We are all pitchers in this real estate world. That includes lenders, realtors, potential buyers. Many of us are "ace pitchers" who have been in this industry for a long time. However, we are not striking out batters as easily as in the early innings(2000-2006). Since mid-2007, we are now giving up extra base hits, throwing wild pitches, walking batters, etc. Our no-hitter is gone: Why? We are fatigued. We are facing a Yankees lineup that consists of: industry regulations, low appraisals, ridiculous increases in FHA mortgage insurance premiums, to name a few. If we want to preserve our lead, we cannot continue to stay in the game, throwing the same pitches and hoping we can "work through it". There is no shame in us having to go to the bullpen to give us a fresh perspective and a fresh approach to this "Yankees lineup". So, it is time to go to the bullpen: Here are some other pitchers in our bullpen:
FHA CHANGES: One of the worst changes in our industry has been the ridiculous increase in FHA mortgage insurance premiums over the past year. EXAMPLE:
On a $200,000 loan, what was a $91 mortgage insurance premium last year is now a $193 mortgage insurance premium. That could price some people out of their comfort zone or worse, their market for certain home prices. So what do we do? We try to find the buyer a lesser expensive home by thinking FHA is the saving grace for loan programs. It is because of the lower down payment requirements, flexible guidelines, etc. that FHA offersHowever, we don't look at alternatives for our buyers.
This is when we have to go to our bullpen. We don't want to continue to throw the same "pitches" to our buyers by trying to show less expensive homes or myself trying to get the buyer to put more money down to lower their payments. It is time to re-think our approach. It is time to take our pitcher out of the game and look to our bullpen(alternative loan programs). Some " pitchers" in our bullpen are:
USDA RURAL HOUSING: This is a loan designated in certain areas considered rural (it does not have to be farm land with goats,roosters, etc). Actually, most of Battle Ground, WA is
considered a designated rural area. Now, there is an income limit in Clark County to qualify, but it is actually pretty liberal: ($82,000 for family of four). CALL ME FOR MORE DETAILS ON THIS.
Difference between this and FHA: On a $200,000 loan going FHA, 3.875% rate , that payment with mortgage insurance is: $1131.
Here is the relief pitcher: USDA Rural Housing loans have very very low mortgage insurance premiums. Rates are generally the same as FHA. That is now a payment of $990 instead of $1131, a $141 difference. Oh, by the way, it is also 100% financing, meaning NO down payment required.
HOMEPATH: This is a loan in which no appraisal is required on these loans and down payment is only 3% Homepath is for those wanting to purchase Fannie Mae, bank- owned properties. (There is a website to find Fannie Mae homes that are eligible). Again, the beauty: No mortgage insurance required on this. Rates are higher on Homepath (4.375% vs. 3.875% FHA). However,on a $200,000 loan, the payment is $998 on Homepath vs. $1131 on FHA. Thus, it is still a monthly savings, AND again the beauty is no appraisal required on these loans.
CONVENTIONAL WITH MORTGAGE INSURANCE: Yes, on conventional loans, with less than 20% down, mortgage insurance is required. However, we have a mortgage insurance
company we work with that has some very low mortgage insurance rates. Now for conventional, you would need 5% down instead of 3.5%. Here is the difference, however:
On the same $200,000 loan comparing conventional mortgage insurance with FHA, the premium on conventional is less than that of FHA. Again, for $200,000 loan, that means instead of $1131 for FHA, $1099 for Conventional. Not a huge payment difference there, but here is a major difference: You can cancel conventional mortgage insurance after ONE year if you have the equity. Regardless of equity, you have to keep FHA mortgage insurance a minimum of five years.
So, there are some relief pitchers in our bullpen. For those low down-payment borrowers, FHA is not the only thing out there. We have to adjust our mind set, learn what alternatives are out there, and not be afraid to take your All-Star starting pitcher (your original marketing approach) out of the game. We all need a bullpen to survive.
(Disclaimer: there are some different credit guidelines between these three programs above and FHA. Call me for details).
Thank you again for your business.
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