Archive for March, 2007
FHA Access–A Safe Way to 103% Financing
A couple of weeks ago I wrote an article called Qualifying For a Home Loan: 6 Reasons to Consider FHA. Not all lenders have been around long enough to remember FHA loans. Those who have remember the extra requirements that made FHA loans unpopular with sellers. But it’s a buyer’s market today, and all that has changed.
Last week I originated my first FHA Access loan in 7 years, and I was reminded what a great program it is. FHA Access is a 2nd loan that pairs with a traditional FHA 1st and covers the 3% down payment and all of the buyer’s closing costs. The Access loan is an 8%, 20–year fixed rate mortgage for up to 6% of the purchase price.
While FHA loans have no income limits, Access does. The borrower’s income may not exceed 120% of the median income for the area. For most of the Sacramento region, the limit is $78,480. That’s pretty generous and shouldn’t be a problem for most people. FHA loans are no longer subject to strict debt to income ratios—instead we submit them through automated underwriting—Access debt to income ratios cannot exceed 43%.
With all the exploding 100% loans out there, FHA Access offers a path to sustainable home ownership without a big down payment.
Got a comment? Please leave it below.
Got a question about FHA Access? Send me an email.
read comments (3)Sacramento Mortgage Rate Update
The 30 year fixed rate mortgage rose slightly this week to 6.0% this week for well qualified borrowers.
Inflation Still the Bigger Threat
After last week’s reports showed increases in both the CPI and PPI numbers for February, the Fed declined to lower interest rates and continues to send hawkish signals about inflation.
However, this week’s falling new home sales and this morning’s declining consumer confidence suggest that the economy may be feeling the effects of the real estate slowdown and the subprime meltdown. What’s ahead for rates?
I Thought Flippers Were Out of Business!
I was talking today with a woman referred by a past client. She and her husband were in the middle of a 100% cash-out refinance on their home. They have a small handyman business and need a “stated income” loan because their tax returns don’t show adequate income. She was upset because her lender had quoted her 12% on her 2nd loan.
After telling her she should feel lucky to get any kind of 100% stated income financing right now, I asked why it was so important to pull all of their equity out. She replied that they had just paid $12,000 to go through an on-line school to learn how to flip properties, and they needed the money to get started. In fact, she said, they were just dying to get started.
This news hit yesterday in the Associated Press:
Wells Fargo cuts 500 jobs in mortgage unit
Tougher standards means bank will be handling fewer subprime loans
Updated: 12:13 p.m. PT March 20, 2007
SAN FRANCISCO – Wells Fargo & Co. is eliminating more than 500 jobs in a division that makes home loans to high-risk borrowers, adding to the economic distress caused by the decaying subprime mortgage market.
Most of the cutbacks, concentrated in South Carolina, Arizona and California, stem from Wells Fargo’s recent decision to make it more difficult for borrowers with blemished credit records to qualify for subprime mortgages.
…following on the heels of this article from Reuters on February 21st:
Wells Fargo cuts 320 subprime mortgage jobs
NEW YORK, Feb 21 (Reuters) – Wells Fargo & Co. (WFC.N: Quote, Profile, Research) said on Wednesday it is cutting 320 subprime mortgage jobs in two operations centers because it is tightening its lending standards to home buyers with poor credit histories.
About 250 jobs are being eliminated in Fort Mill, South Carolina, and 70 in Concord, California, according to a memo from Lynn Greenwood, a senior vice president of communications for the No. 5 U.S. bank’s home and consumer finance group. Wells Fargo is the largest U.S. subprime mortgage lender,
“As a result of changing market conditions — such as moderating house price appreciation — effective Feb. 16 we tightened our credit policy for a portion of our nonprime lending business,” Greenwood wrote. “This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans.”
HSBC Announces Pull Back on ALT A 100% Financing
…more 100% financing evaporates, this time from HSBC and affecting what we call ALT A.-not “A paper”, but not quite subprime either. Keep an eye on your 100% financing, even if it is already approved. If your lock expires before you can close, you may be without a loan.
PLEASE LOCK ALL 80/20 SIVA AND FULL DOC LOANS ALREADY REGISTERED TODAY WITH HSBC!!
HSBC WILL HONOR ALL LOANS ALREADY LOCKED BUT WILL NOT ACCEPT ANY MORE!!
NEW GUIDELINES WILL GO INTO EFFECT ON ALT-A IMMEDIATELY SIVA (stated income, verified assets) MAX CLTV 90% FULL DOC MAX CLTV 95%
Loan City Bites the Dust
Today’s announcement, posted on their website, entirely unexpected…
LoanCity is closed for business. Today March 20, 2007 is the last day we will be funding loans. To our customers, our staff and business partners – we thank you.
There are many people finding out as they near the close of escrow that they don’t have loans after all. What could be more unsettling than that?
Does your lender have the knowledge and experience to steer you away from trouble and weak lenders?
Got a question or concern? Email me.
Another Lender Pulls Back on the Reins
Just another in a daily stream of email notices from lenders tightening their guidelines. Take care with your approvals and recheck constantly. The loan you had approved may no longer exist.
Indymac Bank announces immediate changes to their 80/20 program, to take effect Tuesday, 3/20/07 (note todays date).
All 80/20’s in their pipeline need to be locked no later than today for Indymac Bank to honor this product. This includes all subprime, Alt A, and prime loans that dont fall within the guidelines below.
These loans have to be locked through the Emits system not the Quick Pricer. Here is a highlight of the changes:
The No Ratio 80/20 will be gone Full doc will now require a min, credit score of 680 and 3 mos. PITI reserves Stated will now require a min. score of 700 and 4 mos. of reserves Maximum loan amount for a 1st mortgage will be $417,000 200% Payment shock requirement will be eliminated 2/6 Libor program will be eliminated Alternative sources of credit will no longer be acceptable
Got questions or concerns? Send me an email.
FHA loans are the forgotten toy in the box. Gathering dust like some old Atari game while weve played with our shiny new Xbox, FHA loans years ago lost their appeal. Its time to reconsider.
Here six reasons every first-time buyer should consider an FHA loan.
100% financing. FHA was the first to offer 100% loans. FHA loans actually require a 3% down payment, but they can be combined with a 2nd loan to cover the down payment and closing costs. If you dont need that 2nd loan because Aunt Betty wants to help, FHA will allow her to gift all of the necessary cash. You dont have to contribute 5% of your own money to the purchase. While FHA will require you document your incomeno liar loans allowedthey are often lenient with qualifying ratios, particularly now with the use of Automated Underwriting.
Worthless Pre-Approvals
So youve decided to buy a home. And being the educated consumer or Realtor that you are, you secured loan approval for your 100% financing in advance. Now, youve got a formal approval and all the conditions are met.
Smooth sailing, right? Not necessarily.
I recently wrote an article entitled 6 Reasons Your Next Loan May Take Longer Than It Should. The post got a lot of attention over at Active Rain where most people had begun experiencing these very problems. And Im afraid its just the tip of the iceberg.
Sacramento Mortgage Rate Update
The benchmark 30 year fixed rate loan fell last week to 5.75%.
Spooking the Market
It was a wild week the financial markets. A sell-off in the Chinese stock market triggered a major sell-off in U.S. stocks that was further spooked by Alan Greenspans comment about a possible recession later in the year, worries about Iran and Afghanistan, a downward revisions to some previous economic indicators.
The stock market was primed for a correction after a long bull run, and the weeks event provided the catalyst that sent investors fleeing to the relative safety of bonds. That in turn drove yields (and mortgage rates down). The widely watched 10 year Treasury note finished the week at 4.516%.