USDA Slashes Fees on its $0 Down Mortgage Program

As mentioned in several previous blog entries, USDA drastically reduced the fees on its $0 down mortgage program on October 1st of this year. In this article we will revisit some examples we’ve previously provided that illustrate how much a typical homebuyer can expect to save as a result of USDA’s lower fees.

As you may recall from previous blog entries, the fees USDA charges on its $0 down loan program consist of a one-time upfront “guarantee” fee and a monthly “servicing” fee. Under USDA’s new fee structure, the upfront guarantee fee is now 1.0% of the loan amount (it had previously been 2.75%) and the monthly servicing fee is now 0.35% of the average scheduled unpaid principle balance on the loan (it was previously at 0.50%).

So what do these fee decreases mean for the typical homebuyer? To answer this question let’s see what the USDA fees would have been prior to October 1st on a $0 down $135,000 home purchase versus what they’d be today. Under the old USDA fee structure the upfront guarantee fee on a $135k purchase would have been $3,817.48 and the monthly servicing fee would have been $57.34 during the first year of repayment. If we utilize 3.500% as the interest rate on a 30-year fixed rate USDA loan, the combined principal, interest, and servicing fee payment comes out to $680.69 per month.

Now let’s see what happens if we apply the new, current USDA fee structure to the same $135k home purchase scenario as described above. The results speak for themselves: the upfront guarantee fee drops to $1,363.63, which is a savings of $2,454 over the old fee. The servicing fee goes down to $39.43 per month during the first year of repayment, which equates to a savings of roughly $215 when compared to what the old servicing fee would total up to over the same time period.

In addition to the monthly savings brought about by the lower USDA fee structure, it also results in more purchasing power for the homebuyer. To explain, as mentioned in the example above, when USDA’s old fee structure is applied to a $135k home purchase the combined principle, interest, and servicing fee payment comes out to $680.69 per month. With USDA’s new fee structure, a homebuyer is able to achieve this same monthly payment with a purchase price of $141,000. In other words, the homebuyer in our example has gained $6,000 in purchasing power as a result of the lower USDA fees that went into effect on October 1st.

Thanks as always for reading!

To Sell or Not to Sell: Should Community Banks Sell Residential Loans to Secondary Market or Not?

Community Banks, at their very core, are institutions that through their lending activities help maintain the stability and finance the growth of the areas they serve. Community financial institutions are able to offer a full array of lending and investment products just like the “big boys” due to technology, access to products and some industry standardizing. This has allowed the smaller, community bank the opportunity to retain more of its borrowing base and provide cross-selling chances.

However, many of these community based institutions have decided not to offer long-term, fixed rate residential mortgages. While there are many reasons, primarily it is due to the regulatory environment which surrounds these loans. Yes, the residential lending business has had more than its fair share of regulations of late (Dodd-Frank, TRID, lender compensation, and many more).So what does a potential borrower do if their neighborhood bank does not offer the desired long-term fixed rate product?

The borrower goes elsewhere. Perhaps the borrower goes to a mortgage broker who has no desire to cross sell as the broker has no other products to sell. But what if that broker sells the loan – including the servicing rights – to a large bank? That broker has just provided the community bank’s competition with the most important profile: the borrower’s financial picture with all the details. In today’s highly technologically advanced world the borrower has become potentially a highly sought after prospect. While the community bank has the products to compete, do they have comparable marketing and cross-selling capabilities? Most likely No.

What if the borrower goes to another bank for his/her long-term fixed rate mortgage? Now the relationship between the big bank or other competing institution and borrower has become even closer and more of a chance the community bank will lose out on other lending products. All because the initial community bank would not offer a product which is available. Not only is the product available but the relationship with the vendor can be structured basically risk free.

Perhaps the question should not be whether or not to sell residential loans into the secondary market, but rather, would you be willing to offer a borrower a product in which you can earn fee income, basically risk free, and continue to have an on-going relationship which could turn a borrower into a bank customer?

Dear Community Financial Institution,

We at Flat Branch Mortgage Services can offer you this opportunity and I would appreciate the opportunity to discuss it all!

Patrick Benoist
Vice President
Flat Branch Mortgage Services
 

How Do I Choose a Realtor?

Considering the abundance of real estate companies and agents there are to choose from, figuring out which one to use when buying or selling your home is no small task. It’s also likely to be the most important decision you’re going to make throughout the entire process. This is because the right agent will set you up for success by giving you guidance on prices, location, condition, and a variety of other things that will be to your benefit. Conversely, if you choose an unprepared, unresponsive agent, you will undoubtedly live to regret it. So what can you do to put yourself in the best position to find the agent that’s right for you? You can start by taking the following three steps:

#1: Ask for Recommendations
It’s almost impossible to tell the quality of Realtors from their websites and pictures alone. Every agent will tell you they have great service and impeccable knowledge of the market. The only reliable way to know who you’re working with is to get recommendations from local people that you trust. Find out their experiences and who they have found to be trustworthy and hard working.

#2: Reach out to Local Lenders
Getting referrals can be easier said than done. If you’re moving to a new community from another area you probably won’t have friends and family members around to give you a recommendation. Local lenders (such as Flat Branch Home Loans, wink wink) can be a great source of information on area real estate agents. Mortgage Lenders work with Realtors on a daily basis and know the strengths and weaknesses of the people you are considering.

#3: Go Directly to the Source
Once you do know who you want to work with, it’s always smart to go directly to that person. The Internet is full of websites that will take your personal information and sell it to multiple Realtors. It may look like you are requesting information from a particular person but the reality could be just the opposite. You’ll be inundated with telemarketers who may or may not be looking out for your best interest. So, if you are going to request information online, make sure it is on the agent’s website who you actually want to work with. Or, better yet, pick up the phone and call them to make sure your information is where you want it to be.

In summary, the importance of choosing a reputable Realtor cannot be understated. Do your homework, follow each of the steps outlined above, and you’ll be well-prepared to make an informed choice.

Jim Yankee 8/26/2016

 

Fannie Mae Makes it Easier to get a 3% Down Home Loan

Are you in the market to purchase a home but concerned about the down payment needed? Fannie Mae recently made some changes to their HomeReady product making it easier for more potential homebuyers to qualify for home financing.

One of the great features about the HomeReady program is that it only requires the homebuyer to make a 3% down payment. However, until recently Fannie Mae had restricted the use of this program to households earning 80% of the area median income (AMI) or below.

The good news is that Fannie Mae has relaxed this income restriction such that households earning up to 100% of the AMI are now able to qualify for the HomeReady program. To understand the impact of this change, consider the following three examples:

▸ In Boone County, Missouri the previous income limit was $58,080. With the change to 100% AMI the income limit is now $72,600.

▸ In Greene County, Missouri the previous income limit was $44,720. With the new income limits it is $55,900.

▸ In St. Charles County, Missouri the previous income limit was $56,240. Under the new income restrictions the income limit is $70,300.

With the expanded income limits more homebuyers will be able to take advantage of this great product. In addition to only requiring a 3% down payment here are several more features that make the HomeReady program more affordable and easier to qualify for than many traditional loan programs:

▸ There is no first-time homebuyer requirement

▸ Lower mortgage insurance (MI) coverage options. Only 25% coverage is required, which translates into a lower payment

▸ Up to 45% debt-to-income (DTI) ratio allowed and up to 50% DTI when certain compensating factors are met

▸ Gifts, grants, and cash-on-hand permitted for down payment

With the aforementioned changes Fannie Mae’s HomeReady Program has made the dream of homeownership more attainable than ever.

Thanks for reading!

Three Questions You Should Ask Yourself When Considering a Refinance

In light of the low interest rates that currently exist in the mortgage market it may be a great time for many homeowners to take advantage by doing a refinance. However, in addition to the interest rate, there are many other important factors one should consider when deciding whether or not to do a refinance. Below are three important questions questions you can use as a starting point when contemplating whether or not it makes sense for you to refinance your mortgage.

1. How long do you plan on staying in your home?
This may be the most important thing to ask yourself when deciding whether or not refinancing is right for you. It does you no good to refinance in order to save $150 a month if 7 months down the line you decide to move. So be honest with yourself when thinking about how likely it is–given your lifestyle, career, moving history, etc.–that you’ll be moving in the next year or so. If the odds are that you will be moving within the next year, you may want to hold off on refinancing until/if the point comes where you feel confident that you’ll be staying put for the foreseeable future.

2. What is your breakeven point?
If the first question is a non-issue for you then this question becomes the most important one for you to ask yourself. To explain, the “breakeven point” is essentially how long it is going to take you to recoup the costs of refinancing. For example; let’s say the total costs of your refinance are as follows: $2,000 in closing costs and $1,500 in pre-paid items. In connection with this let’s assume that your existing PITI (Principal, Interest, Taxes and Insurance) payment is $800, your current escrow balance is $900.00, and your monthly savings from the refinance will be $100. In this scenario the breakeven point of your refinance would be 18 months, meaning that it will take you that long to recoup the cost of your refinance and your savings would thereby begin in month 19. The calculation itself is simple but there are several dynamic factors that can and will influence your individual calculation (i.e. How much your existing payment is, when you made your last payment, when your first payment on the refinanced loan will be due, your existing escrow balance, etc.) To expand on this example a little further–if you are still in your home 4 years past the refinance closing date your accumulated savings from the refinance would be $3,000 at that point (48 months you will have lived in the home after refinance – 18 months to recoup the cost of the refinance = 30 months worth of $100 in monthly savings = $3,000 in accumulated savings).

3. What goal are you trying to achieve with the refinance?
Are you looking to pull cash out of your equity in the home to do things like pay off some debts, fund a major home improvement project, or to put towards a child’s college fund? Or is your goal to save money on your monthly payments? Another goal could be to save as much money as possible in the long-term by shortening the term of your loan. Whether or not a refinance is advisable in your situation could very well depend on which of these goals you’re looking to achieve. When inquiring with a lender this is definitely an important point to cover upfront.

As always thanks for reading!

How Much Money Do I Need for a Down Payment?

Considering all of the home loan programs available to borrowers these days and the ever-changing guidelines that exist in today’s mortgage industry, it’s not hard to see why down payment requirements can be difficult to understand from one program to the next. In today’s article we will try to shed some light on this subject by covering the basic down payment requirements of conventional loans and the main government loan programs (i.e. FHA, USDA, and VA, respectively).

Conventional Loans
The minimum down payment required for all forms of conventional financing is 3%. The funds utilized for the down payment can come in the form of a gift provided that it’s from a qualified donor (i.e. a father, mother, sister, brother-in-law, etc.). In connection with this certain documentation requirements and the type of conventional financing also play a key role on what will be asked with regards to the source(s) of your down payment. For instance, if you qualify for “HomeReady” (a newer conventional loan program which we described in a recent blog entry) the allowable down payment sources are a bit more lenient than what is allowed with the “standard” form of conventional financing.

To expand a little further on possible down payment options with conventional financing—let’s say you decide to sell an asset (such as a vehicle) in order to come up with the necessary down payment funds. This is generally acceptable provided that you can document that you are the owner of the vehicle (i.e. your name is on the title), that the individual who purchased it paid a fair price (i.e. at or below NADA or Kelley Blue Book) and that you have a properly executed Bill of Sale. On the other hand if you plan on using your latest gambling winnings that have been stashed in cash under your mattress for your down payment or perhaps want to use a cash advance on a credit card as your down payment, neither of these sources would be considered acceptable.

FHA Loans
The FHA loan program requires a minimum down payment of 3.5%. In addition to the slightly higher minimum down payment required, the guidelines regarding the source(s) of the down payment and what must be documented are comparatively stricter with FHA loans. If you have all of your down payment funds sitting in your checking or savings account things are pretty straightforward; however, if you intend to utilize gift funds, the documentation requirements become much more cumbersome. More specifically, in addition to providing documentation evidencing that the gift is from a qualified donor, the donor has to provide documentation proving that they have the funds to give (via a checking or savings account statement for example) and sign a gift letter. Then, both the withdrawal of the gift funds from the donor’s account AND the subsequent deposit of those funds into your account have to be documented. So needless to say if you’re planning to use gift funds from a donor who is very protective of their asset statements you may have an issue when it comes to getting a FHA loan. Similar to conventional financing, cash-on-hand will also pose an issue in terms of using it as a source of down payment funds.

USDA Loans & VA Loans
The USDA and VA loan programs are both “zero down” programs, meaning qualifying borrowers can utilize them without making a down payment. Easy enough right? If you’d like more information on these programs you can click on the following links:
USDA Loans | VA loans

Thanks for reading!

Debt-to-Income (DTI) Ratio: What It Is and Why It’s So Important

In last week’s blog entry we described four important concepts to understand when purchasing your first home. One the concepts mentioned was your debt-to-income ratio or DTI. This week I’d like to expand on the concept of DTI and its implications on the home loan process.

There are two basic types of DTI that lenders will review when it comes to making sure you qualify for home financing. The first is called your “front-end” ratio, which equates to your total projected housing payment on the new loan (which includes the principal and interest payments on your loan along with property taxes, homeowner’s insurance, mortgage insurance and things like homeowner’s association dues and/or flood insurance as applicable) divided by your gross monthly income. As an example, let’s say your total housing payment comes out to $1,000/month and your gross monthly income is $5,000. This would equate to a front-end ratio of 20% as $1,000 / $5,000 = 20%.

The second and often times more substantial type of DTI is what’s called the “back-end” ratio. The back-end ratio is essentially what we referred to simply as “DTI” last week; it’s calculated by adding up ALL of your monthly debt obligations (including your total projected housing payment) and dividing that number by your gross monthly income. To build upon our previous example, let’s suppose that in addition to your projected housing payment of $1,000/month you also have an auto loan payment of $325/month, a minimum credit card payment of $75/month, and a student loan payment of $100/month. In this scenario your back-end ratio would equate to 30% as $1,500 ($1,000 projected housing payment + $500 in other monthly debt obligations) / $5,000 (gross monthly income) = 30%. As discussed in last week’s entry it’s important to note that things such as health insurance, groceries, cell phone bills, 401K, union dues, etc. aren’t included in the back-end ratio. Debt obligations that ARE accounted for in your back-end ratio include the items mentioned in our example above and things like child support, alimony, furniture store account payments, etc.

In terms of qualifying for a home loan, the maximum front-end and back-end DTI ratios that a lender can accept depend largely on the guidelines of the loan program(s) for which you have applied. For instance, with a standard FHA loan, you can be qualified with a back-end ratio as high as 55% or more depending on various characteristics of your loan scenario (i.e. amount of reserve funds, credit profile, length of time with current employer, etc.). On the other hand, with a conventional loan the maximum allowable back-end DTI is lower at 45%. As a general rule of thumb the USDA RD loan program has DTI restrictions of 29%/41% (front-end/back-end). However, similar to the FHA loan program, higher back-end ratios are allowed (up to 46%) depending on the particulars of your loan scenario. Lastly, with VA loans a special calculation called “residual income” matters more than DTI and as a result it is not uncommon to see back-end ratios of 60% or more be approvable.

As you can see, DTI is a complex and important factor in determining your eligibility for a given loan program. As such, working with a lender that understands the general nuances of each loan program and the applicable DTIs is a critical step to ensuring your loan process starts off on the right foot.

Thanks for reading!

Ready to Buy Your First Home? 4 Key Concepts You Should Understand About Financing

Now that the pleasant weather brought about by spring has finally arrived many of you may be contemplating the purchase of your first home. Purchasing your first home is very exciting and may very well be the largest purchase you’ll ever make. However, the enormity of buying a home and the complexities involved with the purchase process can at times be stressful and overwhelming. So what can you do to help increase your knowledge of the process and ease the stress of the key decisions to be made? For starters you should connect with a qualified mortgage professional and realtor to ensure that you are well-informed and educated about the home buying process from the outset. It will also be advantageous to have a solid understanding of what’s involved with securing financing for your new home. Four of the most important concepts to familiarize yourself with are as follows:

▸ Credit:The ability to demonstrate that you have a history of making timely payments is crucial. If you don’t know your credit score it’s important that you find out what it is and what is on your credit that may be influencing it in a derogatory fashion. The credit score necessary to qualify for a particular program depends on several factors but the rule of thumb is you must have at least a 620. Knowing your score and what influences it is a key starting point toward purchasing your first house.

▸ Down Payment:Do you have money for a down payment? If so, how much is it? Some programs require at least 3% down (i.e. HomeReady or standard conventional financing) and others require no down payment (such as the USDA and VA loan programs). Your ability to put money down will help determine your options for financing and as such the nuances of program requirements (i.e. debt-to-income ratio, credit score, loan amount, interest rate, etc.)

▸ Debt-to-Income (DTI):DTI is a simple comparison between your monthly payment obligations and your gross monthly income. Certain monthly obligations are excluded from the analysis (i.e. utility bills, health insurance, 401K, union dues, etc.). Other items are included (i.e. student loan payments, auto loans, credit cards, child support, alimony, etc.) DTI requirements vary by loan program (conventional loans have stricter DTI requirements than government programs, for example) and a qualified mortgage professional can help you understand the specifics for your particular situation.

▸ Employment and Income:Most loan programs require borrowers to have stable employment and income. From the lender’s perspective the term “stable” simply means that your income is likely to continue for at least 3 years following the closing of your loan. How do we determine this? Some of the more pertinent factors we look at include the profession you are in, how long you have been with your current employer and whether or not you’ve had any recent gaps in employment. For instance, the employment history of someone who’s been employed by the same company for the last 5 years will be viewed more favorably than that of someone who’s only been at their current employer for 2 months, was at their previous employer for 4 months, had an employment gap of 45 days prior to that, only worked for the employer previous to that for six months, so on and so forth. Having stable and consistent income is certainly a plus in qualifying for your first home.

As usual I hope this post helps prepare you to march down the path of homeownership. It’s not as complicated as it appears and getting with a qualified lender and realtor is the first step in ensuring a smooth and efficient process!

Thanks as always for reading!

Do You Really Need a Home Inspection? Consider These Things First

One of the most misunderstood components of a residential real estate transaction is the difference between a home inspection and appraisal and the respective roles each one plays in the home loan process. Today’s article will focus on a related question that we, as lenders, often receive from homebuyers; i.e., “Do I really need to get a home inspection AND an appraisal?” Or in other words, “Isn’t an appraisal alone enough?” To properly answer this question several items must be taken into consideration, as follows:

Firstly, it’s important to understand that the appraiser and home inspector have completely separate roles in the home loan process.Put simply, the appraiser’s directive is to determine the fair market value of the given property while at the same time performing visual observations of the necessary items to determine whether or not the home meets the respective guidelines of the loan program for which you are applying (i.e. Conventional, USDA, FHA, VA or “Other”). I say this because the appraiser’s job is not to inspect every nook and cranny of the home to locate deficiencies and/or items of concern that they feel the buyer should be made aware of. This is, however, the role of the home inspector.

Secondly, it’s important to realize that lenders will rarely require a home inspection for most loan programs.In most instances a lender relies on the appraisal to determine if any further action is necessary for the property to be in compliance with the loan program being used. For instance, say an appraiser notates that there is a noticeable crack in the foundation and takes a picture of it to include in their report. A lender may require a qualified contractor to inspect the crack to determine the structural integrity of the property. On the other hand if the appraiser doesn’t note any potential compliance violations the lender will simply rely on the appraiser’s expertise and move forward with the transaction.

Ultimately, the decision of whether or not to get a home inspection is completely up to the homebuyer.There are many benefits to having a home inspection performed but in some cases it may not be necessary. It really just comes down to the homebuyer’s preference and how comfortable he or she is with the condition of the property. As always, it’s best to consult with a qualified real estate agent and lender before making an important decision like this.

Thanks for reading!

Five Things Homebuyers Can Do To Help Ensure a Smooth Loan Process

It’s no secret that the regulatory environment surrounding the mortgage lending industry has made the loan process increasingly difficult for all parties involved (buyers, sellers, agents, lenders, appraisers and many other industry folks). As a result a question that commonly comes up amongst this group is what can be done to make the loan transaction more efficient, timely and with as limited stress as possible for everyone involved.

With that in mind today we’re going to focus on five important things that you as the homebuyer can do to ensure that your loan process goes as smoothly as possible:

▸ Contact a qualified lender before you go home shopping
It is especially important that you do this before writing an offer on a particular property. This will ensure that you are in the right loan program, understand what documents may be necessary to fulfill the loan transaction, and have a general idea of what your monthly mortgage payments will be.

▸ Choose a homeowner’s insurance company to go with as early on as you can
Waiting too long to select a homeowner’s insurance company is one of the biggest—yet most avoidable—causes of delays during the loan process. In order for your loan to receive final approval to close the lender must have documentation of binding coverage and a copy of the declarations page of your homeowner’s insurance policy. A lender simply cannot clear your loan for closing until this vital piece of information is received. As such the earlier in the process this task can be completed the better.

▸ Be prepared in advance to provide any documentation that your lender may request
It’s not the goal of any lender to make you jump through a bunch of hoops in order to close your loan transaction. However, there are certain documents that lenders themselves are required to obtain from you in order to ensure that compliance laws, secondary market guidelines, and regulatory standards are all met. Some of the most common documents your lender will likely request from you include the following: a recent paystub, your two most recent federal tax returns and W2s, a recent bank statement, and a copy of your driver’s license.

▸ Notify your lender of any material changes that could impact your financing
Communication is a huge key in any real estate transaction. It’s important for the lender to communicate timely updates to you as well as return emails and phone calls promptly. At the same time it’s also important that you as the client inform your lender of any material changes to your employment or financial situation as these things can potentially affect your ability to remain qualified for the loan. Things like job changes, opening or closing a bank account, having a large deposit to your bank account that will be used for closing, etc. need to be communicated to your lender as soon as possible.

▸ Don’t be afraid to ask questions
Asking questions is also a key component of being informed of what will transpire. Questions such as What is my rate?, What will my monthly payment be?, When will my first payment be due?, How much cash will I need to bring to closing?, etc. are all good questions to ask your lender. It goes without saying that your lender should be addressing these things with you upfront. But just in case they aren’t or you’re unclear on something don’t be afraid to ask about it. The lender’s job is to ensure that you understand everything involved with your loan transaction and they should be happy to answer any lingering questions you may have.

Thanks for reading!

Fannie Mae’s other 3% Down Option: The Standard Mortgage

In last week’s blog entry we highlighted a new loan program that Fannie Mae recently unveiled called “HomeReady”. This week we will discuss a similar loan program Fannie Mae is now offering which is simply referred to as their “Standard” Mortgage program.

One of the biggest hurdles in achieving homeownership is the task of saving up enough money for a down payment. Similar to the HomeReady program, Fannie Mae’s Standard mortgage program was designed to alleviate this burden by decreasing the required down payment to 3%. Unlike the HomeReady program there are no income limits with the standard program but it does, however, require that at least one borrower is a first-time homebuyer (something not required by the HomeReady program).

Below are several of the more important features of the Standard Mortgage program:

▸ Only a 3% down payment is required (gift funds can be used)
▸ Reserve funds (if required) can also come in the form of a gift
▸ Fixed mortgage rate with a maximum loan term of 30 years
▸ Only one-unit primary residences are eligible (including condos and planned unit    developments or PUDs)
▸ Unlike the HomeReady program no pre-purchase homebuyer education course is    required

It’s important to point out that in today’s complex lending environment almost any loan program you consider using is going to have little nuances with the potential to cause issues down the road. Therefore, to ensure that you know all your options and are equipped with the knowledge to make an informed decision it’s important that you consult a qualified mortgage professional.

Thanks for reading!

Here’s what you need to know about Fannie Mae’s new HomeReady Loan Program

A lot of maneuvering has taken place recently with Fannie Mae in order to stay abreast and competitive in the ever changing mortgage market environment. One of the by-products of this was the launch of the new “HomeReady” product in December of last year. Unlike its predecessor (MyCommunityMortgage) you do not have to be a first-time homebuyer to access this program. Some of the key features of the HomeReady program are as follows:

▸ There’s no first-time homebuyer requirement

▸ Lower interest rate for the borrower

▸ Flexible credit score requirements (down to 620 on 1 unit properties)

▸ Only a 3% down payment is required (which can come in the form of a “gift”)

▸ Reduced mortgage insurance coverage (which equates to a lower MI payment than that    of a standard conventional loan)

▸ Income limits do apply (borrower(s) must be at or below 80% of the Area Median Income as determined by Fannie Mae)

▸ Purchase and limited cash-out refinance transactions are eligible

▸ 1-4 unit properties and condominiums are eligible

▸ Pre-purchase homeownership education course required

As usual it is best to consult with a qualified home loan expert as there are many other factors that can potentially affect one’s ability to qualify for this loan program. This is why it is critical to work with a lender that knows the process and guidelines.

Next week we will touch on a similar loan program (aka Fannie Mae’s 97% “standard” option) that is less restrictive and thus may be an option for those who cannot qualify for the HomeReady program.

Thanks for reading!

Flat Branch Is Proud To Announce Our New “Community Champions” Loan Program!

Flat Branch Home Loans is excited to announce a new loan program called “Community Champions”! We’ve designed this program to show our appreciation for our community workers. In order to be qualify for this program you must be employed full-time in one of the following professions:

▸EMT (Emergency Medical Technician):Requires registration with the EMT National Registry and licensure by state EMS Authority

▸Fire Department Staff: Firefighter, Driver (also known as “Engineer”, “Chauffeur” or “Fire Equipment Operator”), Lieutenant, Captain, Battalion Chief, District Chief, Deputy or Assistant Chief and includes all support staff

▸Police Department Staff: Police Officer, Detective, Sergeant, Captain, Commander, Deputy Chief, Chief of Police or Station Master and includes all support staff

▸911 Staff: Operator, Dispatcher or Tele-communicator

▸School Staff: Teacher, Nurse, Principal, Assistant Principal, Teacher’s Assistant, Office Manager and includes all support staff

Should you be employed within one of the eligible professions listed above we will pay for your appraisal if your loan falls between $30,000 and $150,000. If your loan amount exceeds $150,000, we will pay for your appraisal AND your loan processing fee. This program can be used in conjunction with our VA, FHA, USDA & Conventional loan programs (MHDC and NHF are not eligible).

We are grateful to all our community workers and have created this program as a way of thanking them for keeping our community safe, secure, educated and beyond! To learn more about this exciting new program please contact one of our local mortgage professionals. You can view and apply with a mortgage banker in your area by selecting a location in the “Contact Us” link at the top-right of this page.

Thanks for reading!

Five TRID changes that all consumers should be aware of

The new year is upon us and with it the mortgage industry has had a few months to get acclimated with the changes brought about by TRID. For those that are unaware, TRID is an acronym for the “TILA-RESPA Integrated Disclosure” regulation that was put into place by the Consumer Financial Protection Bureau (CFPB) on October 3rd, 2015. There were a plethora of things that changed once TRID went into effect, most of which involved reshaping lender requirements to better protect the consumer. In order to help lenders transition to TRID, the CFPB provided a 91 page “Compliance Guide” for lenders to utilize when implementing the regulation. There are five important things covered in the guide that you as the consumer/buyer/seller should be aware of:

▸ The Closing Disclosure (CD) has replaced the HUD Settlement Statement and now must now be provided to the consumer no later than 3 business days prior to closing. In the past lenders could issue a “HUD” the same day as the closing in order to prevent closing delays. Now the lender must issue the CD and the buyer must acknowledge receipt of the CD 3 business days prior to closing. If this deadline is unattainable the closing must be moved.

▸ In order for you (as the borrower) to sign preliminary disclosures electronically, the lender must now have record of your consent being given to do so. This process used to be an all-in-one procedure; lenders could send out electronic disclosures for borrowers to sign without the borrower first granting the lender his or her consent to do so. This is no longer allowed under TRID. Now a two-step process is required in which the borrower first gives the lender consent to send them their disclosures electronically (step one). Upon receiving this consent, the lender is then allowed to send the electronic disclosures to the borrower (step two).

▸ Lenders can no longer require income and asset documentation prior to providing a pre-approval. In the past many lenders required these documents in order to validate the information the consumer provided on the application. Lenders can no longer require such documentation before pre-approval and as such sellers are in a more vulnerable position because they do not know if the buyers have been formally “vetted” (i.e. a preapproval letter does not imply that the borrower’s income and asset documentation has been reviewed by the lender as it once did).

▸ In order for the lender to have an “application” there are six pieces of information that must be attained. Those items include the client’s name (first and last), social security number, subject property address, gross monthly income, loan amount sought and estimated value of the subject property. Prior to TRID implementation many lenders would require one or more additional items depending on their business model.

▸ A Loan Estimate (LE) must be sent no later than 4 business days prior to closing. The LE replaced what was known as Good Faith Estimate (or GFE). What this means is that an LE and CD cannot be issued on the same day, which at times could present an issue for a lender that isn’t in a position to handle the dynamics of today’s environment.

There are several other ways in which TRID affected the mortgage lending process but the items mentioned above are the most noteworthy ones. As always it’s important to work with a professional who understands today’s lending environment and the challenges within it so that you close on time and in a fashion that is conducive to your needs and schedule.

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Need a reason to buy a home? We can provide 8,400 of them!

Yesterday the FHFA (Federal Housing Finance Agency) announced that year over year home appreciation was up 5.6%. So where does this 8,400 number come into play, you ask?

Let’s say that one year ago from today you purchased a home for $150,000. Based on FHFA’s estimated year-over-year home appreciation rate of 5.6 percent, your home would be worth an estimated $158,400 today. This equates to $8,400 in wealth gained in a matter of 52 weeks, which is not a bad return on your investment by any standard.

It should be pointed out that appreciation rates can vary greatly depending on the area you’re in. As such you should consult with your local real estate professional to get a better idea of the estimated home appreciation rates in your area.

That being said, the home appreciation rate as provided by the FHFA is a strong indicator that now is a great time to invest in real estate. Given today’s historically low rates and the extreme volatility currently being seen in the stock market, all signs point to the fact that there may never be a more opportune time buy a home than the present.

As previously mentioned, it is always a good idea to discuss the local market conditions and trends in your area with a real estate professional. To discuss the financing options available to you in today’s market get with a qualified mortgage professional.

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BIG change coming to FHA loans on September 14th

The one constant in the residential mortgage business is change. You can always count on it just like the four seasons experienced here in the Midwest. Back on July 7th I did a blog post that highlighted several big changes going into effect for Fannie Mae backed mortgages (you can read that article here). These changes were welcomed by industry participants as they were designed to make it easier for borrowers to qualify.

Unfortunately this is not the case with the change coming to the Federal Housing Administration (FHA) loan program on September 14th. The change, which has to do with FHA’s guidelines on deferred student loan debt, will ultimately result in less borrowers being able to qualify for a FHA loan.

To explain, under current FHA loan guidelines, when a borrower has student loans that are in deferment for at least 12 months past the closing date, the associated monthly payments can be excluded for qualifying purposes. Excluding these monthly payments often times drops the borrower’s overall debt-to-income (DTI) ratio down so that it falls more in line with what is considered reasonable. This is an extremely beneficial feature of the FHA loan program, especially in today’s lending environment in which many people looking for home financing are Millennials–a generation that carries more student loan debt than any generation in the past.

However, starting on September 14th, FHA guidelines will no longer allow deferred student loans to be excluded for qualifying purposes. Instead, when the monthly payment for any student loan account shows as being $0 or not available on the borrower’s credit report (which is indicative of the loan being in deferment), the lender must utilize 2 percent of the outstanding loan balance to establish the monthly payment.

To understand the significance of this change, consider a borrower with a $10,000 student loan of which is in deferment at least 12 months past the date they wish to close on their home purchase. Under FHA’s current guidelines, the lender would be allowed to use $0 as the monthly payment on this loan for qualifying purposes. Under FHA’s new guidelines, the lender will instead have to use $200 as the monthly payment amount (2% of the $10k loan balance), which could easily cause the borrower’s DTI ratio to fall outside the qualifying range. So as you can see, the impact of this change will be felt by many of prospective homebuyers out there who may be saddled with student loan debt.

If you are one of the many people who could potentially be affected by this change, I highly recommend speaking with an experienced mortgage professional to discuss what impact (if any) it may have on your chances of qualifying for a FHA loan and/or what options might be available to you.

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4 reasons to choose 417 Home Loans at Flat Branch for your next home loan

So, you’re in the market to purchase a home or perhaps are already a homeowner and are considering a refinance to take advantage of today’s historically low rates. In either case you’re going to have plenty of options when it comes to choosing a lender. There are online lenders, small community banks, large banking institutions and local mortgage companies like us. With so many options out there, choosing a lender is not an easy task. So how do you decide? For obvious reasons I am of the opinion that your local mortgage banker is the best choice you can make as a consumer. To support this claim here are four primary advantages that a local mortgage company has to offer over the various other types of lenders:

▸ Your local mortgage banker specializes in just one thing: mortgages.
We don’t offer checking, savings, investments, commercial loans, or the plethora of other financing products available. A Mortgage Banker’s job is to do one thing and one thing only: provide you with the best mortgage experience possible. This type of focus and dedication allows mortgage bankers to be extremely efficient with your loan process and give you the type of service and expertise you truly deserve.

▸ Most mortgage bankers are commissioned employees.
So why does this benefit you? Although there are articles outlining the benefits of being a salaried bank employee or commissioned mortgage banker, consider the following argument. As salaried employees, loan officers of other types of lending institutions are paid regardless of whether your loan closes or not. However, commissioned mortgage bankers such as ourselves don’t get paid a dime unless your loan closes. This means we have a HUGE vested interest in seeing that your loan closes on time and that you have a pleasant experience throughout the process.

▸ Most mortgage bankers control 100% of your loan transaction in-house.
At Flat Branch Home Loans we originate, process, underwrite, close, fund and service most of our loans in-house. Having this type of control over the loan process allows mortgage bankers to provide you with an efficient loan transaction from start to finish. Many banks and other types of lending institutions outsource their underwriting, which means you may end up having someone underwriting your loan that’s 3 states away. This can provide for a cumbersome and inefficient underwriting process of which you will not be subjected to when using a lender that does all of their underwriting in-house.

▸ Your ‘local’ mortgage banker is just that: local.
When you work with a local mortgage banker you can put a face with a name and walk into his or her office and meet face-to-face. This can be a key advantage to working with a local company as it gives you a direct access to your mortgage banker should you have really important questions and/or concerns.

Above are just a few of the many advantages there are to working with a local mortgage company. You have many options when it comes to choosing a lender so make sure to ask the right questions to ensure that you’re dealing with someone you can trust to facilitate a pleasant loan transaction.

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Selling your home soon? Make sure to do these 5 things first!

As August begins and the “dog days” of summer begin to wind down, this is a time of year when many families become focused on getting their children ready for the upcoming school year, last minute vacations and other end-of-summmer activities. For these reasons this is also represents a time of year when the real estate industry experiences a slight lull in activity.

With that said September will soon be upon us and with it the real estate industry will pick back up as many homeowners will make a final push to sell their homes before the year closes out. If you are one such homeowner it goes without saying that the first impression a buyer has of your home is something that can make or break a possible sale. If a potential buyer doesn’t like the outside of your home you will never get the opportunity to show them what the inside has to offer. With this in mind below are a few things you can do to the exterior of your property to maximize its curb appeal to prospective buyers:

▸ Manicured Lawn: A well maintained and groomed lawn can really show off a home. This is especially true if the lawn is fertilized, has little to no visible weeds, and you’ve taken proper care of the landscaping.

▸ Fresh Paint: At times outdoor fixtures can take a beating. For instance, they can rust, show a little wear and you may have burned through a bulb or two. You would be surprised what a fresh coat of spray paint, clean glass and new light bulbs will do to the exterior fixtures on your home.

▸ Repair cracked or broken siding: We’ve all seen what a careless weed eater mistake can do to siding located close to the ground. Take the time to replace these so that signs of deferred maintenance to your home are minimal.

▸ Mildew: It’s not uncommon–especially for vinyl siding–for mildew to form on the outside of your home. The good news is, this is nothing that a power washer, soap and time cannot fix. Clean siding can make a huge difference in the exterior appearance of your home.

▸ Clean windows: Those hard water spots and/or rain streaks need to go! It won’t take much time to clean the windows and the impact will be great for the outside look of your home.

Addressing the items listed above are sure to get your home in better condition for sale. In connection with this it is also a great idea to consult with your local real estate agent when deciding what needs to be done in preparation of listing your home for sale.

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Have a bankruptcy or foreclosure and don’t think you can get a home loan? Think again!

Given the the economic crisis that occurred from 2008 through 2011 it’s not uncommon for some families to have experienced financial hurdles. Many of the nation’s largest employers (such as Ford, General Motors, AIG, and others) didn’t have enough capital to weather the storm and were forced to take on new loans or bailout money to stay afloat. Unfortunately many of these employers were forced to cut costs in order to receive assistance, which in turn resulted in widespread layoffs throughout the US during this time.

Many families and individuals lost their primary source of income due to these layoffs and as a result were forced to file for bankruptcy, lost their homes to foreclosure, and/or became delinquent with their creditors. It is a common misconception that these people can no longer secure home financing but this isn’t true in many cases. Below are some basic guidelines to qualifying for a home loan if you’ve been one of the many people who’s had financial difficulties in recent years:

▸ Bankruptcy: Depending on the loan program the time frame that must elapse before you are able to eligible for financing again ranges from 2-4 years, and even this can vary depending on the filing status (i.e. Chapter 7, Chapter 13, Chapter 11, etc.)

▸ Foreclosure: Depending on the loan program, the circumstances involved with the foreclosure (such as whether the foreclosure was included in a bankruptcy or not) can determine if you qualify for financing and if so how long the waiting period is.

▸ Disputed Accounts: Disputed accounts are NOT included in the calculation of your credit score (they are ignored by the credit bureaus) and as a result your true qualifying credit score cannot be obtained until these accounts are no longer showing the “disputed” status on your credit report. Depending on the type of dispute, the status, balance, age and a few additional items the status of such a dispute can affect your eligibility and/or at least add an additional hurdle in being able to qualify.

The above are some of the most common derogatory elements that are seen in today’s real estate lending environment. To better help you understand what you can do to qualify for home financing in the future I would highly recommend you reach out to a qualified mortgage professional. Depending on the circumstances you might find the information you receive more positive than you think.

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Interested in using the $0 down USDA loan program? Now’s the time to act!

For those of you who’ve been hesitant to take the plunge into home ownership, now would be a great time to consider doing so. This is especially true if you’re interested in utilizing USDA Rural Development’s $0 down home loan program. On June 25th the United States Department of Agriculture (USDA) issued a notice stating that they are increasing a portion of the fees tied to this loan program. The fee increase will become effective with the fiscal year of 2016, which USDA considers to be from October 1, 2015 through September 30, 2016.

The specific fee that’s increasing on October 1st, 2015 is the one-time upfront fee USDA charges the borrower in order to utilize the loan program. This fee–of which can be rolled into the loan–is currently 2.0% of the loan amount. Beginning October 1st the upfront fee will increase to 2.75% of the loan amount. The good news is that the monthly “service fee” USDA charges the borrower by USDA will remain unchanged at 0.50%.

What the increase to the upfront fee means is that (for example) on a purchase of a $130,000 home the upfront fee will go from $2,653.06 to $3,676.09, which represents an increase of over $1,000. All else equal, this fee increase will result in the average borrower’s monthly payment going up by $5. Granted, this isn’t a huge increase, but the big picture is that the cost of financing will increase should you wait to buy a home through the USDA loan program. Additionally, given the volatile nature of the mortgage industry, the low interest rates currently existing in the market could also go up if you wait to purchase.

As always please consult a qualified mortgage professional should you have any questions regarding this fee increase and how it could pontentially impact you.

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