If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Question:

What is going on with the buzz about FHA making changes?

Carrie:

Did everyone think FHA was the only one who weren’t going to tighten-up lending guidelines? Frankly, I’m surprised it hasn’t happened sooner and, I’m pleased, for the most part.
So, what’s new? The down payment change to 5% DOES NOT appear to be happening. The current down payment requirement looks like it will stay at 3.5%. But, mortgage insurance amounts will change. On an FHA loan, mortgage insurance is required to be paid in the form of both upfront mortgage insurance premium and an annual mortgage insurance premium. Currently, these amount as set at 1.75% upfront and .55% annually for minimum down 30 year fixed rate mortgages. The change, that is scheduled to begin April 4, 2010, increases the upfront premium to 2.75% and reduces the annual premium to .50%, again for 30 year fixed rate mortgages.

WHY? Because, mortgage insurance premium is there to protect them in the event of a loss and everybody and their brother flocked to FHA financing starting immediately in 2007 when the market meltdown took place. Lenders who had never done an FHA loan in their careers suddenly sought and sold it as the answer. Now, loans are defaulting. I’m not going to say that’s the only reason, of course FHA guidelines remained loose in the areas of credit and ratio requirements and the lenders simply approved the people who were “going through the system”. There’s simply not time enough here for me to go into my opinions about how we got here. One of the many facts is that FHA suddenly became the loan product to use and now, the result is rising foreclosures and the need to establish greater reserves and replenish the mortgage insurance fund. Not unreasonable considering the environment we’re in today.

On a positive note, FHA has long had a 90-day flipping guideline meant to prevent rapid sales at inflated values. FHA has temporarily lifted the flipping guideline for 1 year from February 1, 2010 to allow for investors to buy a home, fix it up and immediately re-sell it. Previously, the investor would have had to wait a minimum of 90 days before writing a purchase agreement. Hopefully, this will allow for some additional rehabilitation of homes that need it, spur the sale of home improvement product and remodeling employment and well as bring already repaired homes to the marketplace for first time homebuyers. Of course, as with all guideline changes, there are a host of additional rules to follow. For the complete mortgagee letter click here
Now here’s the kicker, the fun part. It’s really laughable. FHA is now going to require that borrower’s have 10% down if they have a credit score under 580. Well, I suppose if there were any investors out there who readily purchased loans with less than a 620 credit score, that might be helpful, but their aren’t. In addition, there are a few who are pushing to a minimum of 640, so really, it’s mute. Maybe, in the future, as lenders loosen their underwriting guidelines, maybe it will apply and FHA won’t have to change their guideline again down the road. Who really knows? Right now, it just really doesn’t make a difference and everyone needs to be well aware and focus on the minimum credit score requirements are as I’ve talked about before – 620 with 3 active lines of positive credit that have been around for 12 months. It’s not going to get easier and credit is KEY. To read more about mortgage credit requirements click here.

Popularity: 1% [?]

Yes, I’m speaking metaphorically. But it is a great way to describe the real estate market in Minnesota. So humor me…..

Incentives, low mortgage rates, down payment assistance programs, 6 percent seller paid closing costs….

Lets say you are a first time home-buyer in Minnesota, do you want to miss this ‘Sweetheart of a deal’ and lose out on the opportunity to get an actual $27,000 in hard money?? Well, if you are in the first time home buyer market and haven’t purchased yet, or don’t get moving and buy now… you can kiss that $27,000 goodbye. Literally.

Listen to The Minnesota Real Estate Show on KTLK, 100.3FM on Saturday, February 6th from 11am to noon to hear us hash out the details, but here is the basic breakdown.

First time home buyer purchasing a home for $175,000.

As a buyer of a distressed property (short sale or foreclosed) with an income under $67,200 a year, you could potentially take advantage of ALL of these down payment assistance and government programs:

The $8,000.00 first time home buyer tax credit.

$10,000 in down payment assistance.

$5,000 in seller paid closing costs

AND if you take advantage of today’s interest rates BEFORE they go up, you could save over $4,000 in monthly payments (the difference between your mortgage payment with the higher interest rate and the current interest rate over 5 years which is the average of how long people stay with the mortgage before moving or refinancing)

I know it is a lot to wrap your mind around, so here it is plain and simple: Take advantage of the sweetheart of a deal, don’t wait until the honeymoon is over. Now is the time to buy.

Tune in to The Minnesota Real Estate Show on Saturdays from 11am to noon to catch the discussion, and as always, feel free to call in and ask your question!

Popularity: 16% [?]

Popularity: 36% [?]

The MN Home Loan Partners is a unique group of lenders, each witha specific area of expertise, who has teamed up to provide an unbeatable level of service to both their clients and referral partners in Dakota County and Scott County, as well as the Twin Cities Metro area of Minnesota.

“It’s been incredibly beneficial for our builders, Realtors and professional associates to know they can refer clients to our team and the right person will take care of them based on their individual needs,” says Carrie Guarrero.

The MN Home Loan Partners are supported by Cornestone Mortgage Company, a strong, nationwide leader in the mortgage industry. Cornerstone has built a solid reputation for being an expert on the home-buying process, for offering loan products that help clients effectively meet financial goals and hiring and retaining some of the best mortgage loan officers in the country.

Most of all, everyone at Cornerstone Mortgage Company believes in and puts into practice the company’s values:

• We will conduct ourselves with honesty and integrity
• We are customer focused
• We respect and care for our people
• We have passion for excellence

The foundation of Cornerstone’s success is its outstanding team of Lenders and thier dedication to help their clients acheive their home-buying dreams. With innovative technology, online pre-qualification, ability to lend nationwide, in-house processing, underwriting and closing, and access to more than 100 investor sources, Cornerstone’s originators have the necessary resources to tailor loans that fit each client’s individual needs.

Beyond the national tools and resources provided by Cornerstone Mortgage Company, the MN Home Loan Partners have worked diligently with local and state agencies to provide additional resources to Minnesota through first time home buyer incentives and down payment assistance.

Popularity: 66% [?]

This is one of Carrie’s favorite quotes of all time. Living my this quote has helped her to become the premier home loan specialist in Dakota and Scott counties. “You can have anything you want in life, if you just help enough other people get what they want.” – Zig Ziglar

Popularity: 55% [?]

The value of a generic mortgage pre-approval = $25.00
The value of a Loan Officer who knows how to truly approve a loan = Priceless
This may sound cliché and I know it’s overused these days, but seriously, how is a first time buyer, or any home buyer in today’s market supposed to know that they can trust the person they’ve supplied their information to over the phone or internet who very rapidly, and simply states; “Congratulations, you’re pre-approved”. I’ve got news for you. You’re not.
If you have not supplied the following documentation, in addition to other documents that may be specific to your particular situation, you do not have a complete mortgage pre-approval and what you thought was a time to celebrate, could turn into a time of nail biting and rapidly graying hair from worry or sudden changes in your “pre-approval” status. So, as a homebuyer today, what should you expect to supply when you “apply” for a loan? Here’s a simple list that is nearly universally applicable:
- A complete loan application, either over the phone or internet including social security numbers, dates of birth, address, employment history, income, asset and credit history.
- Authorizations to obtain your credit report
- Two years complete tax returns
- Two years W2 forms and/or 1099’s
- Most recent 30-days of paycheck stubs for all employment
- Most recent asset statements (checking, savings, retirement etc.)
Why is it important that the mortgage company have this information before you go out looking? Gone are the days of everyone qualifies and documentation is absolutely necessary to be certain that the income, cash and credit that we are using to qualify you for a mortgage are indeed, what can be documented. The only way to insure that…get the documents upfront.
By law, all mortgage pre-approval letters issued are supposed to identify the items that the mortgage loan approval is “subject to”. i.e. If you haven’t supplied any of the above, we’re supposed to say, subject to the receipt of income, asset and credit documentation. Well, imagine you’re the seller of a home. You have two offers, both of which have mortgage pre-approval letters accompanying them. One of the letters says; This loan has been underwriting approved and is subject only to marketable appraisal and title work. The other says; This loan is pre-approved and is subject to verification of the borrowers’ assets, income and credit. Which loan approval do you lean toward accepting? Duh! Of course you want the one that sounds like the loan has actually been reviewed! It really is that simple. If you haven’t provided documentation and at minimum had a full-blown telephone conversation discussing the terms of your loan approval, interest rates, and program options, you are not in a solid bargaining position as a home buyer. Your approval is actually worth less than the piece of paper it’s been provided to you on. I suggest you start over, with someone who knows what’s in your best interest and your first step is collecting the documentation I’ve listed above before you shoot out that e-mail or pick up the phone. Nothing replaces concrete information in the mortgage lending and real estate environment we’re in today.

Popularity: 74% [?]

Question: I have a 720 credit score, yet I am having trouble getting a mortgage, for real???

Carrie:

For real?? Yes, your 720 credit score may not be all it’s cracked up to be. To get a home loan, your mortgage lender have to validate your credit.
So you’ve been told you have great credit and to focus on your number, whatever that might be and then I jump in and tell you that 720 you’ve worked so hard for just might not cut it anymore? What’s up with that?!? I know, it’s next to impossible to catch onto this moving target out there known as your credit score.
Let me help break it down for you in a couple different ways:
The good, the bad and the ugly from a mortgage perspective:
a. >740 – Excellent
b. >680 – Very good
c. >620 – Okay
d. <620 – Not acceptable
On top of that, in today’s mortgage lending environment, most (not all) mortgage investors require that we not only have a credit score, but that we also validate it by digging a little deeper. What in the world does that mean to you? Well, in simple terms, it means you actually have to have some active, established credit. You can’t have 3 lines of credit on your credit report that you’ve opened and paid off all within 6 months and have a 720 credit score that we can use for a mortgage loan. That isn’t considered a predictive score because there isn’t enough history to actually say that your credit score is valid. You haven’t paid your bills long enough to show the likelihood of continuing to do so is indicative of having “excellent” credit history. So, what do we need to see?
1) 3 lines of credit
2) A minimum time frame of 12 months on each of at least 3 accounts
3) Active credit within the last 12 months
What about building “alternative credit”? This is still an option with a select few mortgage investors IF you don’t have a credit score that is below 620. What this means is that you can provide documentation outside of the standard types of credit that would already report to a credit bureau. Examples of these items would be rental history, utilities, cellular telephones, insurance or regular dues or club memberships that are paid on a monthly basis. The same rules apply as above, we need to verify 3 accounts, with a minimum of 12 months history and they need to have been active in the past 12 months.
If you don’t know where you stand or you know you need some help, we have the resources you need to get you on the path you need to being mortgage ready with your credit score. Contact us today to get a free copy of your credit report and an analysis of your mortgage readiness. We’re here to help take the mystery out of the whole credit conundrum.
Look forward to next week’s credit topic – What’s really in your credit score? We’ll give you the nitty-gritty and tell you the basics of what makes up your score and how you may actually hurt your score by doing some things that you and the rest of the world think make sense.

Popularity: 6% [?]

There are special loan options for first time home buyers when looking at foreclosed or short-sale properties that need a little, or a lot of work. Homes that are in need of repairs don’t need to be overlooked when you’re shopping for your first home – even if you’re not a ‘handyman’. There are mortgage loan options available that still allow you to get into your first home with a minimal down payment AND allow you to fix some things that may need repair.
You’ve heard all of the stories…you can get a great deal on your first home if you’re willing to do a little work. If you’re anything like most first time homebuyers, adding home repair on your list of things to do on top of everything else that moving into your first home entails seems a little too much. It’s okay! There are two different loan types that you may qualify for that will allow for you to hire a licensed contractor to make the home what you need it to be.
I’m here to dispel the myth that a 203K is not an ‘easy way’ to finance your home purchase. It’s a whole lot easier to fill out a little extra paperwork and work with a licensed contactor and experienced Real Estate Agent and get the right loan upfront that gets the home repair needs taken care of right away, than it is to get into a home that is in need of repair and attempt to afford or finance these items by other means. Often times, first time homebuyers are steered away from these loans by lenders themselves because they are more time intensive for the Loan Officer and they require a whole lot of extra care and attention to detail. Great reason to steer a client away from their dream! Do a little extra work, give it a little extra attention and help a first time homebuyer open up a host of properties that would otherwise not be available to them or cause financial concerns down the road!
We offer 3 types of 203K loans:
1) FHA 203K(s)/CASA Loan – This is a mortgage revenue bond loan through Minnesota Housing pilot loan program that few lenders participate in. It allows for first time home buyers who qualify under their CASA program guidelines to finance up to $15,000 in home repair or rehabilitation costs.
2) FHA 203K(s) Loan – This is a mortgage loan program for any FHA home buyer, whether or not they are a first time homebuyer. You must qualify under normal FHA loan guidelines and can finance up to $35,000 in home repair or rehabilitation costs.
3) FHA 203K Loan – This is a mortgage loan program for any FHA home buyer, whether or not they are a first time homebuyer. You must qualify under normal FHA loan guidelines and the amount you can finance is only limited by FHA’s maximum allowable mortgage amounts in the county you are buying in. (In Dakota and Scott Counties for example; that limit is current set at $365,000)

Popularity: 78% [?]

Dakota County has been a long time supporter of first time homebuyers by offering its own first time homebuyer loans through participating mortgage lenders (i.e. Cornerstone Mortgage Company, Burnsville), grants and down payment assistance loans, excellent education, among other services for first time homebuyers. There is a new first time homebuyer loan program coming to Dakota County of which, we are excited to take part. Here are some highlights of the new program and what it offers to first time homebuyers purchasing inside Dakota County.

- 30-year fixed rate interest rates slightly below market interest rates
- FHA and VA Loans only – No Conventional Financing
- Household income limits up to $92,290
- Single-family homes up to a purchase price of $276,683
- Existing duplexes up to $389,205
- New Construction is available in some parts of Dakota County, but not all. New Construction is allowed Apple Valley, Burnsville, Eagan, Lakeville and Rosemount among others
- Down payment Assistance Loans will be available up to a maximum of $10,000 based on income and home purchase price
- Minimum down payment from the first time homebuyer is $750.00

If you are interested in learning more about this program or other mortgage loan options specific to Dakota County, contact us today at Carrieg@houseloan.com. We’re here to answer any questions you may have. And, don’t forget, there are down payment assistance and first time homebuyer mortgage loan options in every city and county throughout Minnesota! We are a MN Housing Lender and their program is a statewide program for first time homebuyers. Dakota County is one of many counties in Minnesota that has special financing for first time homebuyers. Don’t hesitate to contact us for information on your local area programs and incentives for first time homebuyers!

Popularity: 100% [?]