and little savings.  Most of us will have a mortgage when we retire, we will have changed jobs 7 times with retirement funds being uncertain.         

Consider all the options you now have with Home Financing. Our parents went to their local home town Bank or local Savings and Loan to obtain a mortgage.  They did business with their banker on not much more than a handshake.   We now have options to go to our local lenders; Banks, Credit Unions, Brokerages; or shop online for our Mortgages.  The mortgage products have changed as well.  In addition to the traditional Mortgages of old, we can choose an Adjustable Rate Mortgage, Fixed Rate 30, 40 or 50 year Mortgage, Payment Option Mortgage and Equity Loans.

Most of us will stick with someone whom has served us well in the past or whom has been referred to us from a trusted friend or advisor.  It may pay to shop around for the best deal.  Be cautious of online companies whom you don't know a lot about and don't have to face you at the closing table when things do not go as expected.  Many consumers may find that fees or rates were not disclosed accurately or find there are ‘hidden' costs in the incredible offer that was made to you over the phone or the internet.  Sitting down with a loan officer you trust and visiting various Mortgage Financing Options makes a lot of sense when it comes to developing financial goals.  There are so many products that can help you achieve those various goals.

Take the time to sit down with your lender to discuss your needs.  Did you know there are various programs for Teachers and Public Workers?  Has anyone offered to help you repair your credit or simply help raise your credit score? Has anyone talked with you about various Mortgage Insurance Options or Secondary financing? Did you know that there is money available for down payment assistance?  As a self employed person, have you reviewed your business plan and considered how your mortgage is financed to help you meet your long term objectives?

Ask your Mortgage Professional to explain and explore your options.  Consider your financial goals when choosing a Mortgage product and understand industry standards when shopping fees and rates.  Work with a local lender and with someone whom has your best interests in mind. 

Security National Bank of South Dakota   Check us out  www.snbsd.com  or www.snbonline.com

Our History

As one of Western Iowa's oldest and largest independent banks, Security National Bank, located in Sioux City, Iowa, has been helping individuals and families meet their financial goals since 1884.                                         

In 1948, Security National Bank introduced a separate Trust Division to assist customers in fashioning investment and trust solutions tailored specifically to their own, very special circumstances.  Since then, Security National's Investment Management and Trust Services Division has grown to be the largest in the state. Total trust assets exceed $1.6 billion with over 2200 client relationships across the nation. 

Security National Corporation was formed in 1969, with Security National Bank its sole member. Since that time, the holding company has grown and now consists of five member banks.  Security National Corporation, with $864 million in assets, is headquartered in Sioux City, Iowa. 

Security National Bank of South Dakota joined the Corporation in 1997 with an office located in Dakota Dunes. In 2007, Security National Bank of South Dakota opened offices in Sioux Falls at 74^th and South Louise Avenue and it's branch location at 26^th and Lorraine Avenue.  All three locations offer a full range of banking products and services including an ATM, drive-up banking, and safe deposit boxes.

Northwestern State Bank in Orange City joined the Corporation in 1972.  Located in the "Dutch" country of northwestern Iowa - Northwestern State Bank serves its community and surrounding rural area.  In 2006, Northwestern State Bank merged with Security State Bank of Sheldon (joined the Corporation in 1996) to form Northwestern Bank. 

First State Bank of Mapleton has seen many changes since becoming a part of the of the Corporation in 1981.  First State Bank promotes good banking service along with stability, growth and a high quality of life within its rural community. 

First National Bank of Akron also joined the Corporation in 1981.  First National Bank provides financial services for the Akron and Westfield communities, as well as a large rural area in South Dakota.

A thought for the day.......

Watch your thoughts, for they become words
Watch your words, for they become actions
Watch your actions, for they become habits
Watch your habits, for they become character
Watch your character, for it becomes your Destiny.....