Minneapolis, MN: For certain FHA loan backed homeowners, refinancing via the FHA Streamline Refinance program is about to get a lot less expensive. Beginning June 11, 2012, FHA implements a new policy for its mortgage insurance rates.

Millions Of FHA Homeowners Now Eligible

FHA mortgage rates have been steadily falling. Unfortunately, FHA mortgage insurance rates have not. Today's FHA homeowners pay up to 1.25% in annual mortgage insurance premiums -- triple the rates that FHA backed homeowners paid just 4 years ago.

For new FHA homeowners -- the ones buying homes today using the FHA's low down payment mortgage program, the FHA's rising mortgage insurance rates are a nuisance more than anything else. High insurance premiums are the price you pay for getting access to a mortgage with just 3.5% down.

But, for homeowners who already have an FHA backed loan, rising mortgage insurance rates have made it difficult to qualify for the FHA Streamline Refinance, the FHA's "no appraisal needed" refinance program. This is because while for many people, we can lower their interest rate over 1%, the new higher mortgage insurance costs eat up all the savings. The program rules state that a mortgage applicant's mortgage payment fall by at least 5% in order to qualify for the FHA Streamline Refinance.

"Mortgage payments" are defined as (1) monthly principal + interest payments, plus (2) monthly mortgage insurance payments. Principal + interest payments have dropped significantly since 2008, but rising mortgage insurance rates have negated these effects. Making that 5% savings marker has become exceedingly difficult.

Potentially millions of FHA-backed homeowners, while eligible, were effectively eliminated from the FHA Streamline Refinance program and from access to today's low rates.

For long-time FHA-backed homeowners, that's all changing.

If your current FHA mortgage was endorsed by the FHA prior to June 1, 2009, you are eligible for the FHA's "grandfathered" mortgage insurance premiums. The new premiums are dramatically lower than the premiums paid by today's new FHA customers, making the FHA Streamline program once again a great option for home owners.

For eligible homeowners, the new FHA Mortgage Insurance schedule is as follows :

• All loans : 0.01% upfront mortgage insurance premium (verus 1.75% for new loans)
• All loans (except 15-year fixed with LTV of 78% or less) : 0.55% annual mortgage insurance premium (verus 1.25% for new loans)
• 15-year fixed with LTV of 78% or less : No annual mortgage insurance premium

Adjustable (ARM) Loan Resets Cause Foreclosures - Fact or Fiction?

Saint Paul, Minnesota: Requests for adjustable mortgage loans dropped to near zero the past few years because of the general belief that adjustable loans are bad, and that recent high levels of foreclosures was because homeowners were doing fine with their loans until their adjustable loans reset to higher rates.

Lenders are again starting to see inquiries about, and home buyers again taking adjustable rate loans because of the super low adjustable loan rates.

FACTS VERSUS FICTION:  According to recent nationwide data, the number one reason homeowners default on their home loans was because their income was cut. This accounted for just under 60% of loans in default. Once traditional causes of foreclosure are factored in (divorce, major illness), cash flow problems added up to a whopping 80% of all "causes" of defaulted mortgages nationwide.

Adjustable payment loans resetting to a higher payment alone accounted for just 2%, according to the data. Rather than being the cause, they appear to be the final straw that breaks the camels back of people who were already in financial trouble.

ADJUSTABLE RATE MORTGAGES: Adjustable Rate Mortgages (ARMs) became one of the most popular and effective tools for helping some prospective homebuyers achieve their dream of homeownership between 2000 and 2007. Initially developed during a time of high interest rates that kept many people out of the housing market, the ARM offers lower initial interest rates by sharing the future risk of higher rates between borrower and lender.

IS AN ADJUSTABLE MORTGAGE RIGHT FOR YOU? Talk to a local licensed Loan Officer (not an unlicensed bank application clerk) about the benefits. ARMs can be an excellent choice of financing under certain conditions, such as rising income expectations, high interest rates, and short-term homeownership plans. But because payments and interest rates can increase, either steadily or irregularly, homebuyers considering this kind of home mortgage loan need to have the income to keep up with all possible rate and/or payment changes. Each ARM has four basic components:

• Initial interest rate, which is typically one to three percentage points lower than that of most fixed rate mortgages.
• Adjustment interval, at the time between changes in the interest rate and/or monthly payment will be.
• Index, what lenders use to determine future rate changes. This is usually LIBOR.
• Margin, or the additional amount the lender adds to the index to establish the adjusted interest rate on an ARM.

Typical adjustable loans come in 1-year, 3-year, 5-ya, 7-year, and 10-year initial fixed term options. The 5-year adjustable is super popular. The rate is fixed for the first five years of the loan, then becomes adjustable on a yearly basis.

VA Streamline Refinance

Minneapolis, MN:  Everyone is talking about the HARP 2.0 (Home Affordable Refinance Program) loan.  But what is you have a VA loan?

A VA Streamline Refinance is similar to the FHA Streamline Refinance. It is officially known as a IRRRL loan (interest rate reduction refinance loan) because of the money you can save by lowering your monthly interest rates. It was created by the VA in an effort help our veterans secure the lowest interest rate possible. This VA loan process is done quickly, with minimal hassle so our veterans can save immediately.

Veterans who have served active duty and a honorable discharge after a minimum of 90 days of service during war, or 181 during a time of peace are defined as eligible. Veterans as defined above, who have VA Home Loans in good standing are eligible for this program. The VA guarantees up to 25% of a home loan, with a maximum of $104,250.

Fast, Quick, Easy & LESS Paperwork!

It is called a Streamline Refinance for the way that the process is done. It is fast, quick, easy and requires significantly less paperwork. Hence, the Streamline name. In some instances it can be done in 10 days! This program is perfect for Veterans trying to save money on their mortgage and secure the lowest interest rates we have seen in years!

Things to Consider About Streamline Refinancing:

• The VA does not require certain things such as income or employment verification, or even an appraisal in some cases
• Your mortgage must have been paid for the past year and be current.
• You can do the loan by including all costs in the new loan, so NO out of pocket money.
• The veteran can not receive cash back.
• Any other liens the veteran may have must be secondary to the VA loan.
• You can skip up to two monthly payments

The qualifications for a VA Streamline Refinance have never been easier. The government wanted an easy way for our veterans to be able to achieve a refinance quickly and easily. While there are a few restrictions to qualify for the refinance, most all who are eligible can receive there va refinance in as little as 25 days.

Qualification Requirements for VA Streamline Refinancing:

• You must first be an eligible veteran of the United States Military which is defined as those who have served active duty and had a honorable discharge after a minimum of 90 days of service during times of war, or someone who has served 181 days in times of peace.
• In order to qualify for a VA Streamline Refinance, you have to have an original VA home loan
• You can not have any mortgage payments that are over 30 days late in the last 12 months.
• You need to be in decent standing regarding your credit.
• You will have to have a Certificate of Eligibility, to do this you have to complete VA form 26-1880.
• Most importantly you must be ready to save thousands on your VA Mortgage payment!

 

HARP Refinance - The first few months

HARP 2.0 has been in place for awhile now, and although I have helped several people refinance their underwater loans with the HARP 2.0 loan program, it has actually been a bit disappointing. As typical with government programs, the reality of HARP 2.0 falls short of the perception.

When the program was announced back in October, 2011 it sounded like everyone - no matter what their loan to value or their income would be able to refinance at today's low interest rates.

When the program moved full steam ahead in March, 2012, many people have been left on the sidelines wondering why they can not qualify, or why they have been denied. Many people with loan-to-values over 105% or with private mortgage insurance are finding their options even more limited.

Here is what I have learned about HARP 2.0 so far...

• Fannie Mae and Freddie Mac do NOT lend to customers.  Lenders lend, then sell loans to Fannie and Freddie.  Therefore all lenders have overlays and additional rules they impose on top of the basic program guidelines.
• Freddie Mac. For a while it was almost impossible to get an "Approval" through Freddie Mac's automated underwriting engine. They supposedly have tweaked their system, so if you have a Freddie Mac loan that was denied just weeks ago.  Try again.
• Unlimited Loan To Value Guidelines - When the guidelines of HARP 2.0 were release last year, they announced that loan to value restrictions were being removed. Although this was the guidelines of the program, most of the large lenders are limiting the loan to value.
• Appraisal Waivers - The appraisal waivers come from Fannie Mae and Freddie Mac. Each have their own automated valuation systems that determine their estimated value of a property. If the automated system accepts your estimated value of the property, then no appraisal is needed. Keep in mind that not every HARP 2.0 refinance will qualify to have the appraisal waived, and that we are seeing very loan "automated" values.

To read more about the reality of HARP 2.0

St Paul, MN: The appraisal process often baffles consumers.  May people feel that their home is worth more than true fair market value, so the appraised value doesn't always make sense to them.

The bulk of your homes value is based on finished square footage.

It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae.

In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules. In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal. Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity. The general rule is 'same or similar, sold within the last six month, within a one mile radius' of your home. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed.

Maintenance items don't increase value. That new roof you just added doesn't really add any value.  It was maintenance. If your home previously didn't have a roof, and now you added a roof - that would add value!

Don't confuse curb appeal with maintenance. Following the same roof theory. A brand new roof sure makes a potential buyer feel better about your home - but how much more would a buyer pay? Not much.

Mortgage lenders and Loan Officers must follow  the guidelines in the Home Valuation Code of Conduct, which among other things prohibits a lender picking the actual lender (must be randomly assigned),  from having any contact with, or influence on how the appraiser values a home.

Wondering what your home is worth? Thinking of selling your home, or refinancing to a lower interest rate? Only an actual appraisal from a licensed appraiser will give you a true number, but here is a online tool that can help give you an idea of what your home is worth.

 

 

ZERO DOWN USDA RURAL DEVELOPMENT LOAN - Not just for Rural Areas

St Paul, MN: One of the biggest challenges for most first-time home buyers is a lack of down payment, and not having the money to pay closing costs. Almost all "zero down payment programs" disappeared with the mortgage market meltdown that started in 2007, so in most parts of the country, the only true no money down programs are just the VA home loan for Veterans or the USDA Rural Development Loan.

Guaranteed by the USDA (United States Department of Agriculture), this program might make you think that you have to buy farmland or live "in the country" to qualify, but this is often not the case. In fact, you might be surprised to see just how many neighborhoods actually do qualify as rural development areas. For this program, the term "rural" really applies to those areas with a lower population, or fewer homes, not necessarily those areas or farmland far outside of the city.

To see what areas qualify for the USDA Loan, click here for the property eligibility map.

There are several benefits of the USDA loan program besides no money down. The program has very low private mortgage insurance costs compared to other loans, and the seller is allowed to pay all of your closing costs and pre-paid items up to 6.00% of the total sales price of the property. While this is great news for first-time home buyers, it's important to note that you don't have to be a first-timer to qualify for a USDA loan.

Other than the location of the property you're seeking to buy, there is one other important aspect to the USDA loan.  It has income guidelines. Click here to see if your family incomes qualifies for the USDA loan. Luckily, however, these numbers have recently increased to allow more potential buyers to take advantage of this special program.

For the USDA program, a great rule of thumb is no major metropolitan areas, and any town with less than 20,000 population.

 

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ARE MORTGAGE RATES GOING UP?

Minneapolis, MN: Mortgage interest rates jumped up last week, putting a scare in those sitting on the fence, thinking about refinancing, yet waiting form rates to drop a bit lower. Lucky for them, Minnesota mortgage interest rates moved back down slowly to about where they have been holding for some time.

The big question is how long can mortgage rates remain this low?

New FHA Streamline Refinance Rules

St Paul, MN:  Home owners with an existing FHA mortgage loan - rejoice. Washington has announced new guidelines to make it cheaper and easier for homeowners to refinance FHA mortgages. The reason is pretty simple – since FHA already backs your mortgage, they’re the ones who are on the hook if you default. So if refinancing will help make your mortgage more affordable for you, it makes sense for them to help.

The updated guidelines apply to FHA Streamlined refinancing, which is about as close to automatic loan approval as any refinance program can get. There are many variables to the program, but under the best circumstances, you don’t even need an appraisal, making it a great loan for underwater home owners.

Reduced FHA Fees

The changes announced dramatically reduce some of the fees usually charged for FHA mortgages and refinancing. FHA loans have two major mortgage insurance parts. The upfront fee, and the monthly mortgage insurance. For refinances starting June 11th 2012 and after, the current upfront fee of 1 percent of the loan amount is being reduced to a mere 0.01% - equal to $10 on a $100,000 mortgage – while the annual insurance premium is being cut by more than half, to 0.55 percent of the balance, down from 1.15 percent currently.

The administration estimates the reduced annual fee will save an additional $95 a month on a $175,000 mortgage, on top of the actual savings from refinancing to a lower mortgage rate.

 Anyone can with an FHA mortgage can refinance at anytime, but to qualify for the reduce fees, you must have obtained your current FHA mortgage prior to June 1, 2009.

Home Lost Value?

The FHA streamline refinance option that does NOT require an appraisal is a great option for homes that have lost value. Homeowners can be underwater on their FHA mortgage (i.e., owing more than their home is worth) and still qualify for refinancing. In fact, there’s no limit on how far underwater a borrower can be and still get an FHA Streamline Refinance.

If you’re underwater, but have a second mortgage or HELOC (home equity line of credit)  – you’ll have additional challenges - so be sure to speak with a good licensed loan officer to determined your exact situation.

Bottom Line

FHA does not do loans. Lenders do loans that FHA insures. Although the FHA has pretty generous guidelines for refinancing, it’s still the lender’s call on whether to refinance or not. Some lenders will have tighter guidelines, and some may even refuse to refinance a mortgage even if it appears to meet FHA requirements. The new guidelines remove some of the obstacles that sometimes make lenders reluctant to do an FHA streamline refinance, by taking such loans out of the formula used to assess their performance as FHA approved lenders. Since many of these mortgages are considered somewhat riskier than more recent home loans, some lenders have been reluctant to refinance them for fear of damaging their rating with FHA. To see if you can obtain an FHA mortgage refinance, check with your local approved FHA mortgage lender.

BE SURE TO SPREAD THE WORD WITH SOCIAL MEDIA

HARP 2.0 refinance program details in MN and WI.

Minneapolis, MN: The much anticipated new version of the HARP Refinance Program (HARP 2) is now in effect, making it one heck of a lot for home owner who have lost value in their homes to refinance their mortgage into today's low mortgage rates. The two biggest guideline changes to the HARP 2 program include the POSSIBILITY of unlimited Loan-to-Value and the POSSIBILITY to refinance even if you have Private Mortgage Insurance (PMI). This opens up financing opportunities for seriously upside home owners who have kept up with their current mortgage obligations. There is a LOT of misinformation out there... I keep hearing silly things like "the government" is paying your closing costs, and there is no appraisal. The reality is NO LENDER ANYWHERE can promise you a HARP 2 refinance approval WITHOUT having a full application and submitting that application through either Fannie Mae or Freddie Macs automated underwriting computers (AUS). You "may" qualify for an appraisal waiver - and lenders will roll in the closing costs...

Be sure you are working with a licensed local loan officer, not some hype machine! Want Minnesota's Best HARP Mortgage Interest Rates? Visit www.MinnesotaBestRates.com. Don't gamble with your credit. Don't get calls from 20 Loan Officers. Get a FREE QUOTE from ONE Licensed Professional Loan Officer.

Who owns my loan?

Minneapolis, MN: Until recently, no one really needed to know, and no one really cared who ultimately owns their mortgage loan. Home owners simply receive their monthly statements, and make their monthly payments to their mortgage company or loan servicer.

There are many program to assist homeowners, including the improved HARP 2, the Home Affordable Refinance Program, which require the loan be owned by Fannie Mae or Freddie Mac, so it is very important to know who, and if they own your mortgage loan.

There are usually a few people involved in your loan process:

• The Originator: The company who did the original loan. This could be a broker, bank, or direct mortgage company
• The Servicer: The company now providing the statements and accepting the payments is only providing the service of billing, statements, customer service, etc. They also pay your property taxes, home owners insurance, and pass the actual principal and interest to the end owner. This company could also have been your originator.
• The Investor:  This is usually not the company that provided the funds originally to make the loan, but a company that may hold your loan permanently, or sell it off to someone else, like Fannie Mae and Freddie Mac. Many times this company also becomes your loan servicer.
• Actual Owner / End Owner: This could be a bank, mortgage company, or some kind of investor group. For a large number of homeowners, this is Fannie Mae or Freddie Mac.

The homeowner would never really know, and again, would never normally care. One company could be everything on your loan, or more likely, your loan could have have multiple parties involved.

Who owns my mortgage loan? – Click to find out

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