Harold Perkins & Mary Ellen Kohut
YOUR IN-HOUSE LENDING TEAM
480-831-1588/800-499-2183
The old saying is, that if you do not like the weather just wait, it will change. Today’s mortgage climate changes every day, sometimes without warning.
There are only two types of loans: Conventional and Government (FHA,VA and The Department of Agriculture, more on the Government loans in next weeks e-mail) Conventional Loans with loan amounts below $417,000 are virtually all purchased by Fannie Mae and Freddie Mac. It is Fannie and Freddie’s guidelines that lenders are following for loan approval. When the lender funds the loan they immediately “ship” the loan to Fannie or Freddie and wait for their vault to be replenished. If the loan passes audit, all guidelines are met, the lender gets their money in return for the loan.
Fannie and Freddie sent out a very nice update allowing 5% down for conventional loans. Except. All conventional loans with less than 20% down are required to have mortgage insurance. Mortgage insurance insures loans in case of foreclosure. Today there are 8 mortgage insurance companies that work with companies originating loans. Only 2 of the 8 mortgage insurance companies will insure loans with 5% down in
The following are recent changes, and these are just the highlights, to Conventional Loans:
- Primary Residence: 5% down if the borrower meets guidelines. Only 2 of the 8 mortgage insurance companies will insure an
- Investment properties: Fannie/Freddie say 10% down, all mortgage insurance companies require 15% down in
- Condo’s: Only one mortgage insurance company will insure at 5% down. 10% is the norm. (primary residence)
- Second Homes: Fannie/Freddie guidelines state 5% down, Mortgage Insurance Companies, 10% down
- No credit Score: Fannie/Freddie no problem, but Mortgage Insurance Companies have their own guidelines (Read: forgetaboutit, that is why there is FHA)
- There are no 100% Conventional Programs
- Credit Scores will determine the interest rates
- Fannie/Freddie will not allow excessive mortgage delinquencies (unless there are extenuating circumstances) Time line not explained, but typically it takes 2 years for a 60 day late not to affect the credit.
- “Stated” or “No Income Verified” programs are fading away. There are lenders that offer the programs, but the interest rates are pricy.
- Investor programs for Stated and NIV rates are very pricy. Depending on the lender, 25% down for stated is required
- Current residences being retained as a rental property will require a rental agreement, copy of deposit check, proof of deposit and some overly anal underwriters may require proof that the check has cleared the bank and that the current residence is indeed a rental by providing a copy of the deck page of the homeowner’s insurance
- Investors with foreclosures will not be able to purchase a home with a mortgage until the foreclosure falls off the credit report or if there were extenuating circumstances
Like the weather, guidelines will change as the market changes. Please call us anytime if you have questions.
FYI: FHA is going through a major overhaul. But she is the pretty girl at this party. Stay tuned for updates.
Remember, we are here to serve you and your clients!
Truth In Lending Promotes Trust In Lending
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