Rates are Lower after Fed does not Taper

 

The government shutdown is over, but with another budget deadline looming in a couple months, it is unlikely economic data will be strong enough to warrant the Fed changing its taper tune in the near future. This also should help keep mortgage rates at relatively low levels over the next couple months.

Buyers beware, these low rates are so low because the government is artificially keeping bond rates low through its $85B / month bond buying program known as QE3. Economists such as Forbes’ Robert Lenzner believe the Fed will gradually ease out this program but cutting back $5B to $10B per month, but also state that rates will rise to an “impossible to predict level” as institutional bond investors will sell off their investments in bonds when this taper begins. This is another good reason to go ahead and buy now if you are planning to do so in 2014.

Here are a few other key items regarding mortgage loans:

• Effective November 16, 2013: Loans submitted to Fannie Mae’s Desktop Underwriter will require a minimum 5% down payment vs. 3% as it is now. With no up-front MI this is a great loan option vs. the FHA loan but some buyers may not have the sufficient funds for the higher down payment amount. If you would like the lower 3% down option we are still taking applications and running DU findings for this great loan product. Loans do not have to be closed by November 15, only have DU Approval, so there is still time to take advantage of this low down payment loan.

• Bank of England is a local lender that offers the Homepath Renovation loan. This product features 3% down, no MI, and up to $35,000 in renovation funds. This product can be used for primary, secondary and investment properties. What a great product! Email me or call for details.

• Florida’s USDA Rural Housing office is reporting 60 – 70 day turn times once they receive the file. This means home buyers and sellers can expect a 90+ day waiting period to close start to finish. FHA has a low 3.50% down payment and allows the funds to be gifted or borrowed from family members, so this is an alternative to allow buyers to buy now, closing in 3-4 weeks, rather than waiting on the USDA product.

• I also have great resources for all types of loans to include Lot and Construction Loans, Condo’s, and Commercial Properties.

 

Mike Tarleton
Sr. Mortgage Loan Officer
5410 E. Hwy 30-A, Suite 212

Santa Rosa Beach, FL 32459

850-866-2963 (Cell)
706-888-0980 (Cell / Text)
866-727-8521 (Fax)
NMLS: 264821
www.bankofengland.us

For informational purposes only.  Credit subject to approval, including credit worthiness, insurability and ability to provide acceptable collateral.  NMLS 418481. Member FDIC.

 

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Government Shutdown and Housing: How will it impact home buyers and sellers?

As of the day of this writing, we are in day 7 of the government shutdown and neither side seems to be close to a compromise. How is this currently impacting the housing market?

The greatest item that I see potentially impacting the mortgage market is related to the IRS Form 4506-T. This is a required verification of the tax return numbers against the IRS database and is a fraud prevention requirement to make sure the tax return numbers are accurate vs. what the IRS has on file.

Currently this function is not being supported by the IRS due to the shutdown and there has been a great deal of speculation that this would delay or prevent loans from closing until this function is up and running again.

However, we have received word from two of our investors that we are being allowed to continue underwriting and closing our loans, and we can provide the 4506-T verification once the IRS is processing them again, and sell the loans to the investor at that time.

Basically, this means we are still doing business as usual!   However, our processors and underwriters will be carefully reviewing the tax returns, and if a potential error is discovered, it could trigger the need for the 4506-T to be completed prior to loan closing.

FHA and VA loans are very automated for the most part and our underwriters are approved to underwrite and approve these loans without the direct involvement of the agencies. We do not need FHA and VA to sign off on the loans we approve, so we are able to continue processing and closing most loans like normal. (FHA is not currently originating Reverse Mortgage HECM loans right now.)

We can get FHA case numbers without the involvement of FHA personnel in most cases.

We can obtain VA Certificates of Eligibility online without the involvement of VA personnel in most cases.

In the few cases that might require the involvement of FHA or VA personnel, they are still working with skeleton crews and taking care of business as they are able. Closings might be delayed for this reason but we would learn of this delay during loan processing and communicate it to the buyer, seller and agents involved.  Most loans can still be processed and closed without delay.

USDA Rural Housing loans are not being closed right now. A visit to USDA’s website offers the following message: “Due to the lapse in federal government funding, this website is not available. After funding has been restored, please allow some time for this website to become available again.”

Prior to the shutdown, Florida USDA Rural Housing was advising us of a 30-45 day backlog meaning that loans could easily take 60+ days from application to closing. When they start working again, look for this loan type to take even longer to close.

Fannie Mae and Freddie Mac are both open for business and we are processing, underwriting and closing conventional loans like usual.

Again, the largest potential risk of not being able to close mortgage loans was the inability to verify tax returns vs. the IRS database and our investors are allowing us to continue closing loans now, and verifying later prior to selling the loan to them.

One final impact of the shutdown is that interest rates are still very low. The Federal Reserve’s decision not to taper its QE3 Bond Purchasing last month helped to lower rates and the shutdown has also had the effect of lowering rates while investors flock to the safety of bonds.

In summary, government backed loans like FHA and VA continue to be approved and closed as usual.  Certain specialty loans including USDA Rural Housing Loans and FHA HECM Reverse Mortgage Loans are not being closed right now, but we can take applications and process files to be ready for approval and closing when the government re-opens.

 

We are doing business as usual and are still taking applications this week for loans to be targeted for closing in October.

 

Mike Tarleton
Sr. Mortgage Loan Officer
Bank of England

5410 E. Hwy 30-A, Suite 212
Santa Rosa Beach, FL 32413

850-866-2963 (Cell)
706-888-0980 (Cell / Text)
866-727-8521 (Fax)

NMLS: 264821
http://www.bankofengland.us

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Buying a Home? Why the FHA Loan is No Longer the Low Down Payment Loan of Choice

This the second article in a series discussing the ins and outs of the best mortgage loan products available for home buyers.  Last week, the USDA Rural Housing Loan was featured.

The FHA loan was once a very popular and useful loan for helping first time home buyers achieve their dreams of home ownership.  “Was” is the key word though because this loan is no longer the loan of choice for most home buyers.

First let me explain why the FHA loan has become the dinosaur of mortgage loans, and then I will explain what is the new best loan with a low down payment that can be obtained anywhere, regardless of whether it is in the City limits or not (see last week’s article about USDA loans).

Due to substantial losses taken during the economic recession and housing crisis, the FHA (Federal Housing Administration) had to increase its revenues to keep operating and attempt to avoid  a taxpayer bailout.  FHA makes its money by insuring loans which in turn allows mortgage lenders to grant loans over 80% loan to value.  In short, the FHA (backed by the U.S. Government) stands behind the loan, allowing lenders to loan home buyers up to 96.5% of the cost of the house.  Without this guaranty, lenders will not loan more than 80% of the cost of a home, eliminating many potential home owners from being able to buy.  After all, how many buyers have an extra $40,000 to put down on that $200,000 house?

For its most popular loan, the 3.50% down 30 year fixed rate mortgage,  FHA now charges 1.75% up-front Mortgage Insurance (MI) and an additional 1.35% annual MI based on the outstanding loan balance.  This annual MI expense used to drop off after the loan reached around 78% loan to value and home owners could request its removal after only 5 years.

However now, FHA borrowers must pay this MI for the full 30 years of their loans even when the loan to value is less than 50%, even when it is less than 10%.  On a $200,000 house the cost of the up-front MI would be $3,377.50 and the beginning monthly MI cost is $215.46 or $2,585 in just the first year.

The FHA loan was designed with a noble cause in mind: to make home ownership more affordable.  Yet now when compared side by side against the USDA Rural Housing Loan and the Conventional Loan with 3% Down, FHA is the most expensive loan option available.

There are a few scenarios where it does make sense to get an FHA loan:

  • If the buyer has had a bankruptcy and/or foreclosure within the past 7 years. Conventional financing requires a 7 year period to have passed, but FHA’s waiting period is only 3 years.  I recently closed a loan where FHA granted an exception and allowed the loan to be made less than 3 years from the foreclosure date (but greater than two years) due to extenuating circumstances.
  •  Manufactured Home Loans. The only mortgage loan product I have available for a manufactured home is an FHA Loan Product.  This is a lower cost loan than other financing for manufactured homes through finance companies.
  •  Refinancing? FHA offers some higher cash out refinance options than conventional loans and also FHA has a Streamline refinance where the home owner can get the benefit of a lower rate without having to have an appraisal completed on the house. This is very useful for those who home value is under water.

If you cannot qualify for a USDA Rural Housing loan due to income or property location eligibility reasons and want a low down payment loan, the Conventional Loan with 3% down is a better and lower cost option than the FHA loan.  I’ll feature this product in my next post.

You are welcome to email specific questions to me at mtarleton@englending.com, call me at 850-866-2963, and also visit my website at www.bankofengland.us.

Mike Tarleton
Sr. Mortgage Loan Officer
Bank of England
850-866-2963 (Cell)
706-888-0980 (Cell / Text)

NMLS: 264821
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IdeaCamp is Back at g.Foley’s Next Week

The PCB Chamber of Commerce IdeaCamp is back on at g. Foley’s next week and will explore a topic that effects all of us, Real Estate in our area.

On Thursday, July 25, the Beach Chamber’s IdeaWorks Committee will hold an IdeaCamp “Think Tank” at g.Foley’s restaurant on 23rd Street in Panama City. This fun, interactive “idea-share” takes place from 5:30 to 7:30 PM. This IdeaCamp is presented by Southwest Airlines, hosted by the Bay County Association of Realtors, and sponsored by Edward Jones and Emerald HR Solutions.

“IdeaCamp is about the coming together of the business community in a professional, interactive setting,” says IdeaWorks Chairman David Balmer, regional director of Dale Carnegie of the Emerald Coast. “People are hungry for information and connecting with other business professionals. Our locations are always good! Great venue + great topics + great speakers = IdeaCamp.”

This unique IdeaCamp will examine several home-buying and home-selling scenarios. The topic, “What does Perspective have to do with Real Estate?” will be covered in this interactive panel discussion.

The panel consists of six Real Estate professionals that will share their practical knowledge with IdeaCamp guests as well as answer questions.

Panelists include David Bowers, a builder with Art Construction of NW FL; Matt Kelley, an inspector with North Florida Home Inspections; David Merrick, an appraiser with Brightway Insurance; Jim Kochevar, a lender with Giles Appraisal Group; Darla Fontenot, an insurance representative with Suntrust Mortgage; and Maureen Richardson, a title representative with Setco Services.

Cost to attend IdeaCamp is free for Panama City Beach Chamber of Commerce members and $20 for non-members. For more information, call the Beach Chamber at (850) 235-1159.

Buyer jilted at the Alter… the closing alter that is

 

I know it is not quite as earth shattering as being left at the wedding alter but it can be quite complicated and feelings and bank accounts are hurt all the same. If you read my blog you know that I try to talk about things that are happening in our office or at least in our Real Estate community so I can get it off my chest…… but also as a way to hear from wiser more amazing agents and people out there.

I was just involved with a deal where the buyer had performed all of his duties, his money is ready, inspections are done and in spite of low appraisal the buyer is ready to follow through with his nuptials and low and behold the seller gets cold feet. The seller hinted that he had lost that loving feeling and afraid of following through but even though all indicators were that he would be honorable… it was not to be.

So what in the world is the buyer to do? Does he have any remedies to at least get his money that he is out much less not being able to find a home comparable to the home that got away. It is very difficult in Florida to make a person sell his home if he does not wish to even if he is contractually obligated. That one is hard to believe!!! But the seller can sue in certain circumstances for Specific Performance.

To obtain specific performance, the purchaser must show that he or she was ready and able to perform at the closing. Specific performance may be granted where there is reasonable certainty as to what was intended in the contract and the meaning of the contract, taken as a whole, is understandable to the court. In order for a contract to be subject to specific performance, the contract must reflect that the obligations of the parties with respect to conditions of the contract and actions to be taken by the parties are clear, definite and certain. If the agreement is definite in all of its essential elements, specific performance can be granted.

“Essential elements” of the contract typically would be the purchase price, deposit amount, down payment amount, legal description of the property, financing terms, closing date and effective time period of the contract. It also could include an inventory of property on the premises that is to be included with the real property, specific conditions for sale, assignment of the contract to a third-party and terms for refinancing, particularly where the seller is holding the mortgage.

If the buyer seeks specific performance, he or she must remain ready to perform his or her obligations under the contract while the lawsuit is pending. Specific performance involves problems of proving contract certainty and reasonableness that are not involved in a lawsuit for damages.

It is also possible that the buyer could seek damages for the money that they spent to acquire the home such as inspections, appraisal and loan processing to name a few. With all the talk about repercussion what about the earned sales commission? (We will play with that one next week)

AS I have warned before I am not an attorney and I do not play one of TV or in the press so please consult an attorney if you find yourself in this precarious position. Thankfully this does not happen often but when it does keep a cool head, contact an attorney and weigh your options.

I would love to hear from my fellow agents and others that may have found themselves in this circumstance. Please change the names to protect the innocent and the NOT so innocent. Until next week, Please remember that, “The only people we have to get even with are those that have helped us”

Play Purdy!!! Multliple offers

I just love this job!!! Every day it is new and exciting and different and just when you think you have it figured out …. here we go again.  One day our buyers are just strolling along and taking their time to figure out just which of the many houses they want and with the blink of the eye it has changed.  Although it is NOT a total sellers market yet, we are inching closer and closer as inventory is going down and the multiple offers are CRANKING up.  So what is one to do when you are faced with multiple offers.

Play Purdy!!!!  (southern for Play Pretty)

My grandmother alway hollered after us as we went out to play,” Play Purdy now!!” Of course that was her way of reminding us to play nice and that is great advice when making an offer on a home that you really want. To make your offer more attractive, don’t ask for closing cost and other extras from the seller. If you do need to ask for closing cost assistance then up your offer to cover those expenses.  It is also a great idea for your agent to be really sweet to the listing agent because emotions do play into our engagement with others… whether on a subconscious or conscious level.

Hot buttons!!!

More than likely the seller has some hot buttons, some things that just may tilt the sale in your favor. Maybe you find out that they would love a quick close or maybe they need to even stay a few days after close…. if you can find out what makes them tick you may have a good chance of having the winning offer.

Share that loving feeling…. oh that loving feeling.

Most home owners love their home and have an emotional attachment and the notion that someone else will love and enjoy it too makes them feel good about the sale of their home.  I have actually had people write a letter to the seller’s expressing how they felt about the home and what it meant to their family.  On a personal level I just purchased a new home and I believe that the seller who really did not want to leave the beach, ( and who would?) felt a sense of comfort because of my over the top enthusiasm for her home that thankfully is now mine.

As we continue to move towards more of a Seller’s market  I will share some more tips next week…. but for now remember, “The only people we have to get even with are those that have helped us.”  And until I see you again, “Play Purdy”