RATES AND THE MARKET – Volatility and upward movement seem to be the name of the game right now. Yes, we’ve seen rates move up from those great levels we got accustomed to for so long. The Fed did what they set out to do – purchasing $1.25 trillion in mortgaged-backed securities and succeeding in their plan to lower home loan rates and help stabilize the housing sector. But the training wheels are now off, the safety net is gone, and home loan rates have moved higher. In fact, as the Fed gradually becomes a seller of their massive holdings of mortgage-backed securities, rates are likely to continue to move higher still. (Market sentiment is described by the words from Chicago’s hit song – “You don’t know what you got until it’s gone – and I found out a little too late …”!)
Here’s a great summary of last week (commentary from one of my coaching colleagues): “It’s the first week of April and the first week that the Fed is not buying mortgages. Mortgage rates did increase, but increases are being attributed to the lowest jobless claims since 2008 and sturdy manufacturing numbers. Consumer spending increased again for the fifth month, more and more cities are seeing home prices rise and consumer confidence improved once again. It’s the first time in 4 years that all major economic indicators are signaling economic growth. The stock market loves all the positive news which, in turn, puts pressure on bonds and raises interest rates.”
CHANGES TO FHA’S UP-FRONT MORTGAGE INSURANCE PREMIUM (UFMIP) – Monday, 4/5/10, the UFMIP on an FHA loan increased from 1.75% to 2.25%. Thank goodness this funding fee is allowed to be added to the loan (it’s expensive, but we all know the reason for it – and we are all grateful to have access to FHA loans). This increase will have small impact on the borrower’s monthly payment. On the loan sizes we work with, it will increase the borrower’s payment from $2 to about $10/mo. (I can review the specifics of this with you, if needed – give me a call.)
NO FLOOD INSURANCE FOR CLOSINGS? I know – who’d have thought? The Senate adjourned on March 26th without extending the National Flood Insurance Program. Language that would have kept the program in place until April 30th was part of a more comprehensive House bill that extended a variety of federal programs and was stalled in the Senate. Currently flood insurance cannot be obtained for property closings (and those closings are unfortunately stalled as well until this is resolved). The Senate will be back in session on April 12th, although we do not know when they will actually vote the money back into the program. My advice: don’t wait until the closing date to have this discussion with your lender. The good news? Thank goodness we don’t have a ton of properties in flood zones here in Minnesota (but there are pockets of properties in various areas that may be affected by this window). More to come on this as we learn updated news.
SELF-EMPLOYED BORROWERS – I would love to talk to self-employed buyers to see if there’s a way to qualify them. A lot of self-employed borrowers write off many expenses and show no income, and thus came to rely on the “stated” and “no ratio” loans of the last era to qualify for a loan, which exist no longer. If someone is writing off the “stars and the moon” and shows no income, then they must wait to buy a home until they do show income or until policies change.
But for the qualified self-employed borrower (and yes, there are plenty of these), let’s look at the other hand (there’s always “another hand”). It generally and simply takes a knowledgeable and trained professional who understands and can read tax returns to qualify these borrowers. That would be me – with years of experience in working with the self-employed borrower, I know and understand the complexities of tax returns. I know how to: a) cash flow tax returns (i.e., understand the differences between cash flows and tax flows); b) find legitimate income; and c) qualify personal and business tax returns, trust beneficiaries and entrepreneurs.
I also know which programs and products are more inclined to allow self-employed borrowers to have only one year of self-employment under their belt (and not two). Again, if the income just isn’t there, it’s not there (and we can tell this very early on in the process) … but if it is there, we have a track record of being able to uncover it, and we have successfully underwritten self-employed borrowers and complex tax returns and closed these type of loans for many, many years. Bring it on!
LAST MONTH OF THE TAX CREDIT – 23 days left, to be exact. We are 100% committed to qualify your buyers up-front and quickly. Let us use our knowledge and expertise to give you an answer quickly (and as we move forward, we’ll do our darnedest to make your home purchase comes together as smoothly and hassle-free as possible). Don’t let others “practice” with what is quite possibly your biggest investment yet. We have a high pull-through rate on our applications and an equally high percentage of satisfied clients and referral partners.
We appreciate those of you who call in and email with questions, scenarios and needs. We are in this together and we love helping you. Your success is our success.
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