Originator Digest

Using a VA Insured Mortgage to Purchase a Home After a Short Sale

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Sat, 07 Apr 2012 14:52:15 -0700

I have had a lot of people ask me about how to buy a home after a short sale using FHA financing but it’s becoming more and more common that people are considering buying a home after a short sale using financing insured by the Veteran’s Administration. These guidelines use to be murky but the issues concerning waiting periods after a short sale and underwriting guidelines are coalescing around an interesting blend FHA guidelines and Fannie Mae guidelines. There are six unique stipulations and they are as follows:

The borrower must have made all mortgage and installment payments within the month due for the 12 months prior to the short sale - This is the same as the FHA rule
The short sale must serve as payment in full on the existing lien(s) and the existing mortgage servicer may not require repayment of the difference between the mortgage balance and the short payoff - This is the same as the FHA rule
Borrowers may not execute a short sale to take advantage of declining market conditions and purchase, at a reduced price, a similar or superior property within a reasonable commuting distance - This is the same as the FHA rule
If a borrower was delinquent on the mortgage at the time of short sale, iLoan will not approve the borrower for VA financing for at least two years after the date of the short sale unless the borrower experienced significant extenuating circumstances and the loan receives and automated underwriting “approve” or “accept” response - This rule is borrowed from the Fannie Mae guidelines for buying after a short sale except Fannie Mae requires 10% down after 2 years where VA financing will allow for 0% down
Borrowers having short sales will not be approved if they also have a previous bankruptcy or foreclosure at iLoan
Borrowers having a short sale within the most recent three years and credit scores at or under 639 are ineligible at iLoan

Outside of these stipulations, only the basic requirements for a VA loan must be met. While these 6 provisions are inflexible, outside of them, we approach these would-be veteran home purchasers with an open mind as we see them as an excellent credit risk. Equally important to finding a good loan officer for this type of transaction is finding a good and enlightened Realtor. Their role will be key in in executing the sale of the current home (if it’s not already sold short) and the selection of the new property if the new property cannot be similar or superior within a reasonable commuting distance from the previous property. Particularly, they should know that you don’t need to be late on your mortgage to do a short sale in most instances and be willing to guide you through that process without a technical default. That will be necessary for a would-be buyer if they don’t want to suffer a long waiting period.

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

The Home Buyers Scouting Report® is provided directly to the buyer by HBM II, a licensed national real estate brokerage service company, not to or through a lender. The FREE home finding service is provided directly to prospective homebuyers by HBM II and its real estate brokers, as part of their ordinary real estate brokerage services. HBM II, Inc. works cooperatively with other real estate agents across the United States in attempting to find ready, willing and able buyers for homes listed for sale. The role of the Preferred Loan Officer is to assist in determining a comfortable home price range for Home Buyers Marketing II, Inc. (HBM II) to use when it is searching for property listings within the buyer's search criteria.

How to Choose and Calculate Your Private Mortgage Insurance (PMI)

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Fri, 16 Mar 2012 14:59:25 -0700

Saving an eighth of a percent on interest rate can save a little on your monthly payment and shopping around on closing costs can save a little on your down payment but perhaps the most overlooked and costly mistake when buying a home is not choosing the right mortgage insurance if the down payment is less than 20%. The wrong decision on this choice can cost thousands of dollars. Let’s take a generic purchase of 200,000 dollars with the minimum down payment and compare them but before that, here are some definitions that you’ll need:

Borrower Paid Monthly Mortgage Insurance (BPMI) - With borrower-paid mortgage insurance (BPMI), the borrower pays the MI premium monthly with their mortgage payment (this will annoy you every month when you get your mortgage statement)
Single Cash Premium Mortgage Insurance - Borrowers can pay a one-time lump sum payment to eliminate the need to pay monthly mortgage insurance premiums (this is nice but it usually means adding to the down payment which isn’t too exciting to most people)
Single Financed Premium Mortgage Insurance - Borrowers can pay a one-time lump sum payment to eliminate the need to pay monthly mortgage insurance premiums AND finance the cost of the one-time buyout into the loan amount (this is usually the best received and most cost effective option)
Lender Paid Mortgage Insurance (LPMI) - With LPMI, we pay the PMI premium on the borrower's behalf, while charging a higher interest rate on the loan (this really only makes sense if someone’s not going to own a property very long)
FHA Mortgage Insurance - FHA mortgage insurance works on a “split premium” basis. Part of it is charged up front and typically financed into the loan while the remainder is paid monthly (this remainder is quite high on loans amortized over 30 years)

Now let’s take a look at the savings/loss comparison on that 200,000 dollar purchase over 10 years:

As you can see, the savings are most abundant using Single Premium Mortgage Insurance. The real question is whether or not to finance it into the loan amount. You’ll want to note that FHA is the most costly choice and this chart doesn’t even factor in the cost of the up-front FHA funding fee. To run your own private mortgage insurance calculator specific to your purchase scenario, try this calculator:

Thanks for doing your research and making the smart choice. Happy house hunting!

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Say Goodbye to the Lowest Mortgage Rates in History

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Fri, 16 Mar 2012 12:14:06 -0700

The market is at a turning point for the worse due to growing worries about inflation. While it is not a problem right now (although the consumer price index did just rise the most in 10 months), there are several strong economic factors emerging that typically lead to higher prices to the consumer and thus higher mortgage interest rates down the road. While the Federal Reserve said they wouldn't raise rates until 2014, Mark Zandi, chief economist at Moody's Analytics and many more economists don't believe that they'll be able to stick to that promise. A stronger dollar, improving jobs markets, and rising commodity prices (like food and oil) are adding to pricing pressures on everyday goods leading to inflation. As a result, the Fed could be forced to raise interest rates sooner than expected to keep inflation in check. Before the Fed raises rates, the markets will be the first to react; and they are. They will do this by selling off treasury bonds; and they are. As they do this, the yield on long term treasuries will rise and when the yield rises, so will long term mortgage interest rates. Here's a long term mortgage interest rate forecast by FFC:

A consumer's experience with inflation is very different. What matters most to people is that they're paying a lot more for food, gas, education and especially rent. Let's take rental rates in the Minneapolis-St. Paul market. Year-over-year, rental rates are up 11 percent! This chart shows how bad rental rates in Minneapolis-St. Paul are by comparison to national averages:

It will be tempting for would-be homebuyers to get discouraged with mortgage interest rates increasing but they should remember that at the same time rates are going up, housing affordability is at new records due to steep drops in home prices. Also, some buyers will get skittish over this and stay on the sidelines of the housing market which will not only hurt them in the long run (by leaving them with an even higher rate) but also put the buyers that don't hesitate in a much better position to get sales concessions when they buy their new home in the short-term or intermediate term. This turn of events could actually be a good thing for those in the market for a new home now. Happy House Hunting!

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

FHA Mortgages: Enough Already!

Sherri Sherpy, NMLS #287770 (iLoan) — Fri, 13 Jan 2012 17:57:39 -0800

Borrowers are going to pay more for an FHA loan in 2012. FHA mortgage insurance premiums are going up AGAIN. This change could possibly take an approved loan file straight to the DENIED bin.

The recent, signed legislation to extend the payroll tax deduction means an increase in FHA’s mortgage insurance premium. The FHA (Federal Housing Administration) has 2 charges to the borrower:

· Up Front Mortgage Insurance, which is currently 1% of the loan amount

· Annual Mortgage Insurance, currently at 1.15% and slated to increase to 1.25%

How could this affect you?

It could end in loan denial. Namely, if as a borrower, you are near the limits of allowable debt-to-income ratios. For example, on a $250,000 loan, this increase will add another $26.04 per month in additional mortgage insurance which also gets added into the debt-to-income ratios. This increase couple topple the peak of allowable ratios and result in a denied status on your loan.

What do you do?

We Are All About Solutions!

Two things:

If you are an FHA buyer, get off the fence, find your home and CLOSE on your loan…now rather than later. Push that spring market today! Heck, even if you do still qualify after the increase, who wants to pay extra mortgage insurance? Pew.
Convert your financing goals to conventional financing. With as little as 5% down (good credit needed), you can get a loan with NO monthly MI. HUGE advantages:

a. No monthly MI means your purchase power just increased dramatically (see illustration below).

b. Sellers and banks LOVE conventional offers!

c. Many lenders will tell you that there is a rate increase for doing this “flavor” of conventional financing (called single premium financed MI). DON’T LISTEN. You can get the SAME rates as those borrowers paying monthly mortgage insurance. You just need to work with a lender who has that capability.

Happy House Hunting!

Senior Mortgage Consultant, NMLS 287770

Cell: 612-363-1106 / sherri@iloanhomemortgage.com / www.sherrisherpy.com

FHA Seller Paid Closing Costs to be Reduced

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Sun, 22 Jan 2012 11:21:37 -0800

To much fanfare, FHA announced measures to better protect their insurance fund in a recent Final Ruling published in the Federal Register. Slipped in as a footnote to this announcement was a declaration that FHA is deaf to the concerns of the real estate industry. They are taking aim to again attempt to reduce the allowable seller paid closing costs. Make no mistake; they wouldn’t be doing this twice if they didn’t fully intend to see it through this time (regardless of industry feedback).

First, a little history (with a touch of nerdy stuff). On July 15^th of 2010, FHA proposed to “cap the seller concessions in FHA-insured single family mortgage transactions at 3 percent of the lesser of the sales price or appraised value” after citing the industry norms of 3 percent for conventional loans and 4 percent for VA loans. They attempted to justify this by saying that high seller concessions encourages inflated appraisals (translation of what FHA was really saying: “appraisers are crooks that don’t know how to do their job and the lenders that we approve don’t know how to underwrite appraisals”) and then they came up with some stats I could have cooked up in my mom’s basement when I was in 8^th grade and put them in a table (but they called it an actuarial table so that sounded cool and a lot of chumps bought it). Of course there was no mention that higher seller concessions come on smaller transactions and smaller transactions on the whole are done for those who are more vulnerable to serious economic turmoil (not that we’ve had any of that lately).

Immediately after they announced these changes, the industry pushed back. And when I say the industry pushed back, I mean everyone from builders to bankers to brokers to the National Association of Realtors®. HUD backed down and instead kept their focus on continuously raising the annual mortgage insurance premium. Now, in the face of a nearly imminent FHA bailout, they are acting on this again. Why? Will it really do anything to shore up how undercapitalized their insurance fund is? No. This is simply HUD and FHA bureaucrats making sure that they can say that they did something to avert the need for a bailout when it eventually comes. It’s nothing more than political CYA.

With this action, the collective costs of political cowardice will be frightfully transparent. The average credit score for FHA loans right now is 700. FHA’s mortgage insurance is currently 35% more expensive than the private market alternative. This proves that there is no actuarial basis for the current costs of FHA loans but rather, FHA is making their current customers pay for their poor decision making in the past in a desperate attempt to prevent themselves from having to face the political music come “bailout time.” To make matters worse, and this shouldn’t surprise us from what’s happened with the Social Security “trust fund,” congress is now using FHA as a piggy bank at the same time that is faces having to bail it out. And now we’ll face reduced seller concessions which with will force FHA purchasers on the more affordable end of the home buying spectrum into higher interest rates and do nothing to help the FHA insurance fund.

So if you end up taking a FHA loan and find yourself paying exorbitant mortgage insurance, a treasury override and not enjoying the historical program privilege of seller paid closing costs in excess of 3 percent, please know this: it has nothing to do with the risk you pose to the lender. It is only a consequence of actuarial and political failure.

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Mortgage Interest Rates, Closing Costs and Mortgage Calculators

Sherri Sherpy, NMLS #287770 (iLoan) — Wed, 11 Jan 2012 14:23:32 -0800

You are in your jammies, its 1:00 AM and visions of new homes are dancing in your head. How much is this going to cost? What interest rate will you get? Who are you gonna call? No need, my friend…the internet has got you covered!

Information is GOLDEN. And if you are like most, you are a do-it-yourself-er (DIY). You want and expect information at your fingertips until you reach a certain point in the home buying process.

I GET THAT.

Most people prefer to browse and learn online before shopping with the aid of a real estate or lending professional. We GUARD and PROTECT our privacy. Anonymity rules. But where do you start? Well, bookmark this blog because The MN Mortgage Mom has just dialed in for you.

1)Interest Rates

Cool. You can find “estimated” interest rates all over the net. I say, “Not so cool.” Why? Because interest rates, to some extent are derived from credit scores, loan-to-value and other criteria. Typically, the posted rates you find on the internet are for those with a minimum of a 740 credit score with 20% down, conventional financing. Maybe you are an FHA borrower/buyer? VA or Rural Housing? Maybe your credit scores are around 680? You need LIVE rates based on YOUR INDIVIDUAL criteria. You can get that HERE. (Disclaimer:Don’t be sending me nasty grams at 1:00 AM that the rates aren’t LIVE. Yep, markets close just like businesses. If you want real live rates, you’re going to have to check them during business hours.)

2)Closing Costs

How much is this mortgage going to cost? (First, if you are buying a home there may be a possibility of getting seller paid closing costs. If you are refinancing, there is a possibility of rolling the costs into the mortgage, thereby reducing your cash-to-close. But, that is a whole new blog…I will get into that another day.) I have never seen a web site that offers the public real closing cost estimates. But, fear none, I got this one. Same link as the one above:Closing Cost Calculator. Enter your criteria and you will receive the interest rates and closing costs specific to your deal. Real Estate Agents!This tool can be invaluable for you and your clients when working up an offer.

3)Calculating Monthly Payment

This is fairly self-explanatory. To incorporate the rates you see into a monthly payment, you can use the mortgage calculator on the right side of our website (about half way down) by clicking here. All you’ll need to do is add the rate, estimated purchase price, estimated down payment, property taxes, estimated homeowners insurance and (if applicable)mortgage insurance.

a.Property Taxes and Homeowner’s Insurance?

Yes. You do not want to forget about these. In most cases, your total monthly mortgage payment will include PITI (principal, interest, taxes and insurance). If you have your eye set on a property or two, you can readily check the current property taxes right here. Click on your state and find the appropriate County link to search by property address. You can get a broad idea of your homeowner’s insurance premium by multiplying the price of the home by .006. Then, divide that number by 12.

b.Mortgage Insurance!

Oh pew, you say. Yep, if you are putting less than 20% down on a conventional mortgage, you will be contending with MI (exception with VA financing). Mortgage insurance is simply insurance that aides in covering a lender’s losses after foreclosure and sale of the property….and you get to pay that premium. Use this resource to learn and compare MI products, options and costs. If this looks like hieroglyphic mumbo jumbo, you may need to pick up the phone and call your loan officer. There are many options and he/she can detail what makes most sense for your needs.Want to jump right to an MI calculator? Jump!

For 30 year fixed FHA financing with minimum down payment, the MI calculation is quite simple: Loan amount x 1.15% / 12.

4)But How Much Can I Afford?

Final step! You have your interest rate, you understand the closing costs and you have worked up the monthly mortgage payment. Can you afford it? Take the Pre-Qualification Test Drive! This is a simple spreadsheet that will allow you to enter your debt and income information and get a general idea if you can qualify for that dream home dancing around inside your cranium. Download the worksheet and off you go.

Woot! The numbers look great! This just may be the home! It’s 2:00 AM and you are chompin at your fingers wanting confirmation of all your hard work. Aw heck, pick up that phone and call (or email) The MN Mortgage Mom. I just “may” pick up the phone. After all, I’m most likely working up the loan for your neighbor who just called me at midnight.

Happy House Hunting!

Senior Mortgage Consultant, NMLS 287770

Cell: 612-363-1106 / sherri@iloanhomemortgage.com / www.sherrisherpy.com

The Mortgage Process is Simply the Perfection of a Loan Application

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Sun, 08 Jan 2012 15:12:46 -0800

Understanding the mortgage process is a constant frustration for consumers. One can search the web and find all kinds of long articles breaking the mortgage loan process into anywhere between 6 and 9 individual steps. Upon reading these, a consumer gets even more confused since each individual step is confusing in and of itself. Unfortunately, the wrong question is likely getting answered in these articles. Most mortgage clients don’t want to become experts on the minutia of processing and underwriting, they just want to know where to start and have an accurate context for why everything happens as it does. The answer for each of these questions lies in the same place.

The mortgage process begins and ends in the same place, with the mortgage loan application. It is filled out and signed at the beginning and updated for signature at the closing. But here’s the key point; every step of the mortgage process is dedicated to verifying a fact or validating an assumption on that was disclosed on the initial loan application. The loan application is broken in to 10 straightforward sections:

1) Mortgage type and terms requested

2) Property information and loan purpose

3) Borrower information

4) Employment information

5) Monthly income and housing expenses

6) Assets and liabilities

7) A summary of the credits (i.e. earnest money and the mortgage) and the costs (i.e. purchase price and closing costs) of the transaction

8) Miscellaneous affidavit section (this covers intent to occupy the property, citizenship and other items)

9) The agreement section (this is the fine print legalese and where the loan application is signed)

10) Information for government monitoring (this covers race, ethnicity and gender)

Nearly all documents a borrower is asked for or asked to sign will directly or indirectly relate to this document. Nearly all of the 3^rd party reports and vendor services used in the loan process will directly or indirectly relate to this document. Throughout the process, as new or updated information is obtained by the lender, the application is updated and re-reconciled with underwriting guidelines. In short, almost all of the mortgage loan process is a collection of acts designed around verifying facts or validating assumptions in this document; the loan application.

Knowing this, what should a prospective borrower seek to do?

If asked to fill out an online application, a paper application or do one face to face with a loan officer. . . be thorough when the initial loan application is filled out. For instance, if there is approximately 11 thousand dollars in a savings account, don’t put 11 thousand dollars on the application if the real figure is 10,771.41. Use 10,771.41 as the figure for the application. If the income is approximately 4000 a month but in reality its 4166.67, make sure the figure on the initial application is 4166.67. Also, insist that your loan officer be accurate on the initial loan application. If you see errors, however small, make sure that he or she corrects them immediately. Don’t tolerate sloppiness.

This may seem like a tedious way to start the mortgage loan process but it has down line consequences. Benefits of an accurate initial loan application include better loan recommendations, faster processing, faster underwriting, a more predictable transaction but most of all . . . fewer if any surprises.

Sure the loan process has a lot of confusing moving parts but if you want to keep it simple, just know that it’s almost all about the accuracy of the loan application and you’ll be way ahead of the game!

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Fannie Mae Homepath Mortgage Loans...NO Appraisal, NO MI and NO Condo Certification!

Deb Brengman Muelken (iloan Home Mortgage ) — Mon, 09 Jan 2012 21:38:00 -0800

Fannie Mae Homepath Mortgage Loans… NO Appraisal, NO MI and NO Condo Certification!

Looking for a fix up property… with mortgage financing readily available?

You believe you are either a handy person when it comes to home fix up projects or maybe you know someone who is handy. Shopping for foreclosed homes seems like a great idea for you, as foreclosed properties are the properties most likely to have some fix up projects that need to be completed.

This is a great idea, right up until you are not able to get financing on that foreclosed property. You may qualify for a mortgage, but the property must also qualify for financing and this is determined by an appraisal inspection. If the appraiser determines there are work orders on the property, the lender may flat out turn down the mortgage or it will be a requirement that the work be completed prior to closing. And, to make it interesting, generally speaking the seller will not allow you to do the work and many times will not do it themselves either. Pretty much turns the property into a cash only opportunity.

Do not give up… you just need to look in the right place. Fannie Mae has a number of foreclosed properties on their books, and believe it or not, they are not interested in being in the business of retaining properties, so they came up with special financing, called the Homepath Mortgage.

The Homepath Mortgage might be just what you need to meet your home purchase goal of doing some fix up yourself. Not all the properties are going to have repair needs, but it is one of the best resources for finding those that do! Depending on the property, there are other special features of the Homepath Mortgage, which make it the right choice for today’s buyer.

No appraisal – so there are not going to be any work orders of items to be repaired prior to closing or any other property issues.

No Mortgage Insurance – even though you have less than 20% down payment, it will not be required.

Down payment starts at 3% requirement for owner occupied – lower than FHA requirement of 3.5%

Down payment starts at 15% for investment properties – lowest investor down payment requirement available in the market.

Seller paid closing costs - up to 6% for owner occupied (please note: often, the banks will only give 3.5%, best to make full price offer if you want the full 6%, just my opinion) and 2% for investment properties.

No Condo Certification – no extra cost of paying for a condo review or worries about passing the requirements.

First Look Feature – owner occupied buyers have a 15 day advantage to purchase these properties before they are available to investors.

To find a property that qualifies for Fannie Mae Homepath Financing, go to www.homepath.com and you will be able to search all the properties that Fannie Mae has available in your area.

Please do not hesitate to contact me if you have any questions or concerns regarding this special financing, I have been writing these mortgages for years, it just might be the perfect mortgage for you!

Thanks! Deb – The Mortgage Lady

Personal ID NMLS#364933 Company ID NMLS#4474

Preferred Phone – 651.353.8531

Secure Fax – 1.877.869.7392

Email: deb@iloanhomemortgage.com or deb@debthemortgagelady.com

Website: www.debthemortgagelady.com

Why a Home Buyer Should Set Up 3 Search Criteria When Buying a Home

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Sat, 22 Oct 2011 20:18:16 -0700

A prospective home buyer or investor might have a clear idea of what he or she wants in the property they'll buy but the current market brings complexities that make setting up search criteria for this purchase a little more complicated. The difference between bank-owned, short sales and person-to-person transactions bring unique elements to this search process that cannot be dealt with by search criteria alone but that's where preparation and planning should begin. There are different negotiating tactics, condition of properties and buyer timelines that must be taken into consideration with each of these types of transactions and they all have a bearing on search criteria for a home buyer.

Let's use an example where someone is pre-approved for a FHA loan and the target purchase price should be around $180,000. Let's assume that they want to be in their new home at least within 8 months of starting the process and want to buy in Saint Paul, MN (although these principles apply to most markets). How might this buyer benefit from 3 sets of search criteria?

Person-to-Person Sale Search:

In a person-to-person sale, there is no element of the transaction on the seller's side that requires approval from a bank. The seller is free to negotiate solely on the basis of their own interest. I recommend setting up a search labeled "person to person," enter your search criteria and be sure to exclude Bank Owned and Short Sale transactions so you know that these are less likely to have the property characteristics and negotiation differences that those transaction types would. Then, I'd investigate the local market data to find what the percentage of the original list price sellers are getting in that area. In this scenario it would be 91.1% (see chart below). If the seller is getting 8.9% less than asking price then you want to make sure that your search criteria is setup for 108.9% of the price you're pre-qualified for. In this scenario that would be a little over $196,000. Skipping this step could cause a buyer to miss out on the property they're really looking for.

Bank Owned Sale Search: With your "bank owned" search, you want to make the same computation. In this case it would be 10.6 percent less than asking price and 110.6% of the pre-approved amount in this scenario would be a top end search criteria of a little over $199,000. When viewing the results of these search criteria, you want to keep a few things in mind.

The properties in the results are more likely to have physical deficiencies due to being abandoned by their previous owner. This can not only add to the costs of owning that home but present complications with financing. In this scenario, many of the properties showing up in the search might have problems that would lead to FHA work orders. Sometimes, even the presence of FHA work orders can kill a transaction as the bank/seller might refuse to do anything about it and won't allow the buyer to cure the issue either. In this case, the transaction will fall apart. Additionally, depending on the city the property is in, these physical deficiencies can lead to code compliance issues which can present obstacles to being able to occupy the property or even have the title conveyed to the buyer.

Another feature of bank-owed transaction is that typically the contract used is the contract chosen by the bank and it is heavily favored towards their interests. Often times, it's easier to lose earnest money and many have clauses for monetary penalties for delayed closings. Lastly, these transactions statistically close more quickly than any other type. This means that a buyer's financing must be well organized and ready to go (not that it shouldn't be anyway).

These won't be on all bank-owned properties and I'm not suggesting that a buyer necessarily exclude them but when looking at a list of properties through a separate "bank owned search", it's nice to know when one is looking at them what one can expect should they proceed.

Short Sale Search:

Short sales are unique because it's the only situation where the seller doesn't have a true profit motive. Sellers in this situation are not allowed to make money so they are often inclined to take the first semi-reasonable offer with a buyer who looks likely to close. This can translate to very good deals for a buyer and that plays out statistically where we find in this scenario that sellers selling short are taking 83.4% of their original asking price. This would mean that we'd take 116.6% of the pre-approved amount and set this search at nearly $210,000. That's a striking difference from a person-to-person or bank owned sale and can open up some excellent housing possibilities for a buyer who might otherwise have limited their search.

There are two concerns to be aware of with these purchases though. One is that there are sometimes physical deficiencies in these transactions that can be hard to cure if they're significant since the seller is likely to be cash strapped. Nonetheless, these are typically easier to deal with in a short sale transaction than a bank owned transaction. The other, and most important one, is timeline. In this scenario, if the buyer wants to be in their new home within 8 months and want to consider buying a short sale, they'll likely need to submit their purchase agreement within 40 days of starting their search since these transactions take the longest to get done (see chart below). The seller's bank has to approve the transaction and that creates considerable delays. If this buyer has gotten 3 or 4 months into the home searching process with no luck, it might be wise to stop considering short sales as it would likely be unreasonable to get that process done in time to meet the buyer's deadline.

What you need it a Home Searching Tool:

Different people will have different opinions about this but mine is that it can be tedious for both a buyer and their Realtor to establish these 3 separate searches and make the ongoing tweaks, adjustments and refinements that arise as a buyer narrows down what he or she wants. For that reason, a secure and buyer-driven search tool which allows the buyer to setup multiple searches and modify them as needed. The tool would have to be rich in options available to the buyer as far as crafting search criteria is concerned. Beyond the basics it would have to include the ability to require a search for short sales at the exclusion of bank-owned and person-to-person sales and any other combination thereof. I usually recommend the Home Buyer's Scouting Report as it meets this need along with many other. I'm sure there are others that do this but I haven't run into them as of yet.

Conclusion:

Today's market requires a buyer to look at their home search in three dimensions. This can help them find properties they otherwise might not find, avoid transaction inconveniences that otherwise might come up at inopportune times and it can also assist them in managing their home buying timeline. With the assistance of a Realtor in understanding all of the differences in transaction types, the best way to do this is to leverage powerful home searching tools to keep the search process organized and in context.

Chart 1

Chart 2

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Fannie Mae and Freddie Make Mac Move to NO Loan to Value Limit Loans on HARP

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Mon, 24 Oct 2011 12:44:22 -0700

The Federal Housing Finance Agency, with Fannie Mae and Freddie Mac, has announced a series of changes to the Home Affordable Refinance Program (HARP). This program was designed to be able to help people who were in a position of negative equity. Now, it someone is upside down on their home, there will be no limit to how far upside down they are in order to qualify for these loans. This program will continue to be available to borrowers with loans sold to the Fannie Mae or Freddie Mac on or before May 31, 2009 with current loan-to-value (LTV) ratios above 80 percent.

Here’s a summary of the most significant changes to the HARP program:

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;

• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;

• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;

• Eliminating the need for a new property appraisal where there is a reliable A VM (automated valuation model) estimate provided by the Enterprises; and

• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

This change, coupled with serious talk of the Fed doing more quantitative easing involving purchasing mortgage backed securities, could be mean BIG opportunities for people who, while well qualified as borrowers, have been locked out of being able to get today’s more favorable interest rates. To find out if a loan is owned by Fannie Mae or Freddie Mac, first find the property’s standardized address by going to the United States Postal Service website, click on “lookup a zip code,” and find the properties “standardized address.” Then, enter that address into these lookups to see if there’s a match:

Does Fannie Mae Own My Loan?

Does Freddie Mac Own My Loan?

FHFA Harp Changes.pdf

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Add Your Signature to the Petition - Reforming Regulations Concerning Short Sales

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Wed, 26 Oct 2011 20:59:50 -0700

While 70 percent* of Americans see homeownership as part of achieving the American dream, the homeownership rate has taken a 10 year decline** that hasn’t been seen since the Great Depression. While some steps have been taken to assist underwater homeowners to refinance, *** A fast transition back into homeownership is good for the economy, consumer confidence, the housing market and indeed...the banks.

Some actions can be taken that require no congressional approval. We, the signers of this petition, ask that the administration to work through the executive branch to implement the following:

Have the FHFA change Fannie and Freddie's guidelines regarding how long a consumer waits to be eligible for a new mortgage after a short sale to no waiting period if there were no late mortgage payments prior to the short sale and 1 year if there were.
Have HUD amend FHA's requirement to wait 3 years after a short sale where the consumer had late payments in the 12 months preceding the short sale. It should be amended to a 1 year.
Have HUD clarify their guidelines regarding buying a short sale where the consumer didn't have late mortgage payments prior to the short sale.
Have the FHFA, pressure PMI companies to waive their right to deficiency judgment in the event of a short sale.
Impose a 5 year moratorium on deficiency judgments on first mortgages.

Thank you for your consideration.

Sources:

*http://info.trulia.com/index.php?s=43&item=131 **http://www.mortgageorb.com/e107_plugins/content/content.php?content.9913 ***http://iloanhomemortgage.com/uncategorized/fannie-mae-and-freddie-make-mac-move-to-no-loan-to-value-limit-loans-on-harp/

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Do I Need to be Late My Mortgage to Qualify for a Short Sale? - Don’t Take Yes for an Answer

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Fri, 07 Oct 2011 13:10:39 -0700

I have a lot of people call me to get pre-qualified to purchase a home using FHA financing after a short sale. Early on, not a lot of these scenarios panned out but these days, more and more of them do. When they don’t, the number one reason is because they took bad advice from a party to their short sale transaction. That advice? “Mr. and Mrs. Short Seller, you need to be late on your mortgage to qualify for a short sale.”

This is often false and has devastating consequences. In many cases, proving imminent danger of default is all that is needed. Imminent danger of default is defined this way, “a borrower is considered to be in imminent danger of default when he or she is likely to default on his or her mortgage payments within the next twelve months.” Before we get into the consequences of misinformation, let’s review the facts:

1. Fannie Mae does not require a mortgage to be late in order to qualify for a short sale.

2. Freddie Mac does not require a mortgage to be late in order to qualify for a short sale.

3. FHA does require a mortgage to be late in order to qualify for a short sale (stupid).

4. VA uses the “imminent danger of default” rule on modifications but there hasn’t been a clear Circular regarding its use with short sales, . . . yet (and it doesn’t say they need to be delinquent either).

5. PMI providers do not universally require a mortgage to be late in order to qualify for a short sale - some do and some don’t (the trend is leaning towards more not doing it in the future and most of their policies are published on the web).

There is risk in getting this advice wrong both for real estate professionals and home seller’s alike. For seller’s, should they go into default solely for the sake of getting a short approved, they will forfeit their chance to be eligible for buying a home after a short sale using FHA financing for 3 years. They will also undermine their chances of getting a shorter pre-foreclosure waiting period with Fannie Mae financing if they want to use the extenuating circumstances argument. In short, it knocks them out of home ownership for 2 but more likely 3 years.

If a seller doesn’t know that they’re giving these opportunities up when they make late payments and should later find out that it may not have been necessary, the person who gave the wrong advice might want to refer to this whole paragraph as the “provable damages” section of this post. Unless the person giving such advice was an informed attorney or the loan servicer, any other might as well be practicing law without a license.

Loan servicers get this wrong quite frequently too although somehow they get kind of a pass on this one. The bottom line is that they need to adhere to the servicing agreements between them and the owner and insurer of the loan. Say for instance your call a loan servicer, . . we’ll call them P.J Chevy Morgan and they are servicing a loan that’s owned by Fannie Mae that doesn’t have mortgage insurance and they say that the loan must be late in order to get approved for a short sale, the solution is simple. Kindly inform them that they aren’t servicing their loan in accordance with the wishes of the owner of the loan and they should review their contract and quit making ignorant statements. And, in the meantime, continue processing the short sale under the assumption of imminent danger of default. If evidence of their mistake is provided (links above), they will proceed. A lot of these people working for servicers are truly surprised to learn that they’re wrong and are accommodating after the fact.

There are two lessons here. Home sellers doing a short sale should do the extra research on the owner and insurer of their loan and look into their policies on “imminent danger of default” vs. true default and real estate professionals should be wary of giving advice on these matters and would do best to carefully and concisely relay communication (with a paper trail) from other parties to the transaction rather than make suggestions. Indeed many real estate professionals are requiring the retention of outside counsel to handle all short sale negotiations and this just may be the wisest course.

Useful links:

● Does Fannie Mae Own My Loan?

● DoesFreddie Mac OwnMyLoan?

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

Twin Cities Off-Leash Dog Parks - My Dog Blog

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Fri, 09 Sep 2011 23:32:21 -0700

If you’re a dog lover like I am, you don’t consider a move without contemplating neighborhood amenities for your dog. In my considerations for a move recently, I had a bit of a time trying to locate most of the off-leash dog parks in the twin cities metro area. After collecting some information I’d thought I’d share.

Remember that some of these parks require passes, dog licensure and all have rules so be sure to do your research! Most cities have some kind of requirements but here are Saint Paul and Minneapolis dog requirements:

Minneapolis:

Saint Paul:

Many of the links to the dog parks will take you to the pages that also have outlined the rules and regulations.

Name City Bloomington Off-leash Recreation Area Bloomington Brookdale Park Brooklyn Park Alimagnet Dog Park Burnsville Trackside Off-leash Dog Park Coon Rapids Wag Farms Dog Park Cottage Grove Basset Creek Off-leash Dog Park Crystal Bryant Lake Regional Park Dog Park Eden Prarie Flying Cloud Off-leash Dog Exercise Area Eden Prarie Eden Prarie Hockey Rink Off-leash Dog Parks Eden Prarie Lions Park Off-leash Dog Park Elk River Lake Minnewashta Regional Dog Park Excelsior Locke Dog Park Fridley Crow-Hassan Park Reserve Off-leash Area Hanover Elm Creek Park Reserve Off-leash Area Maple Grove Fish Lake Regional Park Maple Grove Battle Creek Dog Park Maplewood Airport Dog Park Minneapolis Franklin Terrace Off-leash Rec Area Minneapolis Gateway Off-leash Dog Park Minneapolis Lake of the Isles Off-leash Rec Area Minneapolis Loring Park Off-Leash Dog Park Minneapolis Minnnehaha Off-Leash Rec Area Minneapolis North Loop Off-leash Dog Park Minneapolis St. Anthony Parkway Off-leash Rec Area Minneapolis Victory Prarie Dog Park Minneapolis Egan Park Off Leash Area Plymouth Clearly Lake Regional Regional Dog Park Prior Lake Alpine Off-leash Dog Park Ramsey Lake Rebecca Park Reserve Rockford Dakota Woods Dog Park Rosemount Arlington-Arkwright Dog Park Saint Paul Woodview Off Leash Dog Park Saint Paul Rice Creek Dog Park Shoreview Kaposia Landing Off-leash Dog Park South Saint Paul Carver Park Reserve Victoria Bald Eagle Otter Lake Regional Dog Park White Bear White Bear Lake Dog Beach White Bear Dale Road Open Space and Off-leash Dog Park Woodbury

Bedrooms, bathrooms, square footage, layout, schools. . . There are so many things to remember to consider when moving. Just don’t forget the considerations of all of your loved ones. :)

“This post was written in loving memory of my boy Sir Didymus (Dids) who lived gloriously from October 7^th, 2000 until he died tragically of a twisted stomach on October 21^st, 2010. I think of him every day.”

P.S. If I have omitted an off-leash dog park that you know of, please let me know about it in the comment box below so I can be sure to add it!

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

FHA Short Refi Program

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Mon, 29 Aug 2011 17:10:53 -0700

The FHA Short Refinance Program has always existed in an unofficial form but became a formal program on December 16, 2009 with Mortgagee Letter 09-52. It was “refined” on August 6^th of 2010 with Mortgagee Letter 2010-23. It was designed to provide more mortgage options to those that owe more than their house is worth. There are many requirements for this loan but for most borrowers who are upside down on their home and have good credit; these criteria are likely to be met with the cooperation of the existing lenders about to be paid off.

For these transactions to work, the following criteria must be met:

The homeowner must be upside down on the value of the home
The homeowner must be current on the existing mortgage to be refinanced
The homeowner must occupy the subject property (1-4 units) as their primary residence
The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500 (actually, 600 with us)
The existing loan to be refinanced must not be a FHA-insured loan
The existing first lien holder must write off at least 10 percent of the unpaid principal balance
The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent of the appraised value
Non-extinguished existing subordinate mortgages (2^nd mortgages and HELOC’s) must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent of the appraised value (the subordinate mortgages cannot have a balloon inside of 10 years, must permit prepayment, and must have monthly payments)
For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income (these are very rarely accepted and if this is the outcome of initial underwriting, other options should be considered)
FHA lenders are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan
FHA lenders are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance
The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification
If borrowers have gone through a modification where the payment wasn’t brought current by the existing lien holder they can be eligible for this program if (1) the modification was made under the terms of the Making Home Affordable Modification Program (HAMP), the loan may close the month following the date the modification was permanent or (2) the modification was a non-HAMP modification, the borrower must have made three monthly payments on time and the modified mortgage must be current for the month due

While it may seem unintuitive, this can actually be a good thing for your lender. It requires their consent and when asked, they will evaluate the pros and cons. They’ll consider if having a loan that’s hopelessly upside down on their books is a good thing, how much they could lose in a short sale, how much they could lose in a deed in lieu and how much they would lose in foreclosure. Of these options, often the least expensive to the lender is the short refinance which is why these are considered more and more often these days. Sometimes, they’ll ask that a HAMP modification be considered first and there’s nothing wrong with that. It will likely result in a good outcome in the form of a modification or move the short refi option forward after a delay.

The loan process for putting these together is similar to other FHA transactions except it’s pre-underwritten on the hypothetical basis of a reduced payoff. After the loan application, signed lending disclosures, income documentation, asset documentation and appraisal are in the loan file, it’s sent to the existing mortgage companies for their consideration. Due to the lengthy process of coordinating with existing lenders, these loans can take up to 90 days whereas normal refinances take less than a month.

Short refi’s, HARP loans, HAMP modifications and buying after a short sale are all key products to tackling negative equity. The FHA products are the least known and least explored but assuming good credit, should always be explored.

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283

The Price Price Per Square Foot Debate!

Charles Dailey - NMLS ID#79048 (iLoan - NMLS ID#4474) — Fri, 26 Aug 2011 20:46:49 -0700

Jane Grant, broker of record for Southwest Real Estate serving Riverside and San Diego County does a fantastic job illustrating the pitfalls of incorporating price per square foot as a search criteria when buying a home.

Via Jane Grant - Southwest Real Estate - Riverside County, CA:

Buyers who get overly concerned with price per square foot can become very confused.

Using only price per square foot for comparing properties gives buyers an unrealistic look at the real estate market in general.

It's much better to use recent sold comparable homes, compared to the one you are thinking of buying, that are in similar condition, the same area and have the same number of bedrooms!

Becoming obsessed with price per square foot can lead to making a purchase that you may regret later because there is no common price per square foot formula, due to the many different variables, such as age, condition, (repairs needed), neighborhood, number of bedrooms, and amenities such as swimming pool and of course lot size.

The concept of price per square foot originated with newly built homes. But even the price per square foot of a brand new home can be different as well, due to the quality of materials that the builder uses.

But most of the time it gives buyers an unrealistic look at the real estate market in general. Because buyers see a home that sold for really low price per square foot without investigating the property to find out more about it.

Here's some examples of how vastly different price per square foot can be and why:

The 6 homes in the chart below were all sold in Temecula in the same time-frame.

All of them sold for $250,000 and the lowest price per square foot home had major problems while the one that sold for higher price per square foot had little repairs and was in a lower tax area than the other home.

Highest Price per square foot home in my example had a price per square foot cost of $135.43/ppsf. The location was right next to the Temecula Wine Country, it had new carpet, new paint, and was newly landscaped and it was in a Temecula low property tax neighborhood.

The highest price per square foot home had the least amount of repairs, and was in a low tax area right up against the Temecula Wine County!

The Lowest Price per square foot home is shown below, and in the description it says it has not only mold issues but septic tank issues also. These repairs can cost many thousands to repair and I'm not saying that it was not a good deal at this price, but the price per square foot was low due to the condition of the home.

Buyers often express their criteria for a property and a typical criteria is as follows:

Low Tax Area - No or low assessments

Low HOA fees

Rental ratios better than 1% of the purchase price, for investor clients

Repairs factored into offer price

Yard size of a minimum of 6000 square feet

Investors usually want 70-80% of market price

All of this is possible to find, but when buyers complicate this above search criteria with price per square foot without looking at other comparable factors, they become confused.

Here's why other factors need to be considered.

If a home has low price per square foot but has mold issues, no appliances, holes in the wall and a leaky roof it can cost tens of thousands to repair.

Number of bedrooms are actually more important for rental properties. If a home that has low price per square foot and only two bedrooms then it will rent much lower than a home that has the same square footage with 4 bedrooms.

A turn key home that has already been rehabbed will have higher price per square footage but will require less money to make the home "Turn-Key".

The Age of the home as well as the neighborhood that the home is in can be extremely important also, especially in some cities like Moreno Valley, California. Some areas in Moreno Valley were built in the 1950's and the price per square foot is lower there also.

Don't confuse price per square foot with the other aspects of a home, use recent sold comparable homes that are in the same condition, the same area and have the same number of bedrooms!

Call me for more information about buying a home in Southwest Riverside County, California, or North San Diego County.

Call or e-mail me for even more specific data that meets your search criteria. Want same data for a different City or area?...just let me know!

Jane Grant Broker of Record for Southwest Real Estate, Toll Free: 866-621-0155

FACEBOOK, LinkedIN, U-Tube, Twitter, Trulia

Contact me for information regarding Homes in Riverside County, Real Estate in Southwest Riverside County. My office is in Temecula, and I specialize in selling homes in the Murrieta and Temecula, Wine County, De Luz, La Cresta, Bear Creek, Murrieta, Wildomar and Menifee, Canyon Lake, Canyon Hills, Lake Elsinore areas! Anywhere in Southwest Riverside County and North San Diego County.

Broker of Record- DRE 01109492
Southwest Real Estate, Inc.

Temecula Homes For Sale

Riverside County Homes For Sale

Temecula Luxury Homes

Charles Dailey - iLoan - NMLS ID# 79048 - CA DOC, MN DOC & WI DFI - 612.234.7283