Yellen Raises Rates on her way out as Fed Chair

Yellen-rate-hikeThe Fed increased rates at their most recent meeting. They also indicated they will likely raise rates three additional times in 2018. Please read on for more:

First, who is the Fed and what do they do?

The Federal Reserve Board (the Fed), controls the Fed Fund Rate and the Discount Rate. These are charges for overnight loans from bank to bank or from the Fed to member banks.

What does an increase mean for regular people?
• It could cause banks to increase their “prime rates,” which are often used to calculate interest on consumer products like credit cards and home equity lines of credit (HELOCs).
• Mortgage rates are long-term rates and not directly controlled by Fed rate changes. However, mortgage rates are influenced by Fed policy, and rates can rise in anticipation of future Fed action. There are exceptions, yet home loan rates will typically follow overall interest rate trends over time.

Upcoming change in leadership at the Fed:
In January 2018, the current Fed chair, Janet Yellen, will step aside for a new chair, Jerome Powell. Time will tell whether this transition will impact overall policy.

Here’s what we know:
With the uncertainty, I’m tracking the changes carefully and am happy to keep you informed whenever you like.

Thank you for allowing me to provide you updates on industry news. Please reach out if I can answer any questions for you or help with financing (or refinancing) your home.

Dean Henderson, CRMS
661-726-9000

Fannie Mae/Freddie Mac Raise Conforming Loan Limits to $453,100 in 2018

Last year, the Federal Housing Finance Agency increased the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac for the first time since the housing crisis.

And now, the FHFA is doing it again.

For the second year in a row, and the second time since 2006, the FHFA is increasing the conforming loan limits for Fannie and Freddie in 2018.

The FHFA announced Tuesday that it is increasing the conforming loan limits from $424,100 to $453,100 for 2018.

The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Fannie and Freddie’s conforming loan limits stayed at $417,000 until last year, when the FHFA finally increased the loan limit to $424,100.

But, as the FHFA noted Tuesday, home prices are on the rise, which necessitates a second straight yearly increase in the conforming loan limit.

The FHFA’s third quarter 2017 House Price Index report, which includes estimates for the increase in the average U.S. home value over the last four quarters, showed that house prices increased 6.8%, on average, between the third quarters of 2016 and 2017.

Therefore, the FHFA said that the baseline maximum conforming loan limit in 2018 will increase by the same percentage – from $424,100 to $453,100.

Loan limits will also be increasing in what the FHFA calls “high-cost areas,” where 115% of the local median home value exceeds the baseline loan limit.

Under HERA, the maximum loan limit in those “high-cost areas” is calculated as a multiple of the area median home value, while setting a “ceiling” on that limit of 150% of the baseline loan limit.

According to the FHFA, median home values “generally increased” in high-cost areas in 2017, which drove up the maximum loan limits in many of those areas.

Therefore, the new ceiling loan limit for one-unit properties in most high-cost areas will be $679,650 (which is 150% of $453,100) for one-unit properties in the contiguous U.S.

In 2017, the high-cost loan limit was $636,150.

According to the FHFA, special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

In these areas, the baseline loan limit will be $679,650 for one-unit properties, but the FHFA notes that loan limits may be higher in some specific locations.

For a full look at the conforming loan limits, by county, click here.

The FHFA notes that as a result of “generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit,” the 2018 maximum conforming loan limit will be higher in all but 71 counties or county equivalents in the U.S. than it was in 2017.

 

New Conventional 1% Down Loan

1% down_newbestfriendBuy a Home With a 1% Down Conventional Mortgage And No Monthly PMI

The conventional 1% down mortgage is the best financing option in the market to help homebuyers purchase a home with a low down payment. This mortgage program is available to ALL homebuyers and you do not have to be a first time buyer to qualify. Buyers also have the option of removing the mortgage insurance “PMI” from their payment so they can obtain an even lower monthly payment. I included a Question & Answer section below so you know how to qualify for this program.

The 1% Down Conventional Mortgage Program

The conventional 1% down mortgage is very popular with homebuyers, as it is helping them purchase a home with a low down payment and a low fixed rate.

With rising health-care costs and student loan debts that many people have these days, it is getting more and more difficult for homebuyers to save up for a down payment to purchase a home. 

Until recently, buyers had to put down 3% to qualify for conventional financing, or they were stuck with 3.5% down FHA financing and their expensive monthly mortgage insurance if they only had a minimum down payment.

This 1% down mortgage program is helping more buyers obtain homeownership sooner.

To qualify for this new program, a buyer only has to come up with 1% down. Then the lender gives the buyer a 2% lender credit towards the down payment giving the buyer 3% equity at closing.

Please note, there is NO 2nd mortgage or outside down payment assistance programs involved with this 1% down mortgage program. This is a regular conventional financing program.

Buyers can also get a gift for the 1% down payment, so now prospective buyers can reach out to family and ask for a gift to help them purchase a home.

There is also an option to eliminate the monthly mortgage insurance “PMI” from the mortgage payment, so this is helping buyers obtain an even lower monthly payment. This is a great option for buyers, so now they don’t have to worry about having to remove the monthly PMI from their mortgage payment.

With FHA financing, if you put down less than 10% with FHA, you have to pay the monthly mortgage insurance for the life of the loan,

Rising Rents

With Rising Rents, Owning a Home is a Better Investment

With monthly rents continuing to rise in most parts of California, home ownership is looking like a much better investment for renters.

As you can see below, just a 4% increase in annual rent, can drive a $1,500 monthly rent up to $1,974 in just 8 years, an increase of $474, which is a 32% increase in overall rent.

Compare this to buying a home and obtaining a low fixed rate and monthly payment that will never change. When you own a home, it is a great hedge against inflation for the future, whereas rent will continue to go up over time.

With the new 1% down program, you can now get into a home for the price of a couple of month’s rent. With mortgage rates also still near all time lows, the cost of borrowing money to finance a home is still very good.

FAQ

Frequently Asked Questions for the Conventional 1% down mortgage

Here are the most frequently asked questions that buyers and real estate agents have in regards to the new conventional 1% down loan option.

1. What is the maximum loan amount with 1% down?

The maximum loan with 1% down is $424,100, which is the conventional loan limit.

If you need to borrow over $424,100, the minimum down payment is only 5% down.

2. Can I receive the 1% down payment as a gift?

Yes, the 1% down payment can be gifted on this program. Closing costs and reserves can also be gifted if needed.

3. What credit score is required to qualify for this program?

We require a 700 credit score to qualify for this loan program.

4. Is the 1% down program for 1st time buyers only?

No, you just cannot own another home at the time of closing.

5. Is private mortgage insurance “PMI” required with the 1% down mortgage program?

Yes, borrowers are required to pay private mortgage insurance “PMI” on the 1% down mortgage. The amount of monthly mortgage insurance you pay will depend on your credit score. There is also an option to eliminate the monthly PMI from the mortgage payment.

6. How do you eliminate the monthly mortgage insurance “PMI’ option on this program?

It’s very simple. All you have to do is take a slightly higher interest rate than normal, say from 3.75% to 4%, and we use a lender credit with the higher interest rate to eliminate the PMI from the mortgage payment. This is also known as lender paid mortgage insurance.

7.  Can I get 1% down on 2nd homes or Investment Properties?

No, the 1% down is for Primary Residences only. On 2nd homes, you only have to put down 10% to obtain the No PMI payment option. On investment properties this program is not available, as you have to put down 20%, which eliminates the Mortgage insurance anyway.

8. Do condos qualify for this program?

Yes, you can also purchase a condo using this program with only 1% down and get the No PMI option.

9. Can I use an adjustable-rate mortgage with the 1% down mortgage?

No, the 1% down mortgage requires a 30-year fixed rate mortgage only.

10. What is the maximum number of units for a home with the 1% down payment mortgage?

The 3 percent down mortgage is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed with the conventional 3% down mortgage.

11. But FHA mortgage rates are lower than this program?

Yes FHA interest rates are lower, but when you factor in the very expensive FHA monthly mortgage insurance, the FHA overall monthly payment will always be higher than this 1% down No PMI option.

12. What if I put down 3% or 5%, will I get a lower rate?

Yes, if you put down 3% or 5% for the down payment, you will get a lower interest rate. With Conventional Financing, The larger the down payment, the lower the interest rate you will get.

Helpful Tips

4 other reasons the Conventional 1% down program will benefit home buyers vs FHA financing

There are some other great benefits to using this conventional program vs FHA financing, so you have have more available homes to choose from.

1. This conventional program is a great option for buyers in complexes that are NON FHA approved, so now you have more inventory to choose from and agents have more homes to show them!

2. This conventional program will help you afford to purchase a single family home instead of a condo, as it frees up having to pay monthly mortgage insurance and HOA dues, which can amount to roughly $600-$700 a month on a typical condo. This will open up a lot more inventory you to purchase.

3. Conventional does NOT have an anti-home flipping policy, which means conventional buyers are allowed to purchase homes that are being fixed up and flipped by investors with less restrictions. So now you don’t have to worry about the FHA’s strict anti-home flipping policies. FHA buyers have to wait 90 days before they can buy a flipped home.

4. Compared to conventional financing, FHA appraisals can be a little more strict in terms of asking sellers for repairs on a property, so this is another benefit of going conventional.

If you would like to get approved for this program, or you have any questions about any of this information above, please feel free to contact me directly at 661-726-9000.

Dean Henderson, CRMS
President
Financial Independence Mortgage
661-726-9000
NMLS 233298
CA BRE LIC# 01055950

FHA Prepares for 2017 Housing Boom

fha-update

FHA Prepares for 2017 Housing Boom by Raising Loan Amounts and Lowering Fees

January 9, 2017
by Dean Henderson

After several years of stifled growth held back by ever increasing layers of burdensome government regulations, a new optimism for consumer confidence in housing will be aided by policy changes in the United States Department of Housing and Urban Development(HUD).

The Federal Housing Administration(FHA) has announced that in 2017 the maximum loan amounts for FHA mortgages will be increased in the high-cost California areas of Los Angeles and Orange Counties from $625,500 to $636,150.

In addition to the increased loan amounts FHA has also announced it will decrease the amount of monthly mortgage insurance charged on FHA loans by 25 basis points on most mortgages beginning the week after the new administration takes office.

In the Antelope Valley, most first-time homebuyers utilize the 3.5% down payment FHA program which currently has an annual mortgage insurance factor of .85%.  This will be reduced to .60%.  Assuming an average sales price of $269,000 the monthly mortgage insurance premium will be decreasing from $182.33 to $128.71 which is a savings of over $53 per month or $643 per year.   This could increase the buying power of homebuyers by approximately $8,000.

Ed Golding, HUD’s principal deputy assistant secretary for housing said, “Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families. This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”

The FHA said that the premium cut “will significantly expand” access to mortgage credit and lower the cost of housing for the approximately 1 million households who are expected to purchase a home or refinance their mortgages using FHA-insured financing in 2017.

For a full breakdown of the premium cuts, click here for the details from HUD.

For more information of FHA Home Loan please contact:
Dean Henderson, CRMS
President, Financial Indepedence Mortgage
(661)726-9000

USDA Lowering Fees

USDA-mortgage-lower-fees2Upfront Guarantee Fee and Monthly/Annual Fee Decrease

USDA has announced a reduction in the upfront guarantee fee and monthly/annual fee for fiscal year (FY) 2017 effective with Conditional Commitments issued on or after October 1, 2016 through September 30, 2017. The current and new reduced fees are as follows:

USDA Rural Development Reducing Guarantee and Annual Fees in October:
Effective October 1, 2016 (the start of fiscal year 2017) program fees for USDA Rural Development’s guaranteed home loan program will be significantly reduced.
The upfront guarantee fee will change from 2.75% to 1.0% of the loan amount.
The annual fee will change from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan.

USDA FEES 10-1-16

 

 

 

 

 

The new fee structure will save homebuyers thousands of dollars up front and reduce monthly payments significantly.

For More Information about the USDA program call:

Dean Henderson, CRMS
President
Financial Independence Mortgage
(661) 726-9000

FHA Condo Loan Law Passed

condos1It will soon get easier for condominium buyers to obtain Federal Housing Administration (FHA) loans.

Last week the Presdient signed into law H.R. 3700, also known as the Housing Opportunity Through Modernization Act, that will require regulators to rewrite several rules that determine FHA eligibility for condo developments.

Current rules disqualify buyers from seeking FHA loans if less than 50 percent of the condominium units are owner-occupied. The law lowers that requirement to a 35 percent owner-occupied ratio.

FHA also would have to relax a hard rule banning transfer fees when a condo is sold to allow condominium associations to collect fees that support community improvements. That policy is consistent with Fannie Mae and Freddie Mac’s existing policy.

The agency also must simplify its re-certification process. As it stands, developments must undergo a rigorous certification hurdle every two years.

FHA overseer, the U.S. Department of Housing and Urban Development, must make some of the changes within 90 days, according to the National Association of Realtors. Other changes will be proposed through rule making.

The Congressional Budget Office estimated that the law would boost FHA-guarantee lending by $8 billion between 2017 and 2021, as more condo buyers would be eligible.

The law will also allow the U.S. Department of Agriculture (USDA) to delegate to preferred lenders its approval authority for USDA loans, and the agency to charge a $50 fee to lenders per loan for using the automated underwriting system.

The bill was unanimously approved by the House in February and by the Senate earlier in July.

For more information call:
Dean Henderson, CRMS
Financial Independence Mortgage
(661) 726-9000

Understanding and Managing Credit Scores

Managing Credit Score BubbleUnderstanding the makeup of your credit score is the first step toward managing and improving it.

As you might expect, payment history is the most influential component in your credit score, followed closely by the amounts you owe. To lesser degrees, the length of time you’ve utilized credit, the number of new accounts or inquiries you have, and the various types of credit accounts you hold also impact your score. Overall reporting also looks at how these factors relate to each other in the context of your personal usage.

To help achieve or maintain a healthy score, always remember the following:

Have a system to assure your bills are always paid on time.

Avoid late payments or the excessive use of credit by maintaining a cash “cushion” to pay for unexpected expenses. Don’t “max out” your cards. It’s better to have a high credit limit with a low balance.

Never close old accounts as the age of these can actually help your score.

If you shop for credit, do so in the shortest time period possible to minimize inquiries counted against you.

Don’t be afraid to use credit. You need several accounts in order to have a credit score. Just be sure to keep corresponding payments within your means.

If you have established credit, don’t open new accounts solely for the sake of earning a discount on a new purchase. In the long run, you may spend more than you save up front by paying higher interest rates due to a lower score. Having more accounts also increases the task of making payments and the possibility of missing one.

If you have questions about managing your credit, give us a call. We’re happy to help.

Dean Henderson, CRMS
Financial Independence Mortgage
President
NMLS 233298
(661) 726-9000
Dean@avrefi.com

Home Loan Do’s and Don’ts

A guide to making a smooth loan process

A guide to making a smooth loan process

Now that you have made the decision that you would like to buy a home there are some very important Do’s and Don’t that you need to keep in mind in order to prepare yourself for a smooth mortgage approval process.  The slightest misstep could cause significant difficulties and delays on the closing of your home.  Mortgage guidelines have some strict rules that need to be complied with in order to get you loan approved and it is you loan officer’s job to help guide you through the process and maneuver you around potential road blocks that could lead to a mortgage denial.  These Do’s and Don’t are designed to maximize you FICO scores, minimize your debt-to-income ratios, and assure your funds to close are allowable.

First the Do’s:

  • Do continue making your rent and credit payments on time
  • Do keep working at your current employer.
  • Do ask your loan officer before making any financial moves

Now the Don’ts:

  • Don’t deposit and cash in you bank accounts!
  • Don’t change jobs
  • Don’t make any major purchases. (car, furniture, refrigerator, etc.)
  • Don’t apply for or open and new credit. (even if you’re “preapproved”)
  • Don’t transfer credit card balances or consolidate any debt
  • Don’t pay charge offs or collections.(unless your loan officer says to do it)
  • Don’t close any credit card accounts
  • Don’t increase your credit card balances
  • Don’t change bank accounts.
  • Don’t pay off loans or credit cards (unless your loan officer says it’s ok)
  • Don’t give your landlord notice to move without asking your loan officer first

These are very important rules to following in the before and during you home loan process.  For more guidance to help you navigate to a fast and easy closing please call Dean Henderson at 661-726-9000.

Dean Henderson, CRMS
Financial Independence Mortgage
661-726-9000

New Down Payments Assistance Programs

Down Payment Assistance Program

CalHFA MyHome Assistance Programs

California Housing Finance Agency Launches New Mortgage Assistance Program Helps first-time homebuyers with down payment and closing costs

The California Housing Finance Agency has launched the MyHome Assistance Program for first-time homebuyers who may need help with down payment or closing costs when purchasing a home.

Buyers can receive up to 5% in assistance, low interest rates and deferred payments through MyHome. The program is available to first-time employed buyers with good credit, and can be combined with all CalHFA first mortgage programs and the Mortgage Credit Certificate program, which provides a federal income tax credit that may lower taxes and increase disposable income.

“The lack of savings for a down payment is often the barrier to purchase for first-time homebuyers, even though they can afford the monthly payments,” said CalHFA’s Executive Director, Tia Boatman Patterson. “This new program bundles the first mortgage with down payment and closing cost assistance for our borrowers to make the home buying process simple, affordable and, most importantly, attainable.”

Since 1975, CalHFA has partnered, promoted and preserved safe, affordable housing for Californians, expanding opportunities to hundreds of thousands of residents. CalHFA’s line-up of programs and products demonstrates its commitment to lending with a purpose.

“I’ve got families I’ve been working with for a year, and with MyHome they can finally purchase their first home,” said Ed Bañuelos of Academy Mortgage in Burbank. “This program is awesome, and has a lot to offer people looking to buy a mid-priced home.”

CalHFA offers more programs that help low to moderate income homebuyers including the CalPLUS FHA program, which is a first mortgage loan insured by the Federal Housing Administration, and the CalPLUS Conventional program, a first mortgage loan insured through private mortgage insurance. These loans can be combined with CalHFA’s Zero Interest Program (ZIP) for down payment assistance and/or closing costs – 3.5% assistance for a CalPLUS FHA loan and 3% for a CalPLUS conventional loan.

Help is also available through the Extra Credit Teacher Home Purchase Program, a special program for eligible teachers, administrators and staff in California schools, and the CalHFA Energy Efficient Mortgage + Grant Loan Program that assists with the costs of energy-efficient home improvements.

The California Housing Finance Agency was created in 1975 with the goal of helping more Californians find a place to call home. Its Single Family Lending division has invested more than $19.5 billion to help.

To inquire about this program please call Dean Henderson at (661)726-9000.