I've posted articles from The Mortgage Experts in Denver, Colorado before. I think they have a great way of answering common mortgage & lending questions in an easy to understand manor. Below is an article they posted on Bankruptcy, Foreclosure & Short Sales.
Bankruptcy, Foreclosure, and Short Sale Timelines
by Chris and Debbie Thomas
Here are the current waiting periods before someone who has had a bankruptcy, foreclosure, or a short sale can qualify for a mortgage:
Chapter 7 Bankruptcies:
Conventional (non-government) loans:
-- 4 years from the discharge date
FHA loans:
-- 2 years from the discharge date
VA loans:
-- 2 years from the discharge date
Chapter 13 Bankruptcies:
Conventional loans:
-- 2 years from the discharge date or 4 years from the dismissal date
FHA loans:
-- 1 year of the payout period must elapse
VA loans:
-- 1 year of the payout period must elapse
Foreclosures:
Conventional loans:
-- 5 years from the completion date with 10% down and a 680 credit score
-- 7 years from the completion date with 3% or 5% down
FHA loans:
-- 3 years from the completion date
VA loans:
-- 2 years from the completion date
Short Sales:
Conventional loans:
-- 2 years with 20% down
-- 4 years with 10% down
-- 7 years with 3% or 5% down
FHA loans:
-- No waiting period if all mortgage payments and all other installment debt payments were made on time for the 12 months prior to the short sale
-- The short sale payoff must serve as payment in full. No outstanding deficiency can exist after the short sale.
-- The new purchase cannot be for a property of equal or greater value than the property sold in the short sale if the new property is within a "reasonable commuting distance" of the short sale property.
-- If the borrower is in default on their mortgage at the time of the short sale, the waiting period is 3 years.
VA loans:
-- VA does not have a specific policy regarding short sales.
In addition, each lender is allowed to impose their own, more restrictive guidelines on top of these guidelines. Always check with the individual lenders to find out what their guidelines are. Some lenders follow the guidelines above, and some have much stricter guidelines.
What impact does this have on the real estate industry?
These guidelines (and all guidelines) are not put in place to prevent people from owning houses. Rather, they are intended to keep people in houses.
The short-term effect of strict underwriting guidelines is never good for the industry because fewer people will be able to qualify for a mortgage. However, the long-term effect of strict underwriting guidelines is very good for the industry. Fewer properties will go into foreclosure, helping to preserve values. If values are maintained or go up, more people will want to buy a house.
It is important to understand the guidelines so you can advise your clients correctly. For instance, no one should ever tell a client to stop paying their mortgage so they can qualify for a short sale.
The FHA and VA rules for bankruptcies, foreclosures, and short sales are actually quite lenient when compared to conventional underwriting guidelines.
Showing posts with label the mortgage experts. Show all posts
Showing posts with label the mortgage experts. Show all posts
Wednesday, October 27, 2010
Friday, July 9, 2010
New Appraisal Rules
I'm catching up on my google reader today. I LOVE the advice and blogs from The Mortgage Experts!
by Chris and Debbie Thomas
Fannie Mae appraisal rules are changing. Here's what you need to know:
-- If an interior inspection is required, the following photographs must be included in the appraisal:
-- Kitchen
-- All bathrooms
-- Main living area
-- Examples of physical deterioration, if present
-- Examples of recent updates, such as restoration, remodeling, and renovation, if present
-- If an underwriter thinks the appraisal does not support the value indicated in the report, they will not be able to arbitrarily reduce the value. They must follow the following process:
-- Contact the appraiser to address the report deficiencies.
-- Order a desk review appraisal or a field review appraisal. The appraiser performing the review appraisal must be licensed in the state where the property is located and must have the knowledge and experience to appraise the subject property with respect to both the specific property type and geographical location (in other words, the appraiser performing the review must be a local appraiser).
-- The lender can also order a new appraisal instead of ordering a review appraisal.
-- If they order a review appraisal or a new appraisal, it must be performed by a local appraiser and the value in the new appraisal must be used. The lender cannot average the values of the old appraisal and the new appraisal.
-- Appraisers who do not have the knowledge or experience to perform an appraisal in a specific area cannot be used for Fannie Mae appraisals.
-- If a foreclosed property is used as a comparable property in an appraisal, the appraiser must account for any differences between the foreclosed property and the subject property, such as the condition of the property.
-- Appraisers are not allowed to say they are prohibited from discussing the appraisal with the lender, as long as the lender contact is not someone who is involved in loan production (loan officers, processors, etc.), or someone who is paid on a commission basis, or someone who reports to anyone not independent of the loan production process.
-- Appraisers cannot deduct a dollar for dollar amount from the value of a comparable sale because of seller concessions. They can only deduct the amount that they believe resulted in an increase in the sales price.
Some of these changes take effect immediately and some take effect on September 1, 2010. The changes are only for loans being sold to Fannie Ma
by Chris and Debbie Thomas
Fannie Mae appraisal rules are changing. Here's what you need to know:
-- If an interior inspection is required, the following photographs must be included in the appraisal:
-- Kitchen
-- All bathrooms
-- Main living area
-- Examples of physical deterioration, if present
-- Examples of recent updates, such as restoration, remodeling, and renovation, if present
-- If an underwriter thinks the appraisal does not support the value indicated in the report, they will not be able to arbitrarily reduce the value. They must follow the following process:
-- Contact the appraiser to address the report deficiencies.
-- Order a desk review appraisal or a field review appraisal. The appraiser performing the review appraisal must be licensed in the state where the property is located and must have the knowledge and experience to appraise the subject property with respect to both the specific property type and geographical location (in other words, the appraiser performing the review must be a local appraiser).
-- The lender can also order a new appraisal instead of ordering a review appraisal.
-- If they order a review appraisal or a new appraisal, it must be performed by a local appraiser and the value in the new appraisal must be used. The lender cannot average the values of the old appraisal and the new appraisal.
-- Appraisers who do not have the knowledge or experience to perform an appraisal in a specific area cannot be used for Fannie Mae appraisals.
-- If a foreclosed property is used as a comparable property in an appraisal, the appraiser must account for any differences between the foreclosed property and the subject property, such as the condition of the property.
-- Appraisers are not allowed to say they are prohibited from discussing the appraisal with the lender, as long as the lender contact is not someone who is involved in loan production (loan officers, processors, etc.), or someone who is paid on a commission basis, or someone who reports to anyone not independent of the loan production process.
-- Appraisers cannot deduct a dollar for dollar amount from the value of a comparable sale because of seller concessions. They can only deduct the amount that they believe resulted in an increase in the sales price.
Some of these changes take effect immediately and some take effect on September 1, 2010. The changes are only for loans being sold to Fannie Ma
HUD $100 Down Loan Program
Another great article by The Mortgage Experts in Colorado:
by Chris and Debbie Thomas
We've gotten a number of requests for information about HUD's $100 down deals in the past week, so here's a rundown of what you need to know:
-- A HUD home is a house that used to have an FHA loan, but it went into foreclosure. HUD now owns the property.
-- HUD (the Department of Housing and Urban Development) is the agency that oversees the FHA loan program.
-- If a buyer makes a full price offer on a HUD home, they are able to buy the property with a down payment of only $100 if they get an FHA loan.
-- If they bid more than the listing price and want FHA financing, they have to pay any excess amount in cash.
-- A buyer does not have to get FHA financing to buy a HUD home. HUD does not care at all where the money comes from. They just want to sell the property.
-- HUD will pay up to 3% towards the buyer's closing costs and pre-paids. To get the 3%, you need to ask for it when you bid on the property.
-- Earnest money requirements are as follows: if the sales price is $49,999 or less, the earnest money is $500; if the sales price is $50,000 or more, the earnest money is $1,000.
-- If the buyer uses the FHA $100 down program and does not have to pay for any closing costs, they will be able to get their earnest money back at the closing (except for $100).
Do not let anyone try to talk your buyers out of getting FHA financing. The appraisal guidelines for FHA loans are a tiny bit more restrictive than they are for conventional loans, but there is hardly enough difference to avoid FHA loans. Some brokers who have "been in the business for years" have not kept up with the changes in the mortgage industry and are doing themselves and their clients a real disservice by avoiding FHA loans.
If a lender ever tells you to stay away from FHA loans, that probably means they are not approved to sell them. You should not use those lenders.
by Chris and Debbie Thomas
We've gotten a number of requests for information about HUD's $100 down deals in the past week, so here's a rundown of what you need to know:
-- A HUD home is a house that used to have an FHA loan, but it went into foreclosure. HUD now owns the property.
-- HUD (the Department of Housing and Urban Development) is the agency that oversees the FHA loan program.
-- If a buyer makes a full price offer on a HUD home, they are able to buy the property with a down payment of only $100 if they get an FHA loan.
-- If they bid more than the listing price and want FHA financing, they have to pay any excess amount in cash.
-- A buyer does not have to get FHA financing to buy a HUD home. HUD does not care at all where the money comes from. They just want to sell the property.
-- HUD will pay up to 3% towards the buyer's closing costs and pre-paids. To get the 3%, you need to ask for it when you bid on the property.
-- Earnest money requirements are as follows: if the sales price is $49,999 or less, the earnest money is $500; if the sales price is $50,000 or more, the earnest money is $1,000.
-- If the buyer uses the FHA $100 down program and does not have to pay for any closing costs, they will be able to get their earnest money back at the closing (except for $100).
Do not let anyone try to talk your buyers out of getting FHA financing. The appraisal guidelines for FHA loans are a tiny bit more restrictive than they are for conventional loans, but there is hardly enough difference to avoid FHA loans. Some brokers who have "been in the business for years" have not kept up with the changes in the mortgage industry and are doing themselves and their clients a real disservice by avoiding FHA loans.
If a lender ever tells you to stay away from FHA loans, that probably means they are not approved to sell them. You should not use those lenders.
Thursday, June 24, 2010
Second Credit Report May Delay Closings
This is a great article by The Mortgage Experts from Denver, Colorado. They make the loan process easy to understand!
Second Credit Report May Delay Closings
by Chris and Debbie Thomas
The new Fannie Mae rules for credit have officially taken effect. They WILL change the way you do business.
These new rules affect all conforming (non-government) loans that are sold to Fannie Mae.
Here's what you need to know:
-- Shortly before the closing, the borrower's credit report must be "refreshed". A refreshed credit report shows the borrower's accounts, the balances, the minimum monthly payments, and the number of credit inquiries (the number of times the borrower has applied for credit).
-- If the borrower's total minimum payments increase enough to make the debt-to-income (DTI) ratio 2% higher than it was using the original credit report, the loan must go back to underwriting!
-- If there are any new credit inquiries, the loan must go back to underwriting!
-- Example #1: The original credit report shows monthly payments of $1,000. New housing payments are $1,500. Total monthly payments are $2,500. If the monthly payments go up by $50.00 (2% of $2,500) or more on the "refreshed" credit report, the loan must be underwritten again.
-- Example #2: After the lender pulls the initial credit report, the borrower applies for a new account, or applies for an increase in the credit limit on an existing account. This will result in a new credit inquiry on the refreshed report and the loan must be underwritten again.
There is a very big chance that the loan will not close on time if it has to be underwritten again 3 days before the closing. The loan will still close (provided the borrower still qualifies), but the closing will probably be delayed.
If you are a real estate agent, here's what you need to do to minimize the impact of this new Fannie Mae rule:
-- Make sure you are using a lender who knows about the new credit rules, and make sure they are telling your buyers about it. No good lender will mind if you ask, so ask.
-- Write your contracts so the loan conditions deadline is as close to the closing date as possible - within a day or two. If the loan gets delayed because it has to go back to underwriting, your buyer is risking their earnest money. The loan conditions deadline does not have anything to do with the loan being approved. It is the last date that the buyer can get their earnest money back by objecting to the loan conditions. That means the buyer can get their money back if they say they don't like the interest rate or anything else about the loan. If you think the loan conditions deadline has something to do with the loan being approved, read the contract again to learn what it really means.
-- Repeatedly ask your buyers if they are using their credit cards or applying for new credit. If the answer is yes, you may have a problem.
-- Do not assume that these new rules will simply go away because they make life tough for lenders, real estate agents, buyers, and sellers. The intent of the new rules is to eliminate foreclosures, and they will go a long way towards doing that. These rules are probably here to stay for a very long time. Everyone needs to accept the new reality of the mortgage industry. The government is forcing us all to think strategically (long-term). Most of us only think about the short-term, and that way of thinking has resulted in the current economic mess, so they are forcing us to act differently.
The new rules are for all Fannie Mae loans. It does not matter which lender is used. If the loan is going to be sold to Fannie Mae, the lender must follow the rules. At the moment, the new rules do not apply to FHA or VA loans, but that doesn't mean FHA and VA will never adopt similar rules
Second Credit Report May Delay Closings
by Chris and Debbie Thomas
The new Fannie Mae rules for credit have officially taken effect. They WILL change the way you do business.
These new rules affect all conforming (non-government) loans that are sold to Fannie Mae.
Here's what you need to know:
-- Shortly before the closing, the borrower's credit report must be "refreshed". A refreshed credit report shows the borrower's accounts, the balances, the minimum monthly payments, and the number of credit inquiries (the number of times the borrower has applied for credit).
-- If the borrower's total minimum payments increase enough to make the debt-to-income (DTI) ratio 2% higher than it was using the original credit report, the loan must go back to underwriting!
-- If there are any new credit inquiries, the loan must go back to underwriting!
-- Example #1: The original credit report shows monthly payments of $1,000. New housing payments are $1,500. Total monthly payments are $2,500. If the monthly payments go up by $50.00 (2% of $2,500) or more on the "refreshed" credit report, the loan must be underwritten again.
-- Example #2: After the lender pulls the initial credit report, the borrower applies for a new account, or applies for an increase in the credit limit on an existing account. This will result in a new credit inquiry on the refreshed report and the loan must be underwritten again.
There is a very big chance that the loan will not close on time if it has to be underwritten again 3 days before the closing. The loan will still close (provided the borrower still qualifies), but the closing will probably be delayed.
If you are a real estate agent, here's what you need to do to minimize the impact of this new Fannie Mae rule:
-- Make sure you are using a lender who knows about the new credit rules, and make sure they are telling your buyers about it. No good lender will mind if you ask, so ask.
-- Write your contracts so the loan conditions deadline is as close to the closing date as possible - within a day or two. If the loan gets delayed because it has to go back to underwriting, your buyer is risking their earnest money. The loan conditions deadline does not have anything to do with the loan being approved. It is the last date that the buyer can get their earnest money back by objecting to the loan conditions. That means the buyer can get their money back if they say they don't like the interest rate or anything else about the loan. If you think the loan conditions deadline has something to do with the loan being approved, read the contract again to learn what it really means.
-- Repeatedly ask your buyers if they are using their credit cards or applying for new credit. If the answer is yes, you may have a problem.
-- Do not assume that these new rules will simply go away because they make life tough for lenders, real estate agents, buyers, and sellers. The intent of the new rules is to eliminate foreclosures, and they will go a long way towards doing that. These rules are probably here to stay for a very long time. Everyone needs to accept the new reality of the mortgage industry. The government is forcing us all to think strategically (long-term). Most of us only think about the short-term, and that way of thinking has resulted in the current economic mess, so they are forcing us to act differently.
The new rules are for all Fannie Mae loans. It does not matter which lender is used. If the loan is going to be sold to Fannie Mae, the lender must follow the rules. At the moment, the new rules do not apply to FHA or VA loans, but that doesn't mean FHA and VA will never adopt similar rules
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