Archive for January, 2015

The cost of waiting makes NOW the time to buy, sell, or refinance…by Randy Cullen

January 23rd, 2015
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Many of the calls I’ve received this month have centered on determining the right time to buy, sell, or refinance – so I thought it would be timely to revisit that hot topic! Waiting a year or so to save additional cash for a down payment could cost a client more than they would ever imagine if interest rates climb a point or more. Taking advantage of a low- or no-cost refinance and reducing the term of the loan saves tens of thousands in interest over the life of the loan. The numbers don’t lie.

Many households, regardless of whether they own a home now or are in the market to buy a home, are wondering what to do.  When I speak to current homeowners about managing their real estate asset I can show the benefits of a refinance not only in monthly payment, but interest saved over the term of the loan.  For clients purchasing a home, I can show different ways of structuring the transaction with the cash available so it makes sense. Here are some reasons why NOW is the right time for clients to act:

  • Interest rates are projected to be 1% higher by the end of 2015. This is the average taken from the Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors. That 1% rise in interest rates could decrease your client’s purchasing power by up to 10%.  Make sure your clients know that waiting will cost more!
  • Per the home price expectation survey for 2015, prices will go up somewhere between 3.7-4% before leveling off in 2016.  2016 is projected to be a more normal market, with appreciation at 3-3.5%.  Your clients should welcome a stable housing market.
  • Compared to the pre-housing bubble years of 1985 to 1999, buying a home is 30.8% more affordable now, while renting is 19.8% less affordable.
  • Per a Freddie Mac study published in December, the level of financial comfort for homeowners is 62%, compared to renters at 38%.  Homeowners who have a fixed rate mortgage product have a stable payment over time, and more money to spend on things they want after all the other bills are paid. Renters most likely do not enjoy the same stability.  Their landlord controls the price, and as rents go up, they see a year over year increase in their cost of housing.
  • Rent checks disappear, never to be seen again.  Mortgage payments are an investment in an asset that your client can LIVE in.  Although the market moves up and down in cycles, the appreciation of real estate has remained consistent overall. Read the rest of this entry »

FHA MI Premiums Officially Reduced!….by Barb Crea

January 16th, 2015
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FHA has lowered its annual mortgage insurance premium by 50 basis points for FHA cases assigned on and after January 26th for loans with amortization terms greater than 15 years.

The annual premium rates remain unchanged for loans with amortization terms of 15 years or less and for FHA streamline refinances of existing FHA-insured loans that were endorsed/insured by HUD prior to 6/1/2009.

What does this mean to you and your clients?

If you have a Purchase Agreement for a buyer securing FHA financing and it hasn’t closed yet, the buyer can benefit from the lower MI premium as long as they close AFTER January 26th.

FHA will allow case cancellations for FHA loans currently in process in order to allow borrowers to benefit from the reduction to the annual MI premium rate as applicable.  The ability to cancel began yesterday, January 15th; however, a new FHA case number allowing the lower MI cannot be ordered until January 26th.

Can buyers benefit from the lower MI if the FHA appraisal has already been completed, but they haven’t closed yet?

FHA will allow the use of the existing valid appraisal with case cancellations, so a new appraisal will not be needed for the new FHA case assignment.

You just received a fully executed purchase agreement, OR you’re in the process of negotiating a purchase  agreement for a buyer securing FHA financing, and want the FHA appraisal ordered right away without delays.

The lender can request an FHA case assignment so the appraisal can be ordered right away. On January 26th, it can be cancelled and a new assignment re-ordered so the buyer can benefit from the MI reduction.  FHA does not allow FHA appraisals to be ordered without an FHA case number assignment.

Your buyer is closing January 26th and wants the benefit of the lower MI.

Unfortunately, buyers looking to close prior to January 26th will be unable to benefit from this new MI premium reduction.  They will be required to close with the MI premium rate that is available on THAT date.  To benefit from the MI reduction, the closing would need to be delayed long enough for the lender to receive a new FHA case assignment on or after January 26th.  The loan with the new FHA case assignment may need to be reviewed by an Underwriter, and the Closer will need time to prepare the closing documents reflecting the new FHA case number. Read the rest of this entry »

FHA Property Flipping waiver expires…by Randy Cullen

January 9th, 2015
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FHA is reverting back to its Property Flipping Prohibition as their property flipping waiver expired on 12/31/2014. According to FHA, the program has done its job by stimulating billions of dollars of investments, stabilizing prices, and providing homes for families who were often barred from home-ownership due to the high cost.

In an effort to stimulate repairs and sales of homes in neighborhoods hard hit by the mortgage crisis and recession that followed, FHA waived its standard prohibition against financing short-term house flips. Prior to this policy change, if you were an investor or property rehab specialist you had to own a house for at least 90 days before reselling to a new buyer at a higher price (commonly known as flipping) using FHA financing. Under the waiver of the rule, you could buy a house, fix it up and resell it as quickly as possible to a buyer using an FHA mortgage, provided that you followed guidelines designed to protect consumers from being taken advantage of. The rules and guidelines were not put in place to be the “profit police” to prohibit an investor from rehabbing and reselling a property for a reasonable profit; they were in place to protect buyers from less than honest investors who purchased run down inventory, slapped a little paint here and there (lipstick on a pig), and then resold it in days at an inflated price and huge profit.  The rules were to help borrowers purchase a rehabilitated house that was taken from poor physical shape to one that is repaired, properly inspected, and safe for a family to occupy. Read the rest of this entry »